Breaking News
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Buy REIT Stocks and Make Big Bucks in Real Estate

Stock MarketsAug 01, 2021 12:15
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
Buy REIT Stocks and Make Big Bucks in Real Estate

Real estate investing can be really simple. You don’t need a whole lot of money to start either. No, you don’t need to get a mortgage to buy a condo or building. You can invest in real estate in a diversified way from day one. With commission-free trading on Wealthsimple, you can invest as little as one unit of real estate investment trust (REIT) stock each time.

REITs are managed by professional teams that take care of mortgages, tenants, properties, insurance, and property taxes. Moreover, they own a portfolio of properties and potentially land for development, which offers a lower risk than buying a single property.

Here are a few tips to help you make big bucks with REIT stocks.

Choose the asset type You can invest in residential, industrial, office, retail, healthcare, data centre, self storage, and cell tower REITs. Investors would be glad if they weren’t invested in retail or office real estate, which experienced huge drawdowns in their fair asset values during the pandemic.

There are also diversified REITs that could have retail, office, residential, and industrial properties in their real estate portfolios. However, buying them won’t be the best move if you’re only bullish in certain areas.

By buying individual REITs, you can choose to invest in residential and healthcare REITs that are more defensive and industrial, data centres, self-storage, and cell tower REITs that could provide greater growth.

For residential REIT exposure, you can consider Canadian Apartment Properties REIT (TSX:CAR.UN). Consider NorthWest Healthcare Properties REIT (TSX:NWH.UN) as your healthcare REIT exposure. Granite REIT (TSX:GRT.UN) is a good idea if you like industrial REITs. To gain exposure to data centres, self-storage, and cell tower REITs, you should explore ideas on the NYSE.

Valuation is key If you want to secure great returns from your REIT stocks, it’s the same as other stock investing. You want to buy when the REIT stocks are trading cheaply. Unfortunately, the real estate sector is pretty fully valued right now.

There will be opportunities to make big bucks. For example, during the pandemic, investors could have picked up Canadian Apartment Properties REIT units for about $40 per unit with a yield of about 3.4%. Your position would be up more than 50%.

Similarly, you could have locked in a yield of 11.4% from NorthWest Healthcare Properties REIT at $7 a unit. The healthcare REIT stock appreciated 85% from that level. From Granite REIT, you could have gotten a yield of 6.2% at about $47 per unit and the shares would have appreciated about 82%.

Buy REIT stocks in TFSAs When you do buy Canadian REITs, consider the investments in your Tax-Free Savings Account (TFSA). Canadian REITs tend to pay out monthly cash distributions, which is perfect for those seeking monthly income.

REITs pay out cash distributions that are like dividends but are taxed differently. In non-registered accounts, the return of the capital portion of the distribution reduces the cost basis. The return of capital is tax-deferred until unitholders sell or their adjusted cost basis turns negative.

REIT distributions can also contain other income, capital gains, and foreign non-business income. Other income and foreign non-business income are taxed at your marginal tax rate, while capital gains are taxed at half your marginal tax rate.

If you hold REITs inside a Tax-Free Savings Account (TFSA), your REIT income will be tax-free except for the withholding tax on foreign income. If there’s foreign income, it’ll often be a small negligible amount.

The post Buy REIT Stocks and Make Big Bucks in Real Estate appeared first on The Motley Fool Canada.

The Motley Fool recommends GRANITE REAL ESTATE INVESTMENT TRUST and NORTHWEST HEALTHCARE PPTYS REIT UNITS. Fool contributor Kay Ng has no position in any of the stocks mentioned.

This Article Was First Published on The Motley Fool

Buy REIT Stocks and Make Big Bucks in Real Estate
 

Related Articles

Nike Earnings Miss Drags Adidas, Puma, JD Sports Down
Nike Earnings Miss Drags Adidas, Puma, JD Sports Down By Investing.com - Sep 24, 2021

By Geoffrey Smith  Investing.com -- Adidas  (DE:ADSGN) stock and Puma (DE:PUMG) stock fell sharply on Friday, as a disappointing update on Thursday by rival Nike (NYSE:NKE)...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email