Scared of Real Estate? Buy This REIT Instead
The real estate market is a mess right now. The housing market continues to fall across the country, with the Canadian Real Estate Association (CREA) seeing national home sales drop 12.6% month over month between March and April.
It doesn’t look like the situation will improve, and it’s making it hard for those wanting to invest in real estate or at least bring in some passive income. In fact, even some real estate investment trusts (REITs) are scary right now.
Analysts dropping targets
Due to all this uncertainty, analysts continue to trim their price targets for a huge number of REITs — specifically, ones focused on one part of the sector alone, like residences or offices. This is hard, given that an investor likely wants both passive income from dividends and stable returns. The problem is that the future of real estate in Canada is super uncertain right now.
But if you want passive income from real estate, all is not lost. You can look to a diversified REIT instead. This will allow experts to do the heavy lifting for you — experts that just want to bring in strong earnings.
Not only that, but analysts are increasing their target prices for some REITs. They’re a far more stable choice and could, in fact, outperform the market, according to some. Let’s look at one strong option.
H&R REIT (TSX:HR.UN) is a strong REIT to consider for those wanting options. Analysts have been boosting their prices targets and recommendations for the stock, with a consensus target price of $17 as of writing. Meanwhile, it trades at just $13.85. That’s a potential upside of 23% right now.
What analysts like about H&R REIT is that the company has repositioned its portfolio to focus on residential and industrial properties. These can produce strong growth through 2023, one analyst argued, and that puts it on a strong path towards growth throughout 2023.
The company is now incredibly cheap in every regard — not just from its consensus price target. It trades at just 2.83 times earnings and 0.65 times book value. So, now is an excellent time to consider buying and locking in the company’s 3.92% dividend yield.
Motley Fool investors wanting some solid dividends and returns in the housing market right now would do well to consider H&R REIT. By locking in this company, you could also bring in stellar returns from a $20,000 investment, for example.
In this case, your returns alone could turn from $20,000 into $24,548 within a year. On top of that, you would lock in passive income of $794.20 as of writing. That’s a total of $5,342.20 in just a year!
So, yes, the real estate industry is down. But don’t count it out. Everything rebounds eventually, but with H&R REIT, you’ll likely see your portfolio rebound a lot quicker. Furthermore, there is likely going to be superior growth compared to the rest of the REIT market thanks to its new focus and diversified portfolio.
Before you consider H&R REIT, we think you’ll want to hear this.
Our nearly S&P/TSX market doubling* Stock Advisor Canada team just released their top 10 starter stocks for 2022 that we believe could supercharge any portfolio.
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* Returns as of 4/14/22
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Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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