The time is ripe to invest in the stock market, with the TSX Composite Index seeing a correction. While you enjoy the holiday season, your money can keep working on the sidelines. The next year could see some recovery in real estate stocks as interest rate cuts make mortgages affordable. Moreover, the Canadian government's decision to cut immigration targets by 40% could bring some relief to the housing sector.
Smartest real estate stocks to buy with $1,000
The stock market is in a bearish momentum amid uncertainty around U.S. president-elect Donald Trump's policies. The U.S. Fed and Bank of Canada are closely watching the impact of government policies on inflation and consumer spending. This uncertainty has pulled down even the fundamentally strong stocks.
The real estate market presents a good investment opportunity to benefit from the economic recovery. Here are a few real estate stocks worth buying with $1,000.
CT REIT
CT REIT (TSX:CRT.UN) is the retail real estate investment trust (REIT) that witnessed a 5.8% correction in the unit price in December. The dip comes on the back of bearish market momentum. However, the real estate arm of Canadian Tire continues to enjoy strong earnings and occupancy rates. At a 99.4% occupancy rate and fair market value of property stabilizing, net income surged 56% in the nine months to 2024. Any appreciation in the value of CT REIT's property portfolio will be reflected in the net asset value.
At the end of the third quarter, REIT's net asset value per unit stood at $16.95. The unit is trading at a 17% discount at $14.46. Now is a good time to buy the unit at a discount and lock in a 6.36% yield. The REIT increases its annual distribution per unit by 3% in July. That could increase your yield to 6.6%.
Slate Grocery REIT
Slate Grocery REIT (TSX:SGR.UN) is a grocery REIT with a portfolio of 116 properties located in the United States. Its unit price fell 8% in the December correction. Unlike CT REIT, Slate Grocery REIT has a diversified tenant base, with its biggest tenants, Walmart and Kroger, occupying over 18% of Slate Grocery's leased property.
The grocery segment commands a lower rent than the average retail space as it is a volume-based business. However, grocery tenants are sticky and resilient to the economic crisis, which means Slate Grocery REIT could keep paying distributions for years to come. The strengthening of the U.S. dollar could benefit Slate Grocery unitholders as the REIT pays distributions in U.S. dollars, which are then converted into Canadian dollars.
Slate Grocery's unit price is trading at a 30% discount to its net asset value of US$13.77 over fears of a slowdown in interest rate cuts by the Fed. Now is a good time to buy the unit and lock in an 8.75% distribution yield.
Investing in real estate stocks
A $500 investment in each of the two stocks could buy you 36 units of CT REIT and 34 units of Slate Grocery REIT. Together, the two stocks can give you an annual passive income of $75.9 on a $1,000 investment. Moreover, there is a higher probability of 15-20% capital appreciation as property value recovers.
