Hate Realtor Fees? Buy a REIT Stock Instead!

Aside from the purchase price, realtor fees and other costs increases the total expense of home ownership. Since the housing market is unstable, it would be practical to invest in the Dream Industrial REIT stock to earn passive income.

| More on:

The COVID-19 pandemic didn’t decimate the home-ownership spirit in Canada. While interest rates are at historic lows, home buyers are holding off purchases due to job uncertainty. It could be a wise move, because the housing bubble might burst and send prices crashing. Even those intending to buy investment properties are stalling.

However, beyond the market crash predictions, you must consider other costs related to home ownership. Your expense doesn’t end with the purchase price. Before buying, factor in closing costs such as land transfer tax, mortgage fees, and home insurance, among others.

Closing costs include lawyer’s fees, mortgage discharge, and realtor’s commission on the seller side. Realtor’s commission is the most oversized fee and could run from 5% to 6%. The closing fees are insanely high. For new landlords, add maintenance costs and vacancy risks.

If you have the budget but are unwilling to venture in a highly volatile environment, consider investing in a real estate investment trust (REIT). Your money can earn for you while you wait for the market to stabilize.

The market in the pandemic

Supply and demand are the fundamental drivers of real estate prices. When housing inventory is high and buyers are few, prices go down. When buyers are plenty, but houses for sale are limited, property prices rise. In the pandemic, buyers and sellers are adopting a wait-and-see attitude. Thus, the impact on prices is not yet profound.

Anticipate supply to surge when life is back to normal. However, demand might remain weak if Canadians are unable to afford to buy due to financial strain from COVID-19. If a high-inventory-level-with-low-demand scenario plays out, prices will decrease, and buyers will have more negotiating power.

The Canada Mortgage and Housing Corp. (CMHC) said the housing market is experiencing overvaluation in some parts of the country. The latest report from the federal housing agency shows more sellers than buyers are exiting the real estate market. The reasons are high economic uncertainty and temporary public health and workplace safety restrictions.

Dream investment

Dream Industrial (TSX:DIR.UN) is ideal for income investors. This $1.74 billion REIT owns and operates 262 high-quality industrial properties in key markets across North America. Its presence in European markets is likewise growing. The REIT stock is trading at $11.32 per share and offering a generous 6.16% dividend.

Unlike some retail and office REITs, industrial REITs are doing better in the COVID-19 world. Industrial properties are in high demand, because it services supply chain needs. For Dream, leasing momentum picked up significantly in Q2 2020. The rental spreads on the committed 95.6% occupancy are healthy.

In the six months ended June 30, 2020, net rental income was $82.12 million, or 22.8% higher than the same period in 2019. According to Dream’s Chief Operating Officer Alexander Sannikov, the portfolio should continue to post healthy internal growth owing to a diversified tenant base, below-market rental rates, and annual rent escalators (approximately 2% average).

Sensible decision

Nearly 100% of Canadians dream of owning a home, although buying in coronavirus conditions is risky. In a COVID-induced recession, expect the purchasing power to be much lower due to high unemployment. Thus, investing in industrial REITs make a lot more sense.

Should you invest $1,000 in Wheaton Precious Metals right now?

Before you buy stock in Wheaton Precious Metals, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Wheaton Precious Metals wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends DREAM INDUSTRIAL REIT.

More on Dividend Stocks

Asset Management
Dividend Stocks

Where Will Magna International Stock Be in 4 Years?

Down almost 60% from all-time highs, Magna stock trades at a cheap valuation right now. Is the TSX stock a…

Read more »

An investor uses a tablet
Dividend Stocks

How I’d Generate $350 Monthly Income With a $20,000 Investment

Dividend investing is a time-tested strategy if you need to generate a desired monthly income amount.

Read more »

Canadian dollars are printed
Dividend Stocks

How I’d Use $10,000 to Transform My TFSA Into a Cash-Pumping Portfolio

The TFSA is one of the best places to create cash flow, especially with this stock on hand.

Read more »

a sign flashes global stock data
Dividend Stocks

Where I’d Invest $8,000 In the TSX Today

There's no shortage of great stocks on the TSX today. Here's a look at three options to consider adding to…

Read more »

Two seniors float in a pool.
Dividend Stocks

How I’d Turn $7,000 Into a Growing Income Stream for Retirement

Investors looking for a growing income stream for retirement will find these stocks must-buy options right now.

Read more »

Tractor spraying a field of wheat
Dividend Stocks

Top 2 Canadian Stocks to Buy for Long-Term Gains

Sometimes investors worry too much about the near term, which is what makes these two top value options.

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How I’d Build a Monthly Dividend Portfolio With $7,000

Investors can start building a monthly dividend portfolio through dividend ETFs that pay out monthly.

Read more »

a person watches a downward arrow crash through the floor
Dividend Stocks

Is This Correction Your Chance? Buy Up These 4 Dividend Stocks on Sale

These four dividend stocks aren't only top choices for yield, but for safety as well.

Read more »