The Tax-Free Savings Account (TFSA) is probably the top choice when it comes to creating passive income each month. You can look forward to income coming in and take it out at any time. But the best part, of course, is that you don’t have to worry at all about taxes!
But if you want to create some income for every month of every year, it gets tricky. How on earth are you supposed to do that?
Well, as you probably guessed, I’m here to answer that question.
Follow the rules!
Before we get into the details, it’s important to remember that the TFSA has rules. Rules that, if broken, can lead to penalties and fees and all of that not-so-good stuff from the Canada Revenue Agency.
The basic rule is that you need to stay within the contribution limit. Each year, Canadians 18 and older are given contributions for their TFSA. If you were 18 in 2009, this year you have a total of $88,000 as your limit! But, of course, that doesn’t mean you have $88,000 to invest this year if you’ve been investing at all the last decade or so.
So this year, we’ve been given another contribution allowance of $6,500 as of Jan. 1, 2023. Let’s then say you’ve popped that as cash into your TFSA, and now have a chunk waiting to be invested.
That’s where it gets interesting.
To each their own
Now I’m going to use some numbers here as examples, but it’s important to note these are examples and not set in stone numbers. Further, you should always have a diversified investment portfolio, one anchored with conservative, long-term holds that contain a mix of stocks, bonds, and other investments.
That being said, if you have some cash you’ve designated to have some fun with, then you can certainly take this advice. And when it comes to monthly passive income for a TFSA, I would consider NorthWest Healthcare Properties REIT (TSX:NWH.UN) a strong choice.
NorthWest REIT holds healthcare real estate around the world, with properties ranging from hospitals to parking lots. It currently has a 14-year-average lease agreement and 97% occupancy rate. Yet, shares of the stock are down 40% as of writing in the last year! It trades at just 0.804 times book value, giving it a dividend yield of 9.79%.
Create that monthly passive income
NorthWest REIT is a solid choice in my books based on this current data, but also its business in general. We’re always going to need healthcare, and the company continues to expand its operations. So, I’m fairly confident we’ll see shares bounce back and the dividend hold strong at $0.80 per share annually.
If you’re looking to bring in cash right away, let’s say you have $20,000 set aside to invest right now. That’s a solid amount, and could certainly bring in a substantial amount of passive income from this company as of writing. You can see how much in the chart below. As well, I’ll include where shares could be should they return to 52-week highs this year.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | TOTAL PORTFOLIO |
| NWH.UN – now | $8.25 | 2,424 | $0.80 | $1,939.39 | monthly | $20,000 |
| NWH.UN – highs | $14 | 2,424 | $0.80 | $1,939.39 | monthly | $35,875.39 |
As you can see, you could bring in $1,939 each year in passive income. That comes to $161.62 each month in cash-free TFSA income. Further, if you decide to hold, you could bring in total returns of $15,875.39, including both share growth returns and dividend income.
