The Best Income Investments in Canada

What are the best income investments in Canada? Fortunately, there are plenty to choose from. In fact, Canada is one of the best countries, in terms of selection, for those drawn to revenue producing assets.

Of course, not all opportunities are equally lucrative. It’s important to find assets that can capitalize on the nation’s business, economic and demographic climates. The country relies heavily on its natural resources, real estate and banking sectors. Our dollar is closely tied to the price of oil. Those features present Canadians with unique risks and opportunities. The best income investments in Canada will have to thrive under those conditions.

What are Canada’s best income investments?

It should go without saying that different investments are appropriate for different people. It can depend on various factors, including risk tolerance and liquidity preferences. For that reason, it’s not possible to give a perfect answer. However, if I had to make a blanket statement and opine on the best income investments in Canada, they would be the following.

Apartment REITs

Real estate investment trusts (REITs) that acquire apartment buildings are among the best income investments in Canada. These businesses can capitalize on strong rental markets that will likely be bolstered by an aging population. People tend to downsize and move into rentals after retirement. Moreover, young adults are encumbered by debts and student loans, making purchasing a home less feasible than it once was.

Apartment-centric REITs can also be less susceptible to the volatility experienced by their commercial counterparts. Office REITs, for example, tend to suffer when oil prices drop. But regardless of how poorly an economy performs, people will always need a place to live.

Conservative MICs

A MIC is a mortgage investment corporation; a company that lends capital and secures the loans with real estate. They are popular investments that are often considered safe because of their roots in property. But unbeknownst to many, MICs don’t always have to invest in mortgages. As well, some give management exceptionally broad powers that can expose shareholders to more risk. That’s why one has to be careful when making a selection.

However, MICs with conservative management teams, portfolio loan-to-value ratios (LTVs) of under 75% and that only fund first and second mortgages can rank with the best income investments in Canada. They often pay monthly and frequently provide yields that are well above market averages.

Syndicated Mortgages

A syndicated mortgage is a loan that has multiple investors. Unlike MICs, investors in syndicated mortgages have a direct ownership in the mortgage, rather than owning shares in a company that lends capital. In most cases, they pay interest each month.

Syndicated mortgages can rank among Canada’s best income investments. However, in my view, they should have a maximum loan-to-value ratio of 75% of the “as is” property. For example, if the loan is to fund a construction deal in Ontario, it should be based on the price of the land today, rather than on what it might be after it has been developed.

Portfolio managers who focus on income

Portfolio managers are not akin to financial advisors. They receive a higher level of wealth management training and are often lawyers, chartered accountants, MBAs or CFAs. They also have a legal duty to put their clients’ interests ahead of their own, which other financial professionals do not. As well, they have the authority to buy and sell investments for you without gaining your consent each time. Until recently, they have only been available to wealthy and institutional clients.

Some portfolio managers focus on building revenue portfolios for their clients. These can be effective and diversified Canadian income investments. They are perfect for people who would like high-grade professional guidance.

Note: I have relationships with a few portfolio managers. If you’d like me to put you in touch with one, let me know here. 

Conclusion

The previous four categories are, in my view, the best income investments in Canada. If you would like specific companies that fit into those categories, please submit your contact information the “download my best articles” box below. You’ll receive an email from me shortly thereafter.

About The Author

Alexis Assadi

Alexis Assadi is an investor, entrepreneur and writer, who advocates for making high-performing income investments and the lifelong pursuit of financial intelligence. He is a shareholder and director in three companies that provide funding to small businesses, entrepreneurs and real estate projects. His most recent venture is a firm called Pacific Income LP.

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