Written by Daniel Da Costa at The Motley Fool Canada
There’s a reason why real estate is one of the best and most popular industries you can invest in. Real estate is highly defensive, and it can offer impressive long-term growth potential. However, even though real estate is a great investment, and these stocks are some of the best to buy and hold for the long haul, it’s still crucial to diversify your investments.
Diversification is crucial in every industry, but it can be especially important when it comes to real estate. Keep in mind that you don’t just want to diversify your investments by buying different stocks or REITs. You’ll also want to make sure that these investments are diversified geographically.
Real estate is typically an excellent industry to invest in, but there are times when it can come under pressure. And often, when real estate is under pressure, it’s regional issues that are impacting valuations.
That’s why it’s crucial to own high-quality real estate assets across Canada, and to also diversify your investments to gain exposure to U.S real estate.
With that in mind, if you’re looking to find some of the top real estate stocks to buy today, here are two Canadian stocks to consider.
One of the best residential real estate stocks to buy for exposure to U.S markets
While the real estate sector as a whole can be a great investment, there’s no question that some of the best and most defensive real estate assets to buy are residential properties. And when you consider that Morguard North American Residential REIT (TSX:MRG.UN) has over 50% of its portfolio located in the U.S., it becomes clear that this is a high-potential investment.
As I mentioned, diversifying your investments geographically is incredibly important. For years, Canadian real estate has been on fire, while many regions and states in the U.S. have lagged behind. However, there’s currently an opportunity to see more growth potential south of the border, especially in this high inflation environment.
That’s why it’s no surprise that in its most recent quarter, Morguard saw its same property net operating income (SPNOI) grow by nearly 16% in its U.S portfolio while increasing only 5% in Canada.
Morguard is trading in the middle of its 52-week range and offers an attractive yield of 3.9%. If you’re an investor looking for high-quality real estate stocks to buy now, this is one that should be on your radar.
A top industrial REIT to buy and hold for the long haul
In addition to residential real estate, another excellent sub-sector to invest in is industrial real estate. For years now, we’ve seen significant growth in this sector which includes warehouses, distribution centers, flex spaces, and other industrial buildings with storage facilities.
That’s why Granite REIT (TSX:GRT.UN) has been a top performer for the past few years and continues to offer incredible long-term growth potential. The REIT is well-diversified with assets in North America and Europe, but the majority of its properties are located in the U.S.
Significant diversification provides Granite with ample resiliency. It exposes Granite to more growth potential while also reducing risks associated with owning it for the long haul.
However, as defensive as the investment is, the main reason to buy is for its growth potential. These REITs are seeing major increases in rents as leases roll over, due to strong demand fundamentals and few vacancies in the industry. Granite also has an impressive pipeline of growth projects that will come to fruition in the coming years, which should help to significantly increase value for investors.
So, if you’re an investor that’s looking to add high-quality real estate stocks to your portfolio while they’re under pressure and trading ultra-cheap, Granite and its 3.8% yield is one of the best stocks you can buy today.
Before you consider Granite Real Estate Investment Trust, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in August 2022 ... and Granite Real Estate Investment Trust wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 27 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 8/8/22
Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends GRANITE REAL ESTATE INVESTMENT TRUST and MORGUARD NA RESIDENTIAL REIT UNITS.