What Are REITs? Ultimate Guide to Real Estate Investment Trusts (2025) · Tim L.
Real Estate Investment Trusts (REITs) have become increasingly popular among Canadian investors, with the sector managing over CAD $230 billion in real estate assets as of 2024, according to TSI Network. These investment vehicles offer a unique way to gain exposure to real estate without directly purchasing properties, making them particularly attractive for those interested in dividend-generating investments.
The Canadian REIT market has shown remarkable growth, with distributions to unitholders exceeding CAD $4.2 billion annually. Whether you're a seasoned investor or just starting your investment journey, understanding REITs is crucial for building a diversified portfolio. Let's dive in!
What Is a REIT?
A REIT is a company that owns, operates, or finances income-producing real estate properties. These trusts must distribute at least 90% of their taxable income to shareholders annually in the form of dividends, making them particularly attractive for income-seeking investors.
Discover the best REITs in Canada this month here.
Types of REITs
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Equity REITs: Own and manage income-producing real estate
- Example: Canadian Apartment Properties REIT (CAR.UN) - Canada's largest residential landlord
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Mortgage REITs: Provide real estate financing through mortgages and loans
- Example: First National Financial (FN.TO) - Provides residential and commercial mortgages
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Hybrid REITs: Combine both property ownership and mortgage financing
- Example: Timbercreek Financial (TF.TO) - Offers both mortgage investments and property interests
Popular REIT Sectors
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Residential: Apartment buildings and multi-family housing
- Example: InterRent REIT (IIP.UN) - Owns apartment communities across Canada
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Commercial: Office buildings and retail spaces
- Example: Allied Properties REIT (AP.UN) - Specializes in urban office environments
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Industrial: Warehouses and distribution centers
- Example: Granite REIT (GRT.UN) - Focuses on logistics and distribution properties
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Healthcare: Medical facilities and senior living communities
- Example: NorthWest Healthcare Properties REIT (NWH.UN) - Owns medical office buildings globally
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Retail: Shopping centers and malls
- Example: RioCan REIT (REI.UN) - Canada's largest retail REIT
How to Invest in REITs
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Direct Purchase: Buy REIT shares through a brokerage account
- Popular Canadian brokers: Wealthsimple Trade, Questrade, TD Direct Investing, RBC Direct Investing
- ETFs: Invest in REIT-focused exchange-traded funds
- Mutual Funds: Choose funds specializing in real estate securities
Key Benefits of REITs
- High Dividend Yields: Canadian REITs typically offer dividend yields between 4-8%
- Professional Management: Expert teams handle property management and operations
- Liquidity: Easily bought and sold on major exchanges
- Diversification: Access to different property types and geographic locations
- Tax Advantages: REITs generally pay no corporate tax if they distribute required income
Risk Considerations
- Interest Rate Sensitivity: REIT values often fluctuate with interest rate changes
- Market Risk: Subject to real estate market conditions
- Property-Specific Risk: Challenges with individual properties can affect returns
- Economic Sensitivity: Performance tied to broader economic conditions
Final Words
REITs offer an accessible way to invest in real estate while enjoying professional management and potential income streams. Before investing, consider your investment goals, risk tolerance, and the specific characteristics of different REITs. For more detailed information about generating passive income through investments, check out our guide on monthly dividend stocks in Canada.