Canadian Real Estate Investment Trusts (REITs)
A lot of investors consider income trusts a big no-no or even a taboo subject. There are many reasons for this, among them include the fact that a lot of income trusts pay more in distributions than they receive in earnings. The biggest reason for their recent demise is that they will be faced with corporate taxes in a few years, thus a likely decrease in distributions.
There is one sector within the income trust world that managed to dodge the new federal tax rule, and those are Real Estate Investment Trusts (REITs).
What are REITs?
Real Estate Investment Trusts or REITs are companies that invest in real estate assets and distribute their income (primarily from rent) to their shareholders. The distributions are usually in portions of dividends, return of capital, and income.
How can you buy a REIT?
Equity REITs can be purchased like any other public company/stock through the stock market. If you are interested in REITs, and you haven’t opened a discount brokerage account yet, check out my Review of Canadian Discount Brokerages.
What are the different types of REITs?
As you know, there are many types of real estate investments, and there are REITs that cover them all. They can range from residential rentals, hotels, super store leasing, apartment buildings and seniors housing.
What are the benefits of a REIT? Why wouldn’t I buy my own property?
The biggest benefits of REITs is that you can get exposure to the real estate market without being a landlord yourself. From my experiences as a landlord, it can become a second job and sometimes not a very fun one at that. On top of that, although hard real estate assets can mean high profits, they will never have the liquidity of a REIT (liquidity means to ability to buy/sell with relative ease).
Some Popular Canadian REITs are listed below:
- Boardwalk Real Estate – BEI.UN
- Can Apartment Properties – CAR.UN
- Chartwell Seniors Housing – CSH.UN
- Cominar Real Estate Investment Trust – CUF.UN
- Calloway Real Estate Trust – CWT.UN
- Dundee Real Estate Investment Trust – D.UN
- Extendicare - EXE.UN
- H&R Real Estate Investment Trust – HR.UN
- InnVest REIT – INN.UN
- IPC US REIT – IUR.UN
- Legacy Hotels – LGY.UN
- Primaris Retail Real Estate – PMZ.UN
- Canadian Real Estate Investment Trust – REF.UN
- RioCan Trust – REI.UN
- iShares CDN REIT Index ETF – XRE
Where do I start?
Those of you new to the REIT market, I realize that this can be a little intimidating. If you’re looking for a decent place to start, check out the iShares CDN REIT Index ETF. This REIT index is market weighted meaning that their position sizing/holdings depends on the market capitalization (size) of the REIT.
I personally would start my reading on the largest REIT in Canada, which is currently RioCan Trust – REI.UN. If you’re looking for some more info on XRE, Canadian Capitalist has some more info that you should read up on.
Which REIT do I like best?
That is out of the scope of this article, but I will post about this in the future. In the meantime, do some reading on the REITs listed above. If you already have a favorite REIT, please post your suggestion in the comments.