What is REIT?

REIT stands for Real Estate Investment Trust. It is a type of investment fund that is regulated by government entities and invests in income-generating real estate. It offers investors access to professionally managed real estate portfolios while providing them with liquidity, income, and potential appreciation. A REIT allows investors to invest directly in real estate without the need to purchase an entire property. The trust generates income through the management of its portfolio of properties and the distribution of profits to its shareholders.

Buying an investment property to rent out is not the only way to invest in real estate. Many REIT stocks exist in Canada which allow you to get real estate exposure through your investment accounts.

In terms of returns, REIT total return performance over the past 20 years has outperformed the S&P 500 Index.

Since the S&P 500 is a difficult benchmark to outperform, this is excellent news for investors considering investing in REITs. This might not translate exactly to the Canadian market, but it’s a good indicator of the potential of REITs.

Benefits of investing in REITS

• The ability to add real estate exposure to your investment accounts
• Much higher liquidity than buying and selling a physical property
• Great income potential
• The ability to access sectors that you may not normally be able to invest in (office space, industrial & multifamily)
• Potential for more tax efficiency by deferring taxes (RRSP accounts) or being tax exempt (TFSA) altogether
• Buying and selling properties can be time-consuming. Trading REITs is extremely easy and takes very little time

Please note, the increased liquidity of REITs can be a double-edged sword. In a market crisis, REIT stocks can fall aggressively when investors are flocking to cash and liquidating positions. Directly owning physical properties will likely not have the same effect.

Resources From: Wealth Awesome

What to look for in a good REIT?

When selecting a REIT, investors should look for one that has a Long Track Record in the industry, as well as Strong Management with a solid strategy.

Funds should also have a High Liquidity Rate, Low Expenses, and a Diversified Portfolio. Additionally, investors should determine the REIT's Dividend Policy and consider the type of real estate investments it will be making. Finally, investors should also evaluate the REIT's ability to manage risk through diversification and approaches to market value.

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