REITs, also known as Real Estate Investment Trusts, are companies that pool together funds from different investors in order to purchase real estate. These are popular with investors because real estate is one of the most profitable investments. This is one-way investors can invest in real estate without actually dealing with the process of purchasing and selling themselves. 

How REITs Work

REITs are structured investments that are similar to mutual funds. The difference is that they don’t hold stocks like mutual funds, and ETFs do. They hold real estate investments. It allows investors to invest in real estate in a non-traditional way. 

REITs can come in a variety of sizes, just like mutual funds. However, there are a variety of different REIT types that can influence the size, accessibility and price of the REIT. 

Different Types of REITs

When it comes to REITs, they can be broken down into 3 different categories. These categories include:

• Publicly-Traded REITs
• Public Non-Traded REITs
• Private Non-Traded REITs

The most common type of REITs are publicly traded REITs. These trades, like stock or other types of investments, are found on the TSX(Toronto Stock Exchange) or the NYSE (New York Stock Exchange). These can be bought and sold by any investor and can also be found as Canadian REIT ETFs.

Public Non-Traded REITs can also be bought and sold by any investors, but they don’t trade on any exchanges. If you’re looking for these types of REITs, they can only be purchased by real estate crowdfunding platforms. Private Non-Traded REITs also don’t trade on exchanges. However, only high-net-worth investors are even able to purchase them. 

If you’re looking to invest in REITs, it’s important to note that within these 3 categories there are planty of other subcategories. Let’s take a look. 

Mortgage REITs

These types of REITs are quite common, and they work with a pretty simple process. These are the REITs that give loans and mortgages to real estate developers. These type of REITs make money off of the interest earned through the loans. Interest rates can affect these REITs a lot. 

Equity REITs

These are the most complex types of REITs and there’s actually 12 different categories that this type of REIT is broken into. 

• Data Centre REITs
• Diversified REITs
• Health Care REITs
• Industrial REITs
• Infrastructure REITs
• Office REITs
• Retail REITs
• Residential REITs
• Self-Storage REITs
• Speciality REITs
• Timberland REITs
• Hospitality REITs

These types of REITs make their money by renting out space. As you can see each one of these different sectors focuses of different types of rentals including infrastructure related real estate. There are also plenty of different REITs that own medical offices, office buildings, warehouses and other popular buildings that potentiallly produce monster returns for property owners and investors. 

Hybrid REITs

Hybrid REITs earn money in the real estate sector from a combination of rental income and interest income. This means that these types of REITs both loan out money to real estate developers and rental out different types of real estate spaces. 

How To Invest in REITs in Canada

In Canada, purchasing REITs is similar to purchasing traditional investments. When it comes to Publicly Traded REITs, you can purchase them on the exchange through a broker. This is a pretty simple process and can be done using a traditional brokerage or an online brokerage account. These are also the most affordable REITs that you can purchase. 

Publicly non-traded REITs can also be purchased using a brokerage, however it can be a little more difficult. They also tend to be more expensive and have higher fees since they’re much more difficult to sell. 

Best Canadian REITs

Now that we’ve gone over what REITs are, how they work, and what types there are, we can take a look at which ones are the best. These are some of the best ones you can currently invest in in Canada. 

Morguard North American (TSE:MRG.UN)

This particular REIT, Morguard North American Residential REIT, is a diversified portfolio made up of rental properties. It’s made up of 16 residential properties containing apartments in Canada, 26 residential apartment buildings in the US and one retail property in the US. It was created to produce stable, tax-efficient income for those who invest in the funds since you would pay capital gains on any earnings. Here are some of the stats of the fund itself. 

Smartcentres (TSE:SRU.UN)

This large Canada REIT is a fund that deals in both commercial and residential real estate. They have over 174 different properties throughout the country. This REIT makes their income from rental properties, not from lending to real estate developers. 

Allied Properties (TSE:AP.UN)

Allied Propertities has a large real estate portfolio that is involved in the development, management and ownership of different real estate properties throughout the country, focused in major Candian cities. They primarily invest in retail properties with a focus on IT, banking, government, marketing and telecommunications. 

Granite REIT (TSE:GRT.UN)

Granite is a real estate trust that focuses on industrial properties in real estate in North America and Europe. It includes a wide range of manufacturing facilities that make up a large portion of their income. Here are the stats when you’re looking to buy stocks. 

InterRent REIT (TSE: IIP.UN)

InterRent is another Real Estate Investment Trust that is located in Canada. They do all of their business in Canada and have create a wide portfolio of properties. The rental income from these properties is how they earn their money. 

Canadian Apartment Properties REIT (TSE:CAR.UN)

This particular REIT is focused on acquiring and managing apartment and townhome complexes throughout the country. The types of real estate they focus on are mid tier or luxury, which creates a large part of their income. Just like the others, the income they receive is mainly rental income. 

CT REIT (TSE: CRT.UN)

CT is a small Real Estate Investment Trust that focuses on investing in different real estate investments throughout Canada. The largest portion of it’s income comes from the buildings CT Reit owns and leases to the Canadian Tire Corporation. That said, they also have a wide range of other properties as well. 

Automotive Properties REIT (APR-UN.TO)

This REIT is what’s considered an open-ended real estate trust. They focus on purchasing income-producing automotive properties. This is a Canadian company that focuses on acquiring other Canadian properties. 

Dream Industrial REIT (DIR-UN.TO)

The Dream Industrial REIT owns and manage real estate of  over 339 industrial assets over Canada, the US and Europe. They currently have a decent portfolio and are continuing to grow. Here are some stats regarding this REIT. 

Overall, it is the Best REIT in Canada.

There are plenty of different real estate investment trusts to choose from. It can be difficult to find the best REIT overall. That said, one of the most popular and most recommended REITs is the Allied Properties REIT, which we’ve already discussed above. 

Largest REITs in Canada

In Canada, the largest residential REIT is the Canadian Apartment Properties REIT. In total, the company manages over 67,000 properties throughout Canada, Ireland, and the Netherlands. This REIT is only predicted to grow, which not only makes it the largest residential REIT, it also makes it a great investment. 

Smartcentres is Canada largest retail REiT based on the fact that it has the largest market capitalization. This company owns so many different properties that are used by some super large companies. In fact, the biggest client of this company is Walmart. 

REITs By Market Cap

As we mentioned, there are plenty of different Real Estate Investment Trusts in Canada. While we have gone over many of them, it looks different when you look at them comparably. Let’s take a look at the best REITs in Canada, along with their market caps. 

Highest Paying REITs

When you’re looking into the top Canadian REITs, it’s important to also look at what these REITs pay. Many investors take a look at what the highest-paying REITs in Canada are and how much they pay. However, it’s also important to pay attention to consistent dividend growth. 

Based on this information, the REIT with the highest dividend yield is the Allied Properties REIT. Other numbers you could also pay attention to to discover the yield is the dividend payouts from the ffo payout ratio. 

Canadian REITs To Avoid

When it comes to many REITs, another important thing to consider is which Canadian REITs you should avoid. While different REITs work differently for everyone, there are some REITs that experts recommend you avoid. Here are a few. 

Slate Office REIT

Slate Office REITs is a REIT that invests in high-quality workplace real estate. This makes sense since office REITs focus on commercial real estate. However, that isn’t what makes up their whole portfolio. They have a roster of government as well as high quality credit clients. They make their money by purchasing their assets at a discounted rate. Their main source this REITs earnings comes from rental income. 

As you can see, the price of this particular REIT is only $0.76. This means they’re relatively cheap to purchase. However, those who purchased this in the past may have lost a significant amount of money in the last quarter of 2023. Not only did it lose 82% of it’s value, it also lost it’s trading volume. 

The original volume of this stock was around 150,000, and then it dropped to only 9.000. That said, this doesn’t mean that it won’t increase or gain volume again. In fact, this REIT has been slowly increasing as of the beginning of 2024. That said, the shares are still below $1 each. For this reason, many investors are avoiding this stock; however, if you choose to invest and the shares continue to increase, then you could increase your cash flow. .

True North Commercial REIT

True North Commercial REIT is a commercial Real Estate Investment Trust. It focuses on earning income for it’s investors by investing in these properties. Here are the stats for this particular REIT. 

Just like Slate Office REIT, this REIT took a hit in 2023. This is because of the economic downturn. The company sold some of its properties and bought back some of its units. They also chose to consolidate to avoid a hit to their investors. 

While this didn’t initially hit this REITs stock, it has dropped from $67 per share to around $12 per share. This doesn’t necessarily mean that this is a bad investment though. Many real estate investment trusts suffered when inflation sky rocketed. That said, some investors still believe that this is a risky investment. However, due to the low share price, you could still end up coming out ahead. 

Are Canadian REITs A Good Investment?

When it comes to investing, each investor has their own idea of what a good investment is based on how it can affect their portfolio. That said, just like anything else, REITs are a risk. With any type of investment, you’re taking a risk. In general, though, REITs are a good investment. 

Real Estate Investment Trusts trend very similarly to traditional real estate investments without having to front all of the capital. They can create a steady stream of passive income and can be a great offset to a diversified portfolio. Just like any type of investment, though, it’s important to do your homework. 

Just because REITs, in general, can be a great investment doesn’t mean that they’re all equal. All of these investments track differently and provide different levels of income. Some of the REITs may not even incur any income at all. The best way to determine this is to look through the research on each REIT and make an educated decision on which to invest in. 

Another options is to choose to invest in Canadian REIT ETFs. This is because ETFs already contain a number of diversified REITs and acan be less risky then investing into a single REIT.

Why Investors Choose to Invest In REITs Instead of Real Estate

There are many different reasons why many investors choose to invest in REITs instead of real estate. The most common reason is liquidity. This is because you can sell and trade stocks easily, getting the funds you need when you need them. With real estate, it can take months to get your investment back, and it can even end up costing you money. 

With real estate, there’s always a chance you can lose your money. When you invest in REITs, you may not earn as much as you would with a real estate investment, but you also won’t lose as much. REITs don’t lose as much money as traditional real estate, so this makes it more appealing to investors. 

Investing in traditional real estate is actually more risky than investing in REITs. REITs were made to help those who wanted to invest in real estate but couldn’t quite afford the capital. REITS require much less cash upfront than REITs do. Plus, you can choose how many shares of each REIT you wish to purchase. However, if you don’t want to invest in REITs, there’s also the option on Real Estate Crowdfunding Platforms. 

Final Thoughts

In Canada, there are so many different types of investments to choose from. Real Estate Investment Trusts are just one of many. That said, they tend to be more medium-risk investments. There are plenty of other investments that can be much more risky. 

Before you choose a REIT to invest in, though, you do want to be sure that you’re choosing the one that works best for your portfolio. Each REIT has their own details and investment predictions that you can use to help make an educated decision. As always, you want to be sure that you have a variety of investments in your portfolio. If you need help or have any questions, then you should speak to your financial advisor to help you get the most out of your investments.