Canadian Real Estate Investment Trust

A Canadian real estate investment trust (REIT) is a company that invests primarily in real property, such as apartment buildings, office towers and other income producing properties. Associated income (primarily from rent) is distributed to their shareholders, usually in portions of dividends, return on invested capital and income.

Canadian real estate investment trusts are required to be configured as trusts and are generally not significantly taxed if they distribute their net taxable income to shareholders. REITs have been excluded from the income trust tax legislation proposed in the 2007 budget by the Conservative government of Canada.

Many Canadian real estate investors choose a REIT to participate in the real estate market, without having to be a landlord or manager themselves.

Are there Risks Associated with a Real Estate Investment Trust Company?

There are three reasons why you may wish to consider owning and managing your own real estate portfolio rather than a REIT.

• REIT’s may overvalue, and consequently overpay, for a particular real estate deal. There is often a heavy reliance on future lease increases to make the overvalued purchase pay off. The result is that the trust may not have adequate cash flow, and can cause a subsequent drop in share value.
• High leverage positions to control the maximum asset can increase investor risk, if not properly understood by the individual unit holder.
• Lastly, although real estate investment trusts are invested primarily in property, their performance can be linked to the stock market. The effect is that during a stock market slip, REITs typically slip in tandem.

Canadian Real Estate Investment Coaching is Available

What is the alternative to a real estate investment trust? To maintain the maximum amount of control over your investment dollars, consider your own investment portfolio in real estate. Yes, there are some challenges that an owner of rental properties can face—and being a landlord is not for everyone; however, there are professional management companies as well as excellent Canadian real estate investment coaching companies that can assist you with acquiring, financing and managing your own real estate assets. In fact, MBN Mortgage would like to apply for the job!

The benefit is complete control over your assets, reduced management costs compared to real estate investment trusts and the potential to realize some significant returns on your invested capital. Please us, MBN in Calgary, AB, for more information.