One of the things I hear frequently from potential real estate investors is that they love the idea of owning real estate but they don’t want to be landlords. I get it. Owning and managing properties takes work. The benefits are great, but they don’t come without some effort.
Fortunately, buying a property and becoming a landlord is not the only way to invest in real estate. Aside from options like house flipping or wholesaling, there’s also the option of investing in a REIT.
What is a REIT?
A Real Estate Investment Trust, or REIT, is structured similar to a traditional mutual fund that pools investor capital for the purpose of investing in a portfolio of assets managed by professionals. A REIT invests in dozens, or even hundreds, of income producing commercial plazas and residential complexes. The REIT collects rents from tenants from these properties, and as a Unitholder, net operating income is distributed back to the investors in the form of monthly distributions – cash flow! Investors are also expected to benefit from capital appreciation in the underlying properties over time through increases in Unit values.
REIT’s VS Traditional Property Ownership
Purchasing income generating properties can be lucrative, no doubt about it. Whether it’s a flip property or a buy-and-hold rental, there’s great potential for short and long-term wealth accumulation. However, these methods also pose challenges. Owning and managing properties takes a lot of work, especially once you start getting into commercial properties.
Investing in a REIT gives investors the opportunity to take part in ownership in a portfolio of real estate, that they can actually drive past, without having to worry about the day-to-day management of properties, assets and tenants. For this reason, REITs are often considered a ‘passive’ investment.
Why You Should Care
If it isn’t obvious already, REITs are a great alternative to traditional property investing. People who invest in REITs enjoy all the benefits of owning real estate assets, in a tax-efficient manner, without having to go out and source, buy, manage or finance the property themselves. If you want to invest in real estate but don’t want to do any of the work, this might be a good option for you.
Photos courtesy of District REIT
**Units of District REIT are available to qualifying investors under the Offering Memorandum Exemption (as provided in NI 45-106), and must be purchased through a registered Exempt Market Dealer (EMD).