How to Start Investing in REITs: What to Know Before Buying
Published: Jul 15, 2026
Real estate investment trusts, often referred to as REITs, are commonly discussed as a way to gain exposure to real estate without direct ownership of property. For individuals exploring how to start investing in REITs, understanding how these structures work, the types available, and their potential role in investment portfolios can provide useful context.
This article outlines key concepts related to REIT investing in Canada, including how REITs generate income, how they are traded, and what factors may influence their performance.
What Are Real Estate Investment Trusts?
Real estate investment trusts are entities that own or finance income producing real estate. These real estate assets may include:
Apartment buildings and residential properties
Office buildings and commercial real estate
Retail spaces and shopping centres
Industrial facilities and logistics properties
Healthcare properties and specialized real estate
A REIT typically pools money from multiple investors to invest in real estate properties. In return, REIT investors may receive a share of the income generated, often in the form of REIT dividends.
Many REITs are publicly traded on stock exchanges, meaning their units can be bought and sold similarly to stocks. This structure can provide access to real estate exposure without requiring direct property investment.
How REIT Investing Works
REIT investing involves participating in real estate through entities that own or finance income producing real estate. These investments are often accessed through stock exchanges or pooled investment vehicles. Understanding how REIT prices move and how distributions function may help clarify how these investments behave over time.
Why REIT Prices Move
REIT prices may change based on several factors that affect both real estate assets and financial markets:
Property performance: Rental income, occupancy levels, and property value changes may influence the financial results of a REIT
Interest rates: Changes in interest rates may affect borrowing costs and the relative appeal of dividend income
Market sentiment: Broader investor perceptions and market conditions may contribute to price fluctuations
Sector-specific conditions: Different real estate sectors, such as retail REITs or industrial REITs, may respond differently to economic trends
Because many REITs are publicly traded, their prices may move in response to both real estate fundamentals and general market activity.
How Distributions Fit In
Some REITs make regular cash distributions to investors, often derived from rental income or financing activities. These distributions may be viewed as a component of income generation.
However, several points may be considered:
Distributions are not guaranteed and may vary over time
The level of distributions may depend on income, expenses, and broader conditions
Total return may include both distributions and changes in REIT prices, which are not always aligned
This distinction may help clarify that distribution yield represents only one aspect of overall performance.
Public REITs Vs Private Real Estate Investments
REIT investments may differ depending on how they are structured:
Public REITs: Exchange traded REITs are listed on stock exchanges and may offer liquidity through regular trading
Private or non traded real estate vehicles: These may not be publicly traded and could have limited liquidity or different valuation approaches
Common Types Of REITs
Real estate investment trusts may be grouped into a few broad categories based on how they generate income and the types of real estate assets they are connected to. These distinctions may help clarify how different REIT investments function within the real estate market.
Equity REITs
Equity REITs are commonly associated with direct ownership of real estate properties. These REITs may generate income through rental income collected from tenants across various property types.
Examples of equity REIT categories may include:
Residential REITs focused on apartment buildings and housing units
Retail REITs connected to shopping centres and storefronts
Industrial REITs associated with warehouses and logistics facilities
Office REITs tied to office buildings and commercial workspaces
Healthcare REITs linked to medical or care-related facilities
Diversified REITs that hold a mix of different real estate sectors
The performance of equity REITs may be influenced by property value changes, occupancy levels, and broader conditions in the real estate market.
Mortgage REITs
Mortgage REITs differ from equity REITs in that their exposure may be tied more to financing activities rather than direct property ownership. These REITs may invest in mortgages or mortgage backed securities connected to real estate.
Income may be generated through interest payments rather than rental income. As a result, mortgage REITs may respond differently to changes in interest rates and credit conditions.
Because of this structure, the risk profile of mortgage REITs may differ from that of equity REITs, particularly in relation to financing costs and market conditions.
REITs Vs Rental Property
Comparisons between REIT investing and rental property ownership often arise when discussing real estate exposure. While both approaches relate to real estate investments, they may differ in structure, involvement, and how income is generated.
Key Differences At A Glance
Feature | REITs | Rental Property |
Upfront capital | May involve purchasing units through a brokerage account with varying amounts | May require a larger initial investment for property purchase |
Diversification | May provide exposure to multiple real estate assets within one investment | Often concentrated in a single property or limited number of properties |
Liquidity | Publicly traded REITs may be bought or sold on stock exchanges | Property transactions may take more time and involve additional steps |
Ongoing maintenance | Property management handled within the REIT structure | Maintenance responsibilities may fall on the property owner |
Tenant management | Managed by the real estate company operating the REIT | May involve direct interaction with tenants |
Transaction complexity | Transactions may resemble buying or selling stocks | Property transactions may involve legal, financing, and administrative processes |
Day-to-day involvement | Generally limited for REIT investors | May involve ongoing oversight and decision-making |
Why Some Investors Compare The Two
Both REITs and rental property ownership may provide exposure to income producing real estate. In each case, income may be connected to rental activity or underlying real estate assets, and both may be influenced by factors such as property value and conditions in the real estate market.
However, the two approaches may differ in several ways:
Effort and involvement: Rental property ownership may involve direct management responsibilities, while REIT investing may involve less day-to-day interaction
Access: Publicly traded REITs may be accessed through stock exchanges, while direct ownership may require property acquisition
Concentration: Rental property investments may be tied to a specific location or asset, while REITs may offer exposure across multiple properties
These differences may shape how each approach fits within broader investment portfolios and real estate investing discussions.
How Canadians Commonly Buy REITs
In Canada, REIT investments are often accessed through financial platforms that provide exposure to publicly traded securities. The process typically involves brokerage accounts and access to stock exchanges where real estate investment trusts are listed. The steps involved may vary depending on the platform and investment product selected.
Through A Self-Directed Brokerage Account
A self-directed brokerage account is one common method used to access REITs. The general process may include several steps:
Opening an account: An individual may complete an application with a brokerage provider
Funding the account: Money may be deposited through bank transfer or other supported methods
Searching for investments: A listed REIT or REIT ETF may be identified using ticker symbols or search tools
Placing a trade: Units or shares may be purchased or sold through the platform interface
Once a transaction is completed, ownership of the REIT or ETF may be reflected in the brokerage account.
Individual REITs Vs REIT ETFs
Investors may encounter both individual REITs and exchange traded funds (ETFs) that focus on real estate.
Individual REITs: These provide exposure to a specific real estate company and its underlying property portfolio. Performance may be tied to the operations of that particular issuer
REIT ETFs: These funds typically hold a collection of REITs, offering exposure across multiple real estate sectors and companies
Differences between these options may include diversification levels, fee structures, and concentration risk. Individual REITs may be more focused on a single entity, while ETFs may spread exposure across multiple holdings.
Account Types Investors May Use
REITs purchased through brokerage platforms may be held in different types of accounts, depending on individual circumstances and account availability. Common account types may include:
Registered retirement savings plan (opens in a new tab) (RRSP)
Non registered account
Each account type may have different tax considerations and reporting requirements. The way income, dividends, or capital gains are treated may vary depending on the account structure. These distinctions may influence how REIT investments are held and reported over time.
The choice of account type may depend on broader financial considerations, though no specific approach applies universally.
What Investors Commonly Review Before Buying A REIT
Before purchasing REIT investments, various informational factors are often reviewed to understand how a real estate investment trust generates income and how it is structured. These considerations may vary depending on the REIT, the sector involved, and broader real estate market conditions.
Property Type And Sector Exposure
The types of real estate properties held within a REIT may influence how the investment behaves. Common property categories may include residential buildings, office buildings, retail centres, industrial facilities, and healthcare properties.
Sector exposure may also vary, with some REITs focused on a single segment of real estate while others hold a mix of property types. This exposure may affect how the REIT interacts with different economic conditions and real estate trends.
Occupancy, Tenants, And Diversification
Occupancy levels may provide information about how much of a REIT’s real estate assets are generating rental income. Tenant composition may also be reviewed, particularly when a small number of tenants contribute a larger portion of gross income.
Diversification across properties, tenants, and geographic regions may reduce concentration within a portfolio of real estate investments. These factors may vary widely among different REITs and real estate companies.
Debt Levels And Interest-Rate Sensitivity
REITs often use financing as part of their operations. Debt levels may influence how sensitive a REIT is to changes in interest rates and borrowing conditions.
Higher levels of debt may increase exposure to financing costs, while lower levels may reduce that sensitivity. Interest-rate movements may also affect property valuations and refinancing conditions within the real estate sector.
Distribution History And Fees
REITs may make distributions to investors based on income generated from real estate properties or financing activities. Distribution patterns may vary over time depending on net income, expenses, and market conditions.
Fees associated with REIT investments, including management fees or fund expenses in the case of REIT ETFs or mutual funds, may also be reviewed. These costs may affect overall returns and vary depending on the structure of the investment product.
Together, these elements may provide context for understanding how a REIT operates and how it generates income within the broader real estate investment landscape.
Risks And Limitations Of REIT Investing
REIT investing may involve several risks and limitations that can influence returns and overall performance. These factors can vary depending on the structure of the REIT, the property types involved, and broader economic conditions.
Market Volatility
Publicly traded REITs may experience price fluctuations in line with broader stock market movements. Changes in investor sentiment, economic conditions, and real estate outlooks may contribute to short-term or long-term volatility.
Sector Concentration
Some REITs focus on specific real estate sectors such as retail, office, industrial, or healthcare properties. Limited exposure to a single sector may increase sensitivity to conditions affecting that segment of the real estate market.
Leverage Risk
Many REITs use borrowed funds to finance real estate investments. Higher levels of debt may increase exposure to changes in financing costs and repayment obligations, particularly when interest rates move.
Interest-Rate Sensitivity
REIT performance may be influenced by interest rate changes. Rising rates may affect borrowing costs and can also impact the relative appeal of dividend income compared to other income-producing investments.
Distribution Variability
REIT distributions may fluctuate over time based on net income, property performance, and financing conditions. In some cases, distributions may be reduced or adjusted if income levels change.
Pricing And Valuation Differences
The market price of publicly traded REITs may differ from underlying real estate property values. These differences may reflect supply and demand in financial markets, investor sentiment, and liquidity conditions rather than direct property valuations.
These factors may interact in different ways depending on the REIT structure and prevailing market conditions.
Key Points on REIT Investments
REIT investing may provide access to income producing real estate through publicly traded securities, pooled funds, or other investment structures. These investments can involve exposure to different property types, including residential, commercial, and industrial real estate, with income often linked to rental activity or financing operations.
Factors such as interest rates, sector conditions, and market pricing may influence performance and distribution levels over time. Differences between public REITs, ETFs, and private real estate vehicles may also affect liquidity and diversification.
