What is a REIT in Canada?

A REIT (Real Estate Investment Trust) is a company that owns, operates, or finances income-producing real estate. Canadian REITs trade on the TSX like stocks and must distribute most of their taxable income to unitholders. They allow you to invest in real estate without buying or managing property.

How do REITs make money?

REITs collect rent from tenants in their properties — apartments, offices, warehouses, malls, or healthcare facilities. After paying operating costs and debt, the remaining income is distributed to unitholders as monthly or quarterly cash payments.

Are REITs a good investment in Canada?

REITs offer 4–7% distribution yields, professional management, liquidity (buy/sell instantly), and diversification across property types and locations. They are a strong choice for income-focused investors. However, they are sensitive to interest rate changes and can be volatile in the short term.

How much do I need to invest in a REIT?

You can buy a single REIT unit for as little as $10–30 on the TSX, or buy a REIT ETF for similar prices. Some platforms like Wealthsimple support fractional shares, meaning you can start with as little as $1.

Should I hold REITs in a TFSA or RRSP?

TFSA or RRSP is recommended for REITs because distributions have complex tax treatment in non-registered accounts (mix of return of capital, capital gains, and other income). In a TFSA all distributions are tax-free. In an RRSP distributions grow tax-deferred.

REITs in Canada 2026: How They Work, Types, Tax Treatment & How to Invest

A REIT (Real Estate Investment Trust) lets you invest in real estate without buying property. You buy units on the stock exchange and receive regular cash distributions from rent collected across a portfolio of properties. In Canada, REITs are one of the most popular income investments — and they come with unique tax characteristics that every investor should understand.

How REITs Work

A REIT operates like a company that owns and manages real estate:

The REIT raises capital by selling units on the TSX
It buys or develops income-producing properties
Tenants pay rent
After expenses and debt payments, the REIT distributes income to unitholders
Canadian REITs must distribute most of their taxable income

Most Canadian REITs pay monthly distributions, making them popular with income investors.

Types of REITs in Canada

By Property Sector

REIT Type	What They Own	Yield Range	Risk Level
Residential	Apartments, condos	3–5%	Lower
Industrial	Warehouses, logistics centres	3.5–5%	Lower
Retail	Malls, plazas, grocery-anchored	5–7%	Medium
Office	Downtown and suburban offices	7–10%	Higher
Healthcare	Hospitals, seniors homes, medical offices	5–7%	Medium
Diversified	Mix of property types	5–6%	Medium
Data centre	Server facilities	2–4%	Lower

By Investment Approach

Type	Description	Example
Equity REIT	Owns and operates properties	Most Canadian REITs
Mortgage REIT	Lends money secured by real estate	Rare in Canada
Hybrid REIT	Owns properties + holds mortgages	Some Canadian REITs

Nearly all Canadian REITs are equity REITs — they own actual properties.

Top Canadian REITs by Sector

Industrial (Strongest Growth)

REIT	Ticker	Yield	Why
Granite REIT	GRT.UN	~4.0%	Warehouses, distribution centres
Dream Industrial	DIR.UN	~5.0%	Industrial and logistics

Residential (Most Defensive)

REIT	Ticker	Yield	Why
CAPREIT	CAR.UN	~3.5%	Largest Canadian apartment REIT
Killam Apartment	KMP.UN	~4.5%	Atlantic Canada focus
Minto Apartment	MI.UN	~4.0%	Ontario and Quebec

Retail (Highest Income)

REIT	Ticker	Yield	Why
CT REIT	CRT.UN	~5.5%	Canadian Tire locations
RioCan	REI.UN	~5.8%	Urban retail, mixed-use
SmartCentres	SRU.UN	~7.0%	Walmart-anchored plazas
Choice Properties	CHP.UN	~5.0%	Loblaw-anchored grocery

Healthcare (Aging Demographics)

REIT	Ticker	Yield	Why
NorthWest Healthcare	NWH.UN	~7.0%	Global healthcare properties
Chartwell Retirement	CSH.UN	~4.5%	Seniors living

How REIT Distributions Are Taxed

REIT distributions are not simple dividends. Each distribution contains a mix of income types:

Component	Tax Treatment	Typical %
Other income (interest)	Fully taxable at marginal rate	20–40%
Capital gains	50% taxable	5–15%
Eligible dividends	Dividend tax credit applies	0–10%
Return of capital (ROC)	Tax-deferred*	30–60%
Foreign income	Fully taxable	0–20%

*Return of capital reduces your adjusted cost base (ACB). You pay tax later when you sell — as a capital gain. This makes ROC the most tax-efficient component.

Best Account for REITs

Account	Tax Advantage
TFSA	Distributions are completely tax-free
RRSP	Tax-deferred; no annual tax slips to worry about
Non-registered	Complex; must track ACB for return of capital

Recommendation: Hold REITs in your TFSA or RRSP to avoid the annual tax complexity entirely.

How to Evaluate a REIT

Metric	What It Tells You	Healthy Range
FFO (Funds from Operations)	Cash flow from operations	Growing year-over-year
AFFO (Adjusted FFO)	FFO minus maintenance capital	Growing
Payout ratio (AFFO)	Distribution ÷ AFFO	70–90%
Occupancy rate	% of space leased	95%+
NAV (Net Asset Value)	Value of properties per unit	Trading near or below NAV
Debt-to-assets	Leverage level	Under 50%
Weighted average lease term	How long tenants are locked in	5+ years

Red flags: Payout ratio over 100% (unsustainable), occupancy below 90%, or debt-to-assets above 55%.

REITs vs Buying Rental Property

Factor	REITs	Rental Property
Starting capital	$10+	$50,000–$200,000+
Liquidity	Sell in seconds	Months to sell
Diversification	Hundreds of properties	Usually one
Management effort	Zero	Significant (or hire)
Leverage control	None (REIT manages)	You control mortgage
Income predictability	Monthly distribution	Varies with vacancy
Upside potential	Moderate	Higher (forced appreciation)
Tax deductions	RRSP/TFSA sheltering	Mortgage interest, depreciation
Control	None	Full

REITs and rental property are complementary, not mutually exclusive. Many real estate investors hold both.

How to Invest in Canadian REITs

Option 1: Buy Individual REITs

Open a brokerage account (Wealthsimple, Questrade, etc.)
Search for the REIT by ticker (e.g., CAR.UN)
Place a buy order
Receive monthly distributions to your account

Option 2: Buy a REIT ETF

A single REIT ETF gives you diversified exposure to 15–25 REITs:

ETF	Ticker	MER	Yield	Holdings
Vanguard FTSE Canadian REIT	VRE	0.38%	~4.0%	17 REITs
iShares S&P/TSX Capped REIT	XRE	0.61%	~4.2%	18 REITs
BMO Equal Weight REITs	ZRE	0.61%	~4.5%	23 REITs

See our complete REIT ETF comparison for more options.

REIT Risks

Risk	Explanation
Interest rate risk	REITs often fall when rates rise (higher borrowing costs, less attractive yields)
Sector concentration	Office REITs have struggled post-pandemic; retail faces e-commerce pressure
Economic downturn	Higher vacancy, lower rents
Distribution cuts	If cash flow drops, REITs may reduce payouts
Leverage	Most REITs carry significant debt — amplifies gains and losses
Liquidity illusion	REIT unit prices can be volatile even though underlying properties are stable

How Much to Allocate to REITs

Investor Type	Suggested REIT Allocation
Growth-focused (under 40)	0–10% of portfolio
Balanced (40–55)	5–15% of portfolio
Income-focused (55+)	10–25% of portfolio
Already own rental property	Reduce allocation — you already have real estate exposure

Note that all-in-one ETFs like XEQT and VGRO already hold some real estate through their broad market exposure.