REIT’s: Advantages and Benefits

The advantages and benefits of owning a REIT (real estate investment trust) are numerous. REITs are a great way to capitalize on the high-end real estate market, while leveraging only a small amount of capital. Pooling financial resources with other like-minded investors facilitates the process and opens the door to lucrative opportunities that were otherwise unattainable to lone investors with limited time or management resources.

Real estate investment trusts provide:

• CAPITAL APPRECIATION – REITs maximize capital appreciation by identifying properties with significant upside. Structural improvements and re-zoning further increase the overall value of the investment.
• STEADY INCOME – REITs generate steady, consistent cash flows over time via the distribution of net rental income. Often, this mandatory distribution generates income of 5%-12% annually on the original investment.
• TAX EFFICIENCY – REIT distributions remain un-taxed at the source and eventual taxation is treated more favourably than other investments in the hands of the investor. Furthermore, capital appreciation is treated like a capital gain when REIT units are sold, remaining completely tax-deferred until then.
• TANGIBLE ASSET BACKING – REITs are backed by insured, tangible assets which minimizes volatility and market fluctuations. This leaves the investor with peace-of-mind and a feeling of security knowing that a swing in the stock or markets won’t create an immediate paper loss.
• OWNERSHIP OF REAL ESTATE – The unique combination of capital appreciation and steady income is why real estate is generally considered the ultimate wealth-building investment.
• DIVERSIFICATION – Often, REITs provide diversification by real estate type and region. Such a scenario wouldn’t be possible without syndication (group ownership) and the accumulation of financial resources.
• LIQUIDITY – REITs provide flexible redemption rights to unitholders. This eliminates the hassle of being locked in and provides investors access to their capital should unexpected personal circumstances occur.
• MANAGEMENT COMPENSATION BY PERFORMANCE – It is in the Asset manager’s best interest to increase the value of the REIT as much as possible, as their compensation is usually tied to the performance of the investment.

As you can see, the benefits of REITs are comprehensive. The advantages of syndication outweigh the options of any given individual investor and provide maximum investment potential. The combination of income, growth, security, liquidity, tax efficiency, and diversification cannot be found in any other investment. This is why so many prudent investors choose REIT investments as a basis for their balanced investment portfolio.

This article was written by Aidan Henry. He is the Community Ambassador at League Assets Corp. – a private Canadian REIT.