Skyline Wealth Explains: Property Ownership VS. Investing In A REIT - Skyline Wealth

Skyline Wealth Explains: Property Ownership VS. Investing In A REIT

Many people invest in rental property as a means of passive income, as cash flow is generated from the tenant’s rental payments. However, the term ‘passive income’ may sometimes be misleading, as rental property ownership is often not as passive as it seems. In fact, it can potentially come with some major headaches—especially if you are managing the property yourself.

 

The biggest potential challenges of real estate ownership and property management

  • If you’re investing in rental property personally, you’ll likely be limited to the amount of properties you’re owning at one time. The less properties you own, the higher the potential risk of vacancy impacting your cash flow, as you’ll be generating rental income from a limited number of sources.
  • Your geographic diversification may be limited. Investing in many rental properties spread across different communities—and even provinces—is one way to mitigate potential risk of cash flow disruption due to vacancy. However, an individual property owner & manager will likely be unable to invest in rental property far outside their own region.
  • You’ll also be likely be limited to the size of the properties, and their asset class. Where corporations and institutions typically own groups of properties, individuals typically do not have the purchasing power to buy multiple real estate properties of non-residential types (industrial, retail, hotels, etc.)
  • You’ll be responsible for maintenance, upkeep, and tenant management. If you own and manage rental properties, that makes you a landlord. You may find yourself inheriting all of the potential hassles that accompany that role: from roof repair, to broken toilets, to tenants behind in their rent.

 

How does REIT investing compare to personal property management?

Investing in a Real Estate Investment Trust (REIT) provides the opportunity for an investor to enjoy the benefits of real estate investing without taking on a landlord role themselves.

  • REITs are structured for investors to have pooled ownership of a group of properties. Instead of investing in a single property, you’re investing into an entire portfolio of multiple properties. Because they are often owned by businesses or institutions, REITs are more likely to have the equity available to purchase more properties that are larger in scale, and more diverse in their locations. Each of these factors adds up to the potential for greater stability in cash flow, and the potential for investor returns.
  • REIT investing is a ‘hands-off’ real estate investment: no hassles when it comes to property and/or tenant management. REITs hire property management companies to handle landscaping, repairs, rental payments collection, and more—leaving investors to enjoy truly passive income.
  • REITs can offer greater tax efficiency. All, or a portion, of distributions to investors may be classified as Capital Gains or Return of Capital rather than income. It should be noted that direct ownership and management of real estate does have its own tax advantages; your earned rental income can be offset by expenses.
  • REITs may offer the opportunity to invest via a registered account. These include RRSPs, RRIFs, and TFSAs. Investing through a registered account is an additional tax-saving strategy.

 

How does Skyline Wealth make REIT investing easy?

Skyline Wealth offers three private REIT investment products, each focusing on a different real estate asset class:

  • Skyline Apartment REIT – professionally-managed multi-residential properties in secondary and tertiary Canadian markets
  • Skyline Commercial REIT – professionally-managed light industrial properties along major Canadian transportation corridors, with a focus on logistics and warehousing
  • Skyline Retail REIT – professionally-managed retail properties in secondary and tertiary Canadian markets, with a focus on ‘everyday essential’ brands

Skyline Wealth also offers Skyline Clean Energy Fund, a portfolio of professionally-maintained clean energy producing assets across Ontario. Although Skyline Clean Energy Fund is an equity fund, its origins are based in the Skyline1 team’s experience installing and managing solar assets at its REIT properties.

With each of these investment products:

  • You can invest via a registered account (RRSP, RRIF, TFSA, etc.)
  • Each product is a robust portfolio of assets with historically stable and steady returns. Each has its own tailored acquisitions and management strategy.
  • You’ll be provided the opportunity to invest in real estate or clean energy assets—without any of the hassles of managing the assets yourself.

Cumulatively among its three REIT investments, Skyline currently owns and manages approximately $5.2 billion in real estate assets.2 With our experience and insight, we’d be happy to discuss with you how private REIT investing may be a suitable fit for your investment portfolio. Get in touch with us any time.

[1] Skyline, or Skyline Group of Companies, is an umbrella term used to generally refer to all associated entities.
[2] As at Q3 2020.

Skyline Wealth Management Inc. (“Skyline Wealth”) is an Exempt Market Dealer registered in the provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Prince Edward Island, Québec and Saskatchewan. The information provided herein is for general information purposes only and does not constitute an offer of securities. Sales of interests in any investments offered by Skyline Wealth are only made to certain eligible investors pursuant to regulatory requirements and available exemptions. Any information provided herein is current as at the date of publication and Skyline Wealth does not undertake to advise the reader of any changes.

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