February 8, 2010 - With improving yields, Real Estate Investment Trusts (REITs) in Canada have outperformed their American counterparts and are looking towards a bright 2010 and beyond.
 
In addition to their profitable performance, REITs could become increasingly prevalent in the next few years based on new legislation set for 2011.
 
Investors have found good yields, a significant tax advantage, and the ability to get into real estate with liquidity and avoiding much hassle. REITs certainly have paid off in the double digits of percentage growth in the recent past, but it is still something many investors haven't considered yet in Canada.
 
"It's a small sector of the capital market, so most people aren't aware that they exist," says Dennis Mitchell, a portfolio manager at Sentry Select. "People still like to buy stocks."
 
REITs are basically a mutual fund that invests in a portfolio of real estate of specific types of properties such as apartments, office, retail or hotels. Unit holders get a proportional share of profits and losses. While perhaps not as glamorous as playing the stock market or investing in individual properties, they are generally more predictable and involve significant less work than landlording.
 
Mitchell says he expects Canadian REITs to show good returns in the low teens for the next few years as a total return (distributions plus capital appreciation) given growth and an improved global economy.
 
"With REITs yielding seven per cent, this is a pretty easy prediction to make," he says. "Also, next year will see more capital flow into REITs as income trust investors sell to avoid the impending 2011 taxation of income trusts."

For the full article, pick up a copy of the February issue, currently on newsstands