I’m considering holding REITs in my TFSA since they would be a good income earning investment, but not necessarily tax efficient. My first thought was to look into the iShares CDN REIT Sector Index Fund (XRE), but it’s 0.55% MER is rather high for an ETF than only has 11 holdings.
You can replicate more than 55% of the index fund by investing in the four largest Canadian REITs, saving the 0.55% expense and possibly reducing risk by buying the more established, large cap, companies. The four largest are RioCan REIT (REI.UN), Canadian REIT (REF.UN), H&R REIT (HR.UN), and Boardwalk REIT (BEI.UN). Coming close to their actual weighting, a simple way to set up a portfolio would be 40% in RioCan and 20% for each of the other three.
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I think owning the stocks individually would be a better option you will safe on the high MER as well you have more options and control over it, you could include some US REIT’s or even other income trusts.
Exactly Ray. I will look into other income trusts as well, once I get these four I can see what the next plan of attack is!
Anyone know what’s happening in the Canadian market for apartment buildings? Market values are down badly in the US. Even if Canada is escaping the worst of the house price drops, apartment prices are likely hit by rising risk aversion and higher cap rates. Impacts residential REITs like bei.un and car.un
Clues on 2009 stolen from
http://www.dtzbarnicke.com
Investment
The supply of quality product for sale could not meet the demands of buyers in 2008. The most sought after products are owned and held by the life companies, REITs, pension funds and other large publicly traded property management groups, forcing buyers to look for value investment in neighboring secondary markets such as Kingston, Kitchener, and London. For the relatively few opportunities that did present themselves in 2008, the market was quick to respond and transactions were completed swiftly.
However, in the third quarter of 2008, the number of active buyers and sellers declined significantly as the credit crunch took many investors out of the game and signs of rising cap rates left sellers reluctant to part with inventory at reduced prices. Transaction volume decreased in 2008 across all product classes and is expected to remain flat in 2009. Many owners will become pressured sellers in order to raise equity to satisfy debt obligations in an environment where financing remains difficult to obtain. With reduced buy-side competition, given the lack of available capital in the market, expect some great opportunities for well capitalized buyers.
REITs like REI.UN and REF.UN are investment trust funds right? If we hold these in TFSA account, are the dividends and capital gain is still tax free like other investments in TFSA ?
If not, how do we calculate the tax ?
BMO Has a reit ETF now..