Real Estate Investment Trusts — better known as REITs — are one of the most accessible ways for everyday investors to gain exposure to real estate without buying property directly. If you have ever wanted to invest in commercial office buildings, shopping centres, data centres, or apartment complexes but lacked the capital to do so, REITs are the answer.
A REIT is a company that owns, operates, or finances income-producing real estate. By law, REITs must distribute at least 90% of their taxable income to shareholders as dividends. This makes them one of the most reliable income-generating investments available, often yielding between 4% and 10% annually depending on the sector and market conditions.
There are three main types of REITs. Equity REITs own and manage physical properties, generating income from rent. Mortgage REITs invest in mortgages and mortgage-backed securities, earning income from interest. Hybrid REITs combine both approaches. For most beginners, equity REITs are the most straightforward starting point because their income is tied directly to real estate performance.
When evaluating a REIT, the most important metric to understand is Funds From Operations (FFO) — not earnings per share. FFO adjusts net income for depreciation, which inflates expenses on paper but does not reflect the actual cash generated by the properties. A REIT with a strong FFO relative to its dividend payout is a sign of sustainable income.
Sector selection matters enormously. Industrial REITs owning logistics and warehouse facilities have significantly outperformed retail REITs over the past decade as e-commerce drove demand for distribution centres. Data centre REITs have benefited from cloud computing growth. Healthcare REITs provide defensive income tied to demographic trends. Understanding the underlying demand drivers of each sector is essential before committing capital.
REITs are sensitive to interest rate changes. When interest rates rise, the cost of financing properties increases and REIT valuations often compress — making high-quality REITs temporarily cheaper. Conversely, a declining rate environment typically benefits REITs. Investors who understand this cycle can use rate movements to time REIT purchases strategically.
At Aurion Trust Holdings, our Real Estate platform provides access to a curated selection of REIT opportunities across residential, commercial, industrial, and international markets. Our advisors can help you build a real estate allocation suited to your income goals, risk tolerance, and investment timeline.