This page compares the two main ways to own real estate as an investment: buying units of publicly traded REITs, or buying a rental property yourself. It covers the money each needs, where the returns come from, the costs, how each is taxed and the risks, and ends with how to decide or combine them. It is part of WealthNorth’s guide to real estate investing in Canada.
Quick comparison
| Feature | REIT or REIT ETF | Rental property |
|---|---|---|
| Money to start | The price of a unit | A down payment of at least 20% plus closing costs and reserves |
| Leverage | None for you (REITs borrow at the trust level) | A mortgage on most of the price |
| Liquidity | Sell on any trading day | Weeks to months to sell, with commission and legal costs |
| Work | None | Tenants, repairs, bookkeeping, or a manager’s fee |
| Diversification | Many buildings, tenants and cities | One building |
| Control | None | Full: tenants, rents, renovations, when to sell |
| Registered accounts | Can be held in a TFSA, RRSP or FHSA | Can’t be held in one |
Where the returns come from
REITs pay distributions from rent and their unit prices move with property values, interest rates and the stock market. Your return is unleveraged from your side, though the REIT itself carries debt.
A rental produces rent after costs (often negative in expensive cities), principal paydown and appreciation, all amplified by the mortgage. With 20% down, a 10% change in the property’s value is a 50% change in the owner’s equity, up or down. The full breakdown is in is buying a rental property worth it, and the calculator for a specific property is the rental property calculator.
Costs
- REIT ETF: the fund’s management expense ratio (for example, VRE’s MER is 0.32% and XRE’s is 0.60%) plus any trading commission. Individual REITs have no fund fee. The funds are compared in REIT ETFs in Canada.
- Rental property: mortgage interest, property tax, insurance, maintenance, vacancy, management if hired, accounting, and transaction costs when you buy (land transfer tax, legal fees) and sell (commission). Most running costs are paid from the rent, but the owner covers any shortfall.
Taxes
| REIT (non-registered account) | Rental property | |
|---|---|---|
| Income | Distributions split into other income (fully taxed), capital gains, return of capital and sometimes dividends or foreign income | Net rental income taxed in full at your marginal rate |
| Deductions | None beyond carrying charges on money borrowed to invest | Mortgage interest, property tax, insurance, repairs, management and optional capital cost allowance |
| On sale | Capital gain, with return of capital having lowered your cost base | Capital gain, plus recapture of any CCA claimed |
| Registered accounts | TFSA: not taxed; RRSP: taxed on withdrawal | Not possible |
Capital gains on either include 50% of the gain in income. The REIT distribution components are explained in REITs in Canada; rental income reporting is in how rental income is taxed.
Risks
| Risk | REIT | Rental property |
|---|---|---|
| Price swings | Visible daily; unit prices can fall sharply with rates or markets | Less visible, but real when you sell or refinance |
| Vacancy | Spread across many tenants | One vacancy can cut income to zero while costs continue |
| Tenant problems | Not your concern | Arrears, damage and dispute processes |
| Concentration | Spread across many properties | One building, one city |
| Leverage | None at your level | Amplifies gains and losses |
| Interest rates | Affect unit prices and REIT borrowing costs | Affect your renewal payment directly |
| Rules | Tax rules for trusts | Rent control, tenant protections and short-term rental bylaws |
Choosing, or combining both
REITs tend to fit investors with limited capital, no interest in being a landlord, a preference for liquidity and diversification, or unused TFSA and RRSP room. A rental tends to fit investors with a large down payment and reserves, time or budget for management, a market where rent is reasonable relative to price, and comfort with leverage and concentration.
Many investors hold both: REITs inside registered accounts for diversified real estate exposure, and a rental property for leverage and control. Anyone who already owns a home and a rental has a large real estate position, which argues for a smaller REIT holding rather than a larger one. Other passive options, such as crowdfunding and mortgage investment corporations, are compared in investing in real estate without buying property.
Sources
The figures and rules on this page come from these sources, last checked against them between September 23, 2026 and September 25, 2026. How we check facts.
- BlackRock iShares: iShares S&P/TSX Capped REIT Index ETF | XRE
- BMO Global Asset Management: ZRE - Factsheet
- Canada Revenue Agency: Capital Gains – 2025
- Financial Consumer Agency of Canada: How much you need for a down payment
- Vanguard: FTSE Canadian Capped REIT Index ETF | Vanguard Canada