How to Start a REIT in Canada? A Step-by-Step Guide

Do you want to know how to start a REIT in Canada? If so, you’re in luck! This step-by-step guide will tell you everything you need to know about how to get started. 

We’ll cover the basics of what a REIT is, the requirements for setting one up, and the best way to go about raising capital. So whether you’re an experienced investor or just starting out, this guide has something for everyone!

Let’s dive in!

The Basics: What are REITs?

A real estate investment trust, or “REIT”, is a company that owns and operates income-producing real estate. REITs are one of the simplest and most popular ways to invest in commercial and residential property. They offer investors access to a wide range of properties, including office buildings, shopping malls, apartment complexes, and even prisons!

REITs are a type of “pass-through” entity, meaning that they don’t pay income tax on their profits. Instead, all of the company’s taxable income is passed through to its shareholders, who then report it on their individual tax returns. This makes real estate investment trusts an attractive investment for both individuals and corporate entities because they don’t have to worry about tax implications.

The REIT business model is relatively straightforward: a company buys property, leases it out, collects rent from tenants, pays expenses like maintenance costs or interest on loans (if any), then distributes the remaining profits as dividends to shareholders.

Requirements for Setting Up Canadian REITs

There are a few requirements that you must meet before investing in a REIT in Canada. 

First, the company must be incorporated under Canadian law. 

Second, at least 75% of the REIT’s assets must be invested in real estate (although this can include both commercial and residential property). 

Third, the company must have at least 100 shareholders who each own no more than 20% of outstanding shares. 

Finally, 75% or more of all funds raised by the REIT must come from Canadian residents and corporations (this requirement is waived if less than 50% of assets are invested in Canada).

How to Start a REIT in Canada

A real estate investment trust, or REIT, is a company that owns and operates income-producing properties. This can include things like office buildings, retail stores, warehouses and other types of commercial property.

In order to start a REIT in Canada, you’ll need to follow the steps below:

Step One: Establish a Canadian corporation

The first step is to establish your company as a corporation in Canada. This involves filing Articles of Incorporation with the relevant provincial or territorial government, which will outline details about the business such as its name and address. If you’re planning on setting up a REIT investment across multiple provinces then it may be necessary to register federally instead of just in one province.

Step Two: Register a business name

Once your company is incorporated, you’ll need to register a business name and trademark your brand. This can be done by filing a Name Registration with the Canadian Intellectual Property Office (CIPO) or through a local law firm.

Step three: Open a bank account for your REIT trusts in Canada

You’ll need to open a bank account for your REIT in order to keep its finances separate from you personally. This can be done by visiting any number of financial institutions, although it may be wise to ask an accountant or lawyer first because there are some legal issues that need to be considered when opening an account.

Step four: Obtain licenses and permits for your real estate investment trust

You’ll also need to obtain licenses and permits before investing in a REIT. This will vary depending on the type of property you’re planning to operate, so it’s important to consult with local authorities to find out what’s required.

Step five: Apply for a Federal Tax ID Number (FEIN) in Canada

In order to do business in Canada, your real estate investment trust will need a Federal Tax ID Number (FEIN). This can be applied for by submitting Form SS-16 with the Internal Revenue Service (IRS).

Your company will also need to file regular tax returns and report any income or expenses. This is where it’s beneficial to have a payroll accountant on board who can help you navigate the complex tax system in Canada.

In addition, your REIT will need to comply with various licensing and filing requirements depending on the province or territory it operates in. For more information, please consult with an accountant or lawyer.

Step Six: Purchase Properties for Your REIT trusts in Canada

Once you’ve set up your company and obtained all the necessary licenses and permits, it’s time to start buying properties.

You’ll want to make sure that any property you purchase has a good location (e.g., close to amenities), is in good condition (e.g., not falling apart) and has been well maintained over time because this will help ensure that it remains a valuable asset for years to come.

Step Seven: Manage and Maintain Your Properties in Canada

Once you’ve acquired some properties, it’s important to start managing and maintaining them effectively. This can be done by creating a property management plan and making sure that all the necessary repairs and maintenance are carried out on schedule.

You should also keep track of any changes in the market (e.g., interest rates, vacancy rates) so that you can make adjustments to your real estate trusts as needed.

Step Eight: Collect Rent from Your Tenants in Canada and Deposit it into Your Bank Account

Once your properties are rented out, it’s time to start collecting rent from your tenants and depositing it into your bank account. This can be done on a monthly or quarterly basis, depending on how you’ve set up your accounting system.

Step Nine: Reinvest Your Profits Back Into More Properties in Canada

Once your REIT has been operating for a while, you may find that it’s generating more income than you need. This excess cash can be reinvested back into the company by purchasing additional properties or expanding on existing ones (e.g., adding new units).

Bottom Line

Now you know how to start a REIT in Canada! Although this may seem like an intimidating process, it doesn’t have to be. With hard work and determination, you can make your dream of owning a real estate investment trust (REIT) come true.