What Accredited Investors Should Know About Tax-Efficient REITs

Unlike direct ownership of a rental property, REITs pool investor capital to acquire and manage diversified portfolios of real estate. For accredited investors, REITs offer:

Diversification – exposure to multiple properties instead of a single asset.

Professional management – experienced teams handling operations, leasing, and compliance.

Liquidity – greater flexibility compared to private ownership, particularly in open-ended structures.

Liability protection – investors are not personally liable for property-level risks.

This structure allows accredited investors to participate in institutional grade real estate without the complexity or financial barriers.

The Tax Advantage

In Canada, REITs are designed as “flow-through” vehicles. This means most of the income earned by the REIT is distributed directly to investors, avoiding corporate-level taxation.

According to the Canada Revenue Agency, qualifying REITs must meet strict tests for income sources and property types. When structured properly, this creates two advantages for investors:

Avoiding double taxation – unlike corporations and ETFs, which pay tax at the corporate level and again at the shareholder level, REITs pass income directly through.

RRSP/TFSA eligibility – many Canadian REITs are eligible for registered accounts, enabling investors to shelter distributions from immediate taxation.

REITs in a High-Rate Environment

With interest rates at elevated levels, accredited investors are increasingly focused on after-tax returns. Tax efficiency matters more than ever when comparing real estate with other asset classes like bonds or equities.

Research indicates that properly structured REITs remain a cornerstone for income-focused investors, particularly when combined with registered accounts that further reduce tax drag.

Accredited Investor Considerations

While REITs offer compelling benefits, accredited investors should carefully consider:

Liquidity terms – open-ended vs. closed-ended REITs.

Hold periods – many private REITs use multi-year holdbacks to support stability.

Distribution policy – frequency and percentage of income distributed.

Alignment with goals – income vs. growth vs. long-term development potential.

These factors influence how REITs fit within a broader wealth strategy.

A Platform for Real Assets

At Black Oak Capital, our Agri-Growth Fund is structured as an open-ended REIT to provide accredited investors with:

Exposure to institutional-grade farmland in Ontario.

Tax-efficient income flow-through, eligible for registered accounts.

Protection from personal liability that comes with direct real estate ownership.

This structure allows us to combine the stability of farmland with the long-term upside of development-adjacent holdings.

For accredited investors, tax efficiency is more than a technicality — it directly impacts long-term compounding. REITs remain one of the most effective ways to access real estate at scale, reduce tax drag, and participate in institutional-quality assets.

In today’s environment, where every basis point matters, the structural advantages of REITs are worth understanding.