REITS are excellent ways to participate in real estate as they must pay regular distributions. A portion of these distributions is usually tax free, as REITs flow out losses or gains or have cash-flow that is tax preferred through property depreciation.
There are 2 broad categories:
a) private REITS, not publicly traded, such as League's IGW REIT, Skyline or Centurion
b) publicly traded REITs which always run the risk of stock market volatility, like any stock.
The biggest benefit is regular cash-flow (unless they decide to stop like Lansborough did a few years ago and other might do if cash is tight). The biggest drawback is NAV accuracy / volatility. With respect to a) you have to rely on the issuers assurance that their net asset value (NAV) is accurate. The NAV is critical as the distribution from any REIT is not only from cash-flow or funds-from-operations (FFO) but also from asset sales or re-financing.
So if you give me $100,000 and I give you 10% a year, it does matter what is left in the bank (for you) i.e. your share 5 years hence: $35,000 ? $85,000 ? $115,000 ?
Thus, look at the FFO and the % of payout of it, the so called pay out ratio. Then ask if this payout is sustainable in light of the revenue, expenses, asset quality and NAV. That is the critical analysis which is complicated.
Many REITs over-distribute, because they assume the real estate asset value goes up, or because they pay mortgages down every month and thus, can re-finance every so often. If that is not the case, the price of the NAV continues to drops, such as in MOB.un, a GE sponsored Medical Office REIT, or Lansborough REIT (LRT.un) which dropped from around $5 to sub 50 cents (90%+ drop) a few years ago. Thus, despite cash-flow, the overall return is negative for a few years running. Private REITs tend to estimate their NAV based on real or imagined property values, sometimes disclosed, often not. Liquidity can be an issue.
Residential (aka apartment building based) publicly traded REITs in Canada are: Boardwalk (BEI.un), Transglobe (TGA.un), CAPReit (CAR.un), InterRent (IRR.un) and Northern Properties REIT (NPR.un). There are another 15 or so focused on various commercial, like industrial, storage, office or retail. The biggest one is indeed RioCan.
Or you could buy the ETF called XRE.un, a basked of about 12 or 15 REITs in Canada.
There are 200+ REITs in the US.
REITs were great buys about two, 2 1/2 years ago. Boardwalk, for example, went from $22 to over $50, but is now possibly trading over NAV with now a sub 4% yield.
You can usually do better in well run private syndications (such as ours or InvestPlus) or in JVs with REIN members if they know what they are doing (there are quite a few) if cash-flow is less of a goal. Always look at the total return of cash-flow plus equity creation through mortgage paydown or value upside. If cash-flow is the only or primary goal, then REITs are a good option, or real estate with low or no mortgages - however look at the sustainability of the distribution and the asset quality also.
REITs are great vehicles for monthly cash-flow for retirement where equity upside is less relevant perhaps.
Disclaimer: This is an opinion. This is not financial advice. I am not a financial analyst nor a financial advisor. Any investment has risk. Please invest at your own risk. We offer a private total-return oriented real estate based investment vehicle that is not a REIT but could be construed as competing with REITs.