Owning Too Much Real Estate Locks You Out of Strong Stock Returns

The Greater Toronto Area real estate market has officially dipped below the $1 million mark for the first time in five years, with the average selling price for all home types landing at $973,000 last month. This contraction represents a 27% price decline from the market’s all-time peak in February 2022.

I’ve heard many people say before that their home has been their best investment. Because their primary residence is tax exempt, maybe it has been. But owning a second rental property is subject to capital gains tax, and is something we don’t recommend.

If you’re invested in publicly traded stocks, residential real estate likely ends up being your worst investment because of the many costs that so many ignore. People often look at the price their neighbour sold their home for last month, subtract the price they paid for the home they live in today, and compute the difference as their profit. 

However, after considering carrying costs like property taxes (up 21% the last three years for Torontonians), land transfer taxes, renovations, insurance, maintenance, and real estate agent fees, most homes barely manage to keep up with inflation. 

If you really like the real estate sector, we much prefer owning Real Estate Investment Trusts (REITs) rather than a second physical property. The advantage is simple: liquidity. If we change our mind one morning and want to dump a stock, all it takes is pressing the “sell” button and we are out of the investment instantly. There are no stagings, no lawyers, and no tedious visits to the bank. We get to participate in the real estate market without the headache of being a landlord.

Two of our REITs reported earnings last week on February 17, 2026. 

CT REIT, which is anchored by Canadian Tire, posted almost 5% growth in their net operating income amid an exceptionally high occupancy rate of 99.5%. Because of this stability, they were able to increase their monthly distribution last spring.

We saw similar strength from Dream Industrial REIT, which reported that its net operating income grew by about 6%, driven largely by strong rent growth across Canada. They also maintained a solid occupancy rate of 96.2%. 

We started buying both of these REITs in 2024. Since then, our clients are up by about 35% on CT REIT and 15% on Dream Industrial REIT, including distributions. We’ll take those real estate returns over the GTA home price returns as of late. (Disclosure: Clients, Sunni Schneider, and Jeff Pollock have a financial interest in CT REIT and Dream Industrial REIT as unitholders but have not received any compensation from either issuer.)

Ultimately, if we ever lose conviction in either REIT, we can exit the position with a single click.

-written by Jeff Pollock