Private apartment funds: Long-standing supports for long-term holders

In a period defined by an evolving trade war, heightened political risk, and economic uncertainty, investors are looking for sources of stable income. Private real estate investment funds focused on rental apartments may be part of the solution, offering an “all-weather strategy” for navigating a range of market conditions, says Geoff Lang, SVP, Business Development at Equiton. 

For instance, the rising interest rates and inflation of recent years were a cause for concern among many investors, he says. But as inflation carved into the rest of their portfolio returns, market conditions at the time saw distributions derived from rental income continue — underscoring the role private real estate investments can play in a diversified portfolio. 

Lang notes the three key benefits of private rental apartment funds: tax-efficient monthly income potential^{^}, strong fundamentals, and the opportunity to invest in tangible assets. Here’s what they can mean for investors.

1. Tax-efficient income

While there are as many private real estate investment funds as there are property types, those focused on rental apartments are often seen as the “gold standard”, particularly among institutional investors like pensions and family offices, says Lang. Private rental apartment funds offer investors exposure to a portfolio of properties, which can be diversified by location, age, and so forth, and often pay monthly distributions derived from rental income.

When it comes to tax efficiency, private real estate investment funds may classify distributions as return of capital (ROC), which effectively allows investors to defer taxes until the time of disposition.  This often proves to be a distinct advantage compared to dividend income and interest income. So, it can be very strategic for clients looking for tax-efficient cash flow,” says Lang. “It also benefits those with a longer investment horizon, allowing them to reinvest the full amount of their distribution.”

2. Strong fundamentals

Canadians will always need a place to live; that’s why there’s ongoing demand for rental units across Canada, says Lang. As well, Canada has experienced historically high levels of population growth, adding further pressure on housing.

In fact, “rental market conditions across Canada’s large urban centres remained tight,” according to the Canada Mortgage and Housing Corporation’s fall 2024 rental market report. Further, rents increased by 23.5% when units turned over. 

“When you have occupied properties, it signals a healthy rental portfolio,” says Lang, adding that Equiton’s Apartment Fund (Equiton Residential Income Fund Trust) has an occupancy rate of nearly 98% as at Q1 2025. Compare that to Canada’s national occupancy rate, which has hovered around 96% in recent quarters, signaling intense pressure in the rental market.

3. A tangible asset

“Canadians just love talking about real estate, and it’s fairly easy to understand,” says Lang. Still, not everyone wants the headache of becoming a landlord, he adds, which comes with the responsibility of acquiring properties that have the potential to appreciate in value, collecting rent from tenants, doing renovations, and taking calls late into the night. 

“Canadians have realized that it’s very onerous,” he says. “We see many mom-and-pop style owners divesting their properties and making their lives easier with well-run private real estate funds.”

He emphasizes that when investors own shares of a private real estate fund, they have a stake in real, tangible investments. “Investors love being able to visit the properties, to drive by and see them. It’s almost like owning a building yourself,” says Lang. “The difference is that someone else is managing the property and you can go home smiling at the end of the day.”

Private real estate plays a bigger role as investor needs evolve

The traditional 60/40 portfolio split no longer offers the same mix of growth, stability and income it was once known for, says Lang.

“It’s now more of a 50/30/20, where that 20% is allocated to alternatives looking to provide alpha or income, depending on their goals,” he says. “Private apartment funds offer a kind of buffer between the two. They’re designed for a mix of property value appreciation — your alpha — as well as income, which comes from rent and other sources.”

That said, Lang notes that careful consideration must be given to choosing a private real estate investment fund that’s right for one’s clients.

“It can be difficult choosing which is the best, which one is the best fit for their clients,” says Lang. “Making sure the company is implementing a corporate governance strategy before allocating is a must.”

To start, suggests Lang, ensure the fund manager has audited financials available on its website, is being as transparent as possible, has a majority independent board, and generally operates like a public company — even if it’s private. Lang adds that private real estate investment funds may be well suited for long-term investors with a three- to five-year hold.^†

Equiton’s Apartment Fund is one such investment solution that is designed to deliver a combination of capital appreciation and monthly income, explains Lang. 

“Our multifamily-focused Apartment Fund is designed for long-term investors who also seek monthly, tax-efficient income,” Lang says. “Private Canadian Apartments,¹ an index reflecting the performance of Canadian multifamily assets, hasn’t had a negative year in over three decades, making them a historically great choice for this kind of investor.” Equiton’s Apartment Fund is included in this asset class.

Click here for more information on Equiton’s Apartment Fund.

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^{^} Not to be construed as tax advice. For specific tax advice, consult a tax professional.

^†Private market securities are subject to higher risks, including limited liquidity. These investments may not be accessible or suitable for all investors. Consult a registered dealer for more info.

¹ Private Canadian Apartments = MSCI/REALPAC Canada Quarterly Property Fund Index – Residential / MSCI Real Estate Analytics Portal NOTE: This information is not publicly available