How to Structure a Real Estate Fund in Canada

Step-by-step guide to structuring a real estate fund in Canada. Covers limited partnership vs trust, fund manager compensation, investor reporting, NAV calculations, and subscription agreements.

March 20, 2026 · 12 min read

Book a Strategy Call Apply Online

4.8 · 116 reviews

Book a Free Strategy Call

Speak with a mortgage expert about your investment goals.

Custom Financing Solutions

We tailor mortgage products to your unique investment strategy.

Fast Pre-Approval

Get pre-approved quickly so you can act on deals with confidence.

How to Structure a Real Estate Fund in Canada

Quick Answer

Advanced 12 min read

A real estate fund is a multi-deal vehicle where you raise capital once and deploy it across multiple properties, unlike syndications which are single-deal raises. In Canada, Limited Partnerships are the standard structure.

Important Numbers

$50K–$150K+

Legal setup cost range for funds

$5M–$10M+

Practical minimum fund size

1–2% of committed capital annually

Typical management fee

6–8% annually

Standard preferred return (hurdle rate)

Table of Contents

Stay Updated

Get the latest mortgage tips and investment strategies.

There comes a point in every serious real estate investor’s journey where single-deal syndications aren’t enough. You’re doing a deal, raising capital, closing, then starting from scratch for the next one. Every time.

That’s exhausting. And it doesn’t scale.

A real estate fund changes the game. Instead of raising money deal by deal, you raise a pool of capital once and deploy it across multiple properties. Your investors write one cheque. You manage the portfolio. Everyone wins.

But structuring a fund is a different animal than putting together a JV or a one-off syndication. There are real legal structures to choose from, specific compensation frameworks, reporting obligations, and documents that need to be done right.

I’m going to walk you through exactly how this works in Canada.

Fund vs. Syndication: What’s Actually Different?

Let me make sure we’re on the same page before we go further.

A syndication is a single-deal vehicle. You find a property, raise money specifically for that property, buy it, manage it, and eventually sell it. One deal, one raise, one exit.

A fund is a multi-deal vehicle. You raise capital into a pool, then the fund manager (you) decides which properties to buy. Investors are buying into your judgment and strategy, not a specific property.

Feature	Syndication	Fund
Number of deals	One	Multiple
Capital raise timing	Per deal	Upfront or ongoing
Investor approval per deal	Often yes	Usually no
Manager discretion	Limited	Broad
Complexity	Moderate	High
Legal and setup costs	$15K–$40K	$50K–$150K+
Minimum fund size (practical)	N/A	$5M–$10M+

Funds make sense when you’re doing enough volume that raising deal-by-deal is holding you back. If you’re doing two or three deals a year with $5M+ in total capital, it’s time to start thinking about a fund.

Choosing Your Structure: Limited Partnership vs. Trust

In Canada, you have two main structural options for a real estate fund. Each has trade-offs.

Limited Partnership (LP)

This is the most common structure for Canadian real estate funds, and for good reason.

How it works: You create a Limited Partnership. A corporation you control acts as the General Partner (GP). Your investors are Limited Partners. The GP makes all investment decisions and manages the fund. LPs contribute capital and receive returns.

Why it works well:

Flow-through taxation—income passes through to partners and is taxed at their rates
Clear separation between management (GP) and investors (LPs)
LP liability is limited to their investment
Well-understood structure by lawyers, accountants, and regulators
Flexible profit allocation (you can create different LP classes)

The downside: The GP has unlimited liability. That’s why you always use a corporation as the GP—the corporation bears the liability, not you personally (though lender personal guarantees can change this).

Trust Structure

Some funds use a trust, sometimes called a limited partnership trust or investment trust.

How it works: A trustee holds the fund’s assets on behalf of unitholders (your investors). You, through a management company, act as the fund manager under a management agreement.

Why some funds use it:

Can be easier for certain types of investors (like RRSPs/RRIFs) to invest in
The mutual fund trust structure is familiar to institutional investors
Can offer tax advantages in specific situations

The downside: More complex to set up, more expensive to maintain, and less intuitive for smaller investors. Tax treatment can be less favourable depending on the fund’s activities.

My recommendation: Unless your securities lawyer has a specific reason to use a trust, go with the LP structure. It’s simpler, cheaper, and the standard for Canadian real estate funds.

Once you’ve nailed your fund structure and compensation model, the next puzzle is how to finance the actual property acquisitions—book a free strategy call with LendCity and we’ll show you how to stack debt and equity so your fund’s returns actually work.

Fund Manager Compensation: How You Get Paid

This is where things get interesting—and where you need to be thoughtful. Your compensation structure affects how investors view your fund, how aligned your interests are, and how much money you actually make.

The standard model has two components:

Management Fee

This is an annual fee based on the total capital in the fund (or sometimes on deployed capital only). It covers your operating costs—salary, office, admin staff, accounting, legal.

Typical range: 1% to 2% of committed capital annually.

A $10 million fund charging 1.5% generates $150,000/year in management fees. That keeps the lights on while you execute the strategy.

Some structures to consider:

Fee on committed capital: You earn fees on the total amount investors committed, even before it’s deployed. Better for you, but investors may push back.
Fee on deployed capital: You only earn fees on money that’s actually invested in properties. More investor-friendly, but your early revenue is lower.
Stepped fees: Lower fee percentage on larger commitments. A $500K investor pays 1.5%, while a $2M investor pays 1.0%.

Carried Interest (The “Carry”)

This is your share of the profits above a minimum return threshold (called the “preferred return” or “hurdle rate”).

Typical structure:

Investors receive a preferred return first (usually 6% to 8% annually)
After the preferred return is paid, profits are split (commonly 70/30 or 80/20 in favour of investors)
The 20% to 30% the fund manager keeps is the carried interest

Hypothetical example: Say your fund generates 15% annual returns in a given year. Investors get their 8% preferred return first. The remaining 7% is split 80/20. So investors get 8% + 5.6% = 13.6%, and you get 1.4% carry on top of your management fee.

Some funds include a catch-up provision where, once the preferred return is met, the manager receives a larger share of the next profits until the overall split reaches the target ratio.

GP Co-Investment

Smart fund managers put their own money in the fund. This is called GP co-investment, and it does two things:

Shows investors you have skin in the game
Aligns your interests perfectly—you make money when they make money

Institutional investors often require the GP to invest 1% to 5% of the fund size. Even with smaller funds, putting in your own capital sends a powerful signal.

Book Your Strategy Call

NAV Calculations: Telling Investors What Their Investment Is Worth

NAV stands for Net Asset Value. It’s the total value of the fund’s assets minus its liabilities, divided by the number of units outstanding.

NAV = (Total Assets − Total Liabilities) ÷ Number of Units

Unlike publicly traded REITs, your fund won’t have a market price that updates every second. You need to calculate and report NAV periodically—usually quarterly.

How to Value the Properties

This is where it gets tricky. Real estate doesn’t have a stock ticker. You need to determine what your properties are worth, and there are a few methods:

Cost basis: Carry properties at what you paid. Simple but doesn’t reflect value changes.
Appraisal-based: Get independent appraisals periodically (annually is common). More accurate but expensive.
Internal valuation model: Apply cap rates to your NOI. Cost-effective but can be questioned by investors.
Combination: Cost basis for the first year, then annual appraisals adjusted quarterly using internal models.

Most funds use a combination approach. Your fund documents should clearly state the valuation methodology so investors know exactly how NAV is calculated.

Why NAV Matters

NAV determines:

The price new investors pay to enter the fund (if open-ended)
The price investors receive if they redeem their units
Your management fee (if calculated on NAV)
The reported performance of the fund

Get your NAV methodology wrong and you’ll have unhappy investors, regulatory questions, and a mess on your hands.

Your fund’s NAV calculation directly impacts new investor entry prices and redemption values—schedule a free strategy session with us and we’ll help you structure financing around property valuations so your NAV projections stay realistic and defensible.

Investor Reporting: What You Owe Your LPs

Running a fund means you owe your investors clear, consistent, professional reporting. This isn’t optional—it’s both a legal requirement and a business necessity.

Quarterly Reports

At minimum, provide:

Fund performance summary (returns for the quarter and since inception)
Updated NAV per unit
Portfolio summary (properties owned, occupancy rates, NOI)
Capital deployment update (how much is invested vs. held in reserve)
Market commentary (what’s happening in your target markets)
Any material events (acquisitions, dispositions, refinancing)

Annual Reports

More detailed than quarterlies. Include:

Audited financial statements (required for most funds)
Detailed property-by-property performance
Year-over-year comparison
Manager’s letter (your outlook and strategy update)
Tax information (T5013 slips for LP investors)

K-1 / T5013 Tax Slips

Your fund’s accountant will prepare T5013 slips for each LP, showing their share of income, losses, and distributions. These must be issued by March 31 for the prior tax year. Late tax slips are one of the fastest ways to lose investor goodwill.

Subscription Agreements: Getting Investors In the Door

The subscription agreement is the contract an investor signs to enter your fund. It’s a critical document that serves several purposes:

What it includes:

The amount the investor is committing
Representations that the investor qualifies under the applicable exemption (accredited investor, OM exemption, etc.)
Acknowledgment of the risks
Power of attorney granting the GP authority to act on behalf of the LP
Acknowledgment that they’ve received and reviewed the offering documents
Bank/wire transfer instructions for funding

Investor suitability: Your subscription agreement should include questions about the investor’s financial situation, investment experience, and risk tolerance. Even if you’re not a registered dealer, documenting suitability shows you did your homework.

Know-Your-Client (KYC) and Anti-Money Laundering (AML): You need to verify your investors’ identities and the source of their funds. This isn’t just good practice—it’s required under Canadian AML legislation (FINTRAC reporting obligations may apply depending on your structure).

Open-End vs. Closed-End: Pick Your Model

One of the biggest structural decisions is whether your fund is open-end or closed-end.

Closed-End Fund

Raises capital during a fixed period (the “fundraising period”)
Capital is locked up for the fund’s term (typically 5 to 10 years)
No new investors after closing, no redemptions until the fund winds down
Simpler to manage because you know exactly how much capital you have

Open-End Fund

Accepts new capital on an ongoing basis (quarterly or semi-annually)
Allows redemptions (with notice periods and liquidity limits)
Grows over time as more investors join
More complex because NAV must be current for subscriptions and redemptions
Needs liquidity management to handle redemptions without fire sales

Most first-time fund managers should start with a closed-end fund. It’s simpler, the terms are clearer, and you don’t have to worry about redemption requests while you’re trying to buy properties.

The Cost of Setting Up a Fund

Let me give you a realistic budget:

Expense	Estimated Cost
Securities lawyer (fund formation)	$50,000–$150,000
Accounting setup and first-year audit	$15,000–$30,000
Fund administration (if outsourced)	$20,000–$50,000/year
Offering documents and marketing materials	$5,000–$15,000
Regulatory filings	$2,000–$5,000
Total first-year setup	$92,000–$250,000

This is why fund size matters. If you’re raising $2 million, spending $150,000 on setup eats 7.5% of your capital before you buy a single property. At $10 million, that same cost is 1.5%.

Most people shouldn’t launch a fund until they can realistically raise $5 million to $10 million minimum.

Building Your Fund Team

You can’t do this alone. A properly run fund needs:

Securities lawyer: Structures the fund, drafts documents, handles compliance
Tax accountant/CPA: Handles fund accounting, audits, T5013 preparation
Fund administrator: Tracks capital accounts, calculates NAV, handles distributions (can be outsourced)
Property manager: Manages the physical real estate
Mortgage broker: Arranges financing for acquisitions
Valuation professional: Provides independent property appraisals

This team costs money, which is why the management fee exists. Your fee needs to cover these costs while still leaving enough to make the fund worth your time.

The Bottom Line

Structuring a real estate fund is one of the most powerful moves you can make as a Canadian real estate investor. It lets you raise capital once, deploy it across multiple deals, and build a real asset management business.

But it’s also a serious undertaking. The legal costs are real, the reporting obligations are ongoing, and your investors expect professionalism at every step.

Start with syndications to build your track record. Move to a fund when you have the deal flow, the investor base, and the operational capacity to justify it. And when you make that move, surround yourself with the right professionals.

The difference between a fund that thrives and one that collapses often comes down to structure. Get the structure right, and everything else gets easier.

Book Your Strategy Call

Frequently Asked Questions

What's the minimum fund size to make a real estate fund worthwhile in Canada?

Practically speaking, $5 million to $10 million is the minimum. Setup costs run $100,000 to $250,000, and ongoing management costs (legal, accounting, administration) require a meaningful management fee base. At $5 million with a 1.5% management fee, you're generating $75,000 annually to cover operations—tight, but workable. Below $5 million, the overhead eats too much of your returns and a deal-by-deal syndication approach is usually more efficient.

Should I use a limited partnership or trust structure for my fund?

For most Canadian real estate fund managers, the limited partnership is the better choice. It offers flow-through taxation, clear governance, limited liability for investors, and it's well-understood by lawyers and accountants. Trust structures can make sense if you're targeting RRSP/RRIF investors or institutional capital that prefers unit-based structures, but they're more expensive to set up and maintain. Talk to your securities lawyer about your specific situation, but the LP is the default for good reason.

What's a typical management fee and carried interest for a Canadian real estate fund?

The industry standard is a 1% to 2% annual management fee on committed or deployed capital, plus 20% to 30% carried interest above a preferred return (hurdle rate) of 6% to 8%. A common structure is "1.5 and 20"—a 1.5% management fee plus 20% carry above an 8% preferred return. Larger funds may negotiate lower fees, and institutional investors will push for more investor-friendly terms. Your compensation structure should align your interests with your investors'.

How often do I need to report to fund investors?

At minimum, quarterly reports and annual audited financial statements. Quarterly reports should include fund performance, updated NAV, portfolio summary, and market commentary. Annual reports add audited financials, detailed property performance, and tax information (T5013 slips). Many fund managers also provide monthly updates or dashboards. The more transparent you are, the more trust you build—and the easier it is to raise capital for your next fund.

What's the difference between an open-end and closed-end real estate fund?

A closed-end fund raises capital during a fixed period, invests it, and returns capital after a set term (usually 5 to 10 years). No new investors join after closing, and no redemptions happen until wind-down. An open-end fund accepts new capital and allows redemptions on an ongoing basis (usually quarterly). Closed-end is simpler to manage and better for first-time fund managers. Open-end funds require sophisticated NAV calculations and liquidity management.

Can RRSP or TFSA money be invested in a real estate fund?

It depends on the fund structure. LP units are generally not "qualified investments" for registered accounts unless the LP meets specific criteria under the Income Tax Act. Trust units can be structured to qualify for registered accounts, which is one reason some funds use a trust structure. If attracting RRSP/TFSA capital is important to your investor base, discuss this with your tax advisor and securities lawyer early in the structuring process—it affects fundamental design decisions.

How do I calculate NAV for a real estate fund?

NAV equals total assets minus total liabilities, divided by the number of outstanding units. The challenge is valuing the properties. Most funds use a combination approach: cost basis for new acquisitions, annual independent appraisals for existing properties, and internal cap-rate-based valuations for quarterly updates between appraisals. Your fund documents must clearly disclose the valuation methodology. An independent auditor should review your NAV calculations annually at minimum.

What should a subscription agreement include?

A subscription agreement should include: the investor's capital commitment amount, representations confirming they meet the applicable securities exemption, acknowledgment of investment risks, power of attorney granting the GP authority to act for the LP, confirmation they've reviewed all offering documents, investor suitability questions (financial situation, experience, risk tolerance), and identity verification for KYC/AML compliance. Your securities lawyer drafts this document—it's not something you create from a template.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Consult a licensed mortgage professional before making any financing decisions.

Written by

LendCity

Published

March 20, 2026

Reading time

12 min read

Share this article