Real estate made affordable REITs are listed on the stock exchange and are bought and sold in minimum board lot sizes of 1, 10 or 100 units. Thus, making it affordable for investors to add real estate assets into their investment portfolio.
Passive income stream Because REITs are mandated to distribute at least 90% of their taxable income back to shareholders as dividends, it is often regarded as a stable stream of passive income.
Professional property management The real estate assets are professionally managed by property managers. They are responsible for leasing out the properties with the best tenancy mix and rental income, continually drive footfall, upkeeping the properties, positioning the properties, ensuring 100% occupancy and best tenancy mix to maximise rental income.
A real estate investment trust (REIT) is a company that owns and operates a portfolio of multiple real estate properties, with a simple business model – to generate rental income and drive asset appreciation in the longer term.
A REIT pools money from investors and buys real estate properties. These properties are then leased out for rental income and redistributed to investors in the form of dividends.
Steady stream of passive income Because they are regulated and mandated to return at least 90% of their taxable income as dividends, a well-managed REIT is especially popular amongst income investors, with the potential for capital appreciation over time.
Dedicated REIT manager
REITs are generally classified by the type of properties they own:
Investing in a REIT holds several advantages over buying, financing and managing a property itself.
Affordable REITs are traded in minimum board lot sizes of 1, 10 or 100 units. Making them an enticing alternative for investors who wants to add real estate into their investment portfolio, without a hefty price tag.
Transparent & Liquid Exchange-listed REITs can be bought and sold based on real-time pricing during stock market hours, conveniently and seamlessly.
Diversified Investing in a REIT dilutes your risk because you are investing in a portfolio of multiple properties. Also, some or all the properties in a REIT are located different geographical locations, offering investors diversification in a single transaction.
Passive income Because they are mandated to distribute at least 90% of their taxable income as dividends, making REIT an appealing investment choice for income investors with the potential for capital appreciation over time.
Professional management The property manager assumes the role of a landlord – enticing and managing tenants and the day-to-day upkeeping of properties.
REITs are not created equally. Because the real estate assets have differing nature and characteristics, understanding how each REIT works, the strategy and potential risks will help you immensely in your evaluation and selection.
Type of REIT Taking a Retail REIT as an example – the quality of tenants, volume of foot traffic throughout the day and across the week, occupancy rates or a frequent change in tenancy are telling signs you can look for in your assessment.
Track record of the management team A good management team will have the ability to achieve the best tenancy mix, upgrade the facilities and enhance the services of an underutilized building, thus creating more value for investors.
The above list are not exhaustive, but serves as a starting guide to help you with your REIT assessment and selection.
Like any listed stocks, you can buy and own shares of a REIT via a broker. Alternatively, you can also purchase an Exchange Traded Fund or Unit Trust that tracks a REIT index or has REITs as underlying assets.
You can also consider DBS Invest-Saver, a regular savings plan that lets you accumulate REITs affordably and progressively.
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