REITs stand for Real Estate Investment Trust. In short, you buy a share in a company that manages and maximises returns from properties owned by them and sold to you via shares. The first REITs on Bursa was AXIS. It was listed in 2004. Returns to investors are in the form of capital appreciation if the price for the shares increases as well as the annual distributions of its income, predominantly, rental of malls, offices, hotels or industrial buildings. If you know about commercial rental, it’s pretty consistent. A lot of REITs pay out up to 90% of their taxable profits. Thus, you can see that the yield is actually double of FD or better most of the time.
Take just 1 hour to study about REITs, key in their names into google and search for its latest financial results and what’s the current yield if you buy and keep as a long term investment.
Do I have any REITs. At this point in time, no. I love stocks but for property, I prefer to actually spend time and view them. In fact, my wife and I love viewing properties as it allows you to learn more about the property and subsequently the property market. Nevertheless, for those who are saving money for their first property, nothing wrong with putting the money in REITs in the meantime. Thus far, I have not come across an REITs which suddenly lose half of its value. However, I do know of a recent fiasco in Singapore Stock Exchange where a few stocks lost 99% of its value within a short period of time.
Next suggested article: Iskandar Property Digest – Nov/Dec 2013