Want To Invest In Property But You Don't Have Enough Money? Try Investing In REITs

Want to invest in property but you don't have enough capital? REITs is the way to go.

Every one of us dream of owning a property, but not many of us can actually own a property for investment. However, if you really want to get in the property game, a good alternative to buying a property is REITS. Real Estate Investment Trusts or REITs, is an option worth exploring for all newbie investors looking to dip their toes in the property pool.

What is a REIT?

REITs in Singapore

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If you're reading this, it means you're looking at investing to get returns in the future. You have different options for various investments, such as stocks, bonds, and commodities. These are all financial instruments that are traded in the stock markets using brokerage firms. These assets aim to give you a share, albeit tiny, of the company when you buy their shares.

REITs are no different. REITS are listed companies that take investors' pool of money and invest the capital into real estate properties to own and operate. While it's nice knowing you own a small portion of a property's value, the real benefit comes through the dividend yields. You can think of this as steady rental income that you earn without doing anything!

Sounds too good to be true?

This might be the case, and the great thing about REITs is the fact that they're reliable and predictable! It's an asset you own, just like purchasing your own accommodation, if you want to see long-term growth. 

REITs in Singapore

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With us so far? If you're still reading, we'll discuss what the typical dividend yield is and how to invest in REITs.

How to get started with investing in REITs in Singapore

REITs in Singapore

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Getting started is simple. You just need a Direct Securities account with the Central Depository Ltd, also known as a CDP account, and a brokerage firm account. The CDP account allows you to have ownership of the shares once you purchase them. The brokerage account is the trading platform that lets you buy the shares. You can have several brokerage accounts, but only require one CDP account.

REITs in Singapore are an asset class that many non-investors are unfamiliar with but is highly desirable due to the relatively high returns per annum.

But that doesn't mean that it comes without risk! How it works is that all REITs invest in properties, and they will, in turn, receive rental income from its inhabitants. And you, an as investor, will, in turn, receive dividend payouts.

If a property is not performing, or the market is soft, you stand to lose out. 

However, properties are versatile and there are different types of properties that REITs invest in. You can mix up your investments by diversifying. This will affect the value of the returns.

What affects the value of REITs in Singapore?

As you have the ability to do your due diligence prior to investing with a REIT, it's worth being safer than sorry!

REITs are a unique asset class as they act somewhere between a bond and a stock. The bond-like feature comes due to the rental income the listed companies receive from the properties' tenants. After accounting for expenses and admin fees, shareholders will receive a quarterly payout.

On the other hand, REITs act like a stock due to its growth potential. But like the word potential suggests, there is no guarantee. The shareholders will receive capital gains when only if the shares increase in value.

As with all shares, REITs are subject to influence by the economy's outlook. Specifically, the subsectors that influence the economy the most are Industrial, Hospitality,  Office, Healthcare and Retail. REITs will invest in properties within these subsectors, so it is important to have a good feel for which subsector has a positive outlook and which might be experiencing turbulent times in the near future.

REITs in Singapore

REITs in Singapore

Source: PXHere

Now that we've gone over the basics for REITs, here is our list of the some REITs in Singapore worth investing in in 2018.

Commercial/Office

1. Capitaland Commercial Trust

Dividend yield: 4.77%

2. Suntec REIT

Dividend yield: 5.15%

3. OUE Commercial REIT

Dividend yield: 6.63%

 

Healthcare

1. First REIT

Dividend yield: 6.21%

 

2. ParkwayLife REIT

Dividend yield: 4.41%

 

Hospitality

1. Frasers Hospitality Trust

Dividend yield: 6.77%

 

2. OUE Hospitality Trust

Dividend yield: 6.08%

 

3. CDL Hospitality Trust

Dividend yield: 5.49%

 

Now you know how REITs in Singapore work! Which will you invest in? Leave a comment or share it with your friends!

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