A real estate investment trust (REIT) is a firm that invests in income-producing real estates, such as shopping malls, condominiums, housing projects, hospitals, parking garages, and others. You can purchase shares of a REIT to gain exposure to its property investments and include that real estate in your investment portfolio without directly managing the property.
Investors that invest in REITs hold them for at least three years, with some holding them for ten years or more. You can invest in publicly traded Singapore REITs through a bank such as DBS. To invest in non-traded REITs, however, you will typically need to deal with a broker or financial advisor.
There is plenty to learn about the ins and outs of investing in REITs. To assist in elucidating crucial issues concerning REITs. This is what you ought to know.
Three REIT categories exist equity REITs, mortgage REITs, and hybrid REITs
Equity REITs invest in real estate and generate money from rental income, property sales, and dividends. Mortgage REITs invest in mortgages and mortgage-backed securities, as their name suggests (a type of asset guaranteed by a mortgage or a collection of mortgages). These types of trusts can generate income from mortgage interest, but interest rate fluctuations can significantly impact their yield. Finally, hybrid REITs invest in both real estate and mortgages.
Two investment options exist publicly traded REITs and non-traded REITs
There are two ways to invest in these securities. The first strategy is to acquire publicly traded REITs. You can invest in them the same way you would invest in any other stock or ETF – by purchasing shares through a brokerage account.
In contrast, non-traded REITs are not traded on a stock exchange. To invest in them, you would need the investment of a financial counselor or broker. Comparatively illiquid are non-traded REITs to their publicly traded cousin. According to the Securities and Exchange Commission, to retrieve your money after investing in a REIT, you must wait until the REIT lists its shares on a public exchange or liquidates its assets.
The risk level of a given non-traded REIT can be affected by location and lease terms, among other variables. Like other types of investments, real estate investment trusts (REITs) include a degree of risk. For instance, the share price of publicly traded REITs can incur declines since it fluctuates with the stock market.
With non-traded REITs, however, other factors, such as a tenant’s lease for their commercial property or whether you’re investing in a completed or under-construction facility, might influence risk.
Consider your objectives when selecting a REIT to invest
Similar to any subsequent financial decision, you should always examine your financial goals and how your next action will assist you in achieving them. Those easily discouraged by volatility may be hesitant to invest in a publicly traded REIT that experiences the same highs and lows as the stock market. Similarly, an investor who desires ready access to their funds at all times may wish to avoid investing in anything that locks up their funds for extended durations.
Publicly traded REITs offer greater liquidity, but non-traded REITs may offer better yields and serve as a potential inflation hedge. Therefore, it depends on the objectives and needs of the investor; do they seek liquidity or absence of volatility?
How can I invest in REITs?
Like any listed stocks, you can buy and own shares of a REIT via a broker. Alternatively, you can 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. Learn more about REITs in Singapore through top banks like DBS.
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