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New investment - How to Invest in REITs (新投资 - 如何投资 REITs)

Date: Jul 26, 2021

In our Feb 2021 blog, we talk about the government working on the implementing rules and regulations for the Real Estate investment trusts (REIT).

Now, with the Congress passing a bill that will allow foreign entities to open companies here in the Philippines, and own it 100% for some sectors, this is now a good time to explore the real estate investment again.

Here, we will explore about the Real Estate investment trusts (REITs) and how one can make money investing in it.

What are REITs?

REITs refer to Real Estate Investment Trusts. They are companies that own and operate real estate properties to generate income.
REITs properties can include hotels, data centers, cell towers, hospitals, commercial areas, office spaces, shopping centers, apartments, warehouses and other buildings.
Most investors would prefer REITs because of diversification, low capital investment, lower risk and higher returns.

How does REITs Make Money?

Basically, REITs makes money from the rental income. Most REITs company would just simply lease out and collect rent on the various properties that they own.
The company then generates income out of this and they then pay back investors through dividends.
The best part is — REITs are required to pay out at least 90% of their taxable income to their investors. Most would even pay out 100%! 

Reasons Why You Should consider Investing in REITS?

1. Higher potential Earnings

Real Estate Investments Trusts are historically one of the best-performing asset classes in the market today.
As we know, real properties grow in value over time and don’t depreciate in value easily,
REITs also produce more income through regular rental revenue that's why they have the ability to generate dividends.

2. You Don’t Have to Spend a lot of Money

If you want to take advantage of the growing performance of real estate business without owning an expensive real property, invest in REITs.
In fact, buying real property is very expensive and most of them, you need to pay a reservation fee and a large down payment.

3. Zero Contract and Obligation

When buying a property, you have to scout the area, check the neighborhood & parking spaces, accessibility, take out a large loan with a contract, pay mortgages on time, get insurance and etc.
And if your savings is not enough, there is a high risk in entering such a long-term contract. You can avoid all these stressful contracts and obligations by just investing in REITs.

4. Portfolio Diversification

Most REITs are already diversified, since they are invested in different real estate properties such as shopping mall units, commercial buildings, office spaces, hotels and the like.
If you want to allocate a part of your portfolio with real estate business, REITs are excellent options. Diversification is one of the most effective strategies of investing.

5. Lower Risk

Because you are not locked in a contract, you can avoid a lot of risks. When you diversify your portfolio with REITs, you can minimize risk by extending your earning potential to different asset classes and allocation.

How to Invest in Philippine REITs?

  1. Open a trading platform that offers REITs
  2. Search for well-established REIT companies
  3. Invest in REIT via PSE EASy
  4. Trade REIT using an online broker
  5. Choose the best performing REITs

When choosing your REIT investment, make sure to invest with companies that has great properties and tenants. It can also help if you monitor how the best REITs perform in the market.

If you are a beginner, leave the research and hard work to the experts. You can invest in REIT ETFs.
REIT ETFs are composed of several REITs already. Investing in them will also offer the most diversification. Hence, a great advantage for you.

There are already two local REITs that you can start trading in the Philippine Stock Exchange. The best performing REITs are Ayala Land REIT (AREIT) and DoubleDragon REIT (DDMPR).

Megaworld and others will soon follow. 

Any investors can buy shares using any accredited online broker by the Philippine Stock Exchange like BDO SecuritiesFirst Metro Securities, and COL Financial.

Other Best Performing REITs that you can Invest

Code REIT / REIT ETF
AREIT Ayala Land REIT
DDMPR DoubleDragon Properties REIT
RWR SPDR Dow Jones REIT ETF
USRT iShares Core U.S. REIT ETF
IYR DJ US Real Estate iShares
AOX.DE Alstria Office REIT AG
AMT American Tower Corp.
DLR Digital Realty
CCI Crown Castle International
SBAC SBA Communications Corp.


Disclaimer: 

This article is for information purposes only and should not be considered as a professional advice.
All investments have risks. Risk only the money you can handle to lose. Always do your own research before investing in any asset.

Reference: Dailypik