Singaporeans’ obsession in property investments is well-known for many years. Since property prices are currently so sky-high in Singapore, the next best way of owning a property is through REITs.
Many Singaporeans typically invest in Real Estate Investment Trusts (REITs) with a view of diversifying their portfolios and for the dividend income. But what is exactly a REIT and do investors realize that REITs do carry market risks? Many investors assume that REITs are low risks and that dividend income is recurring. Is this true?
In this article, I would touch on the key aspects of REITs and what we should look out for before investing in REITs. I need to clarify that I have never invested in REITs before and do not believe in the merits of investing in REITs as well. This research on REITs is primarily for awareness sake and is not meant as a form of inducement to buy REITs.
According to SGX website,
a listed REIT consists of multi-properties, such as office, shopping malls, hotels or serviced apartments. The revenues generated from the underlying assets are distributed to unit holders at regular intervals. Units of listed REITs are bought and sold like any other securities listed on exchanges at market-driven prices.
Some investors may confuse REITS with unit trusts. This is because, like unit trusts, REITs are managed by approved fund managers and involve trustees approved by the Monetary Authority of Singapore. The key difference between the two financial instruments is unit trusts normally own a portfolio of securities, while REITs primarily own physical real estate assets and real estate-related assets.
In addition, unlisted unit trusts can only be bought and sold through the manager of the unit trust fund at prices usually quoted at the end of each trading day. Listed REITs, on the