One of the most effective ways to build wealth is by investing. With successful investments, you can accomplish your long-term goals. To invest successfully, you need to diversify your portfolio by having asset classes. Diversification will help lower the risk. Rather than investing money in stocks and bonds, you can invest in real estate.
You can find real estate investment trusts (REITs) that allow you to invest in real estate assets and diversify your portfolio. REITs Singapore gives an investment opportunity in real estate to everyone in Singapore and benefits from it. Like you invest in mutual funds, stocks, and exchange-traded funds, you can buy real estate assets through REITs.
What is a REIT?
A REIT or a real estate investment trust is an entity that owns, operates, and finances a portfolio of several real estate properties to provide income and spur asset appreciation.
How does a REIT in Singapore work?
A typical real estate investment trust in Singapore operates in a straightforward business model. To make it easy to understand, a REIT invests in multiple types of properties using money pooled from investors. They lease out these properties for rent, thus generating income, which is distributed among investors in the form of dividends.
Having real estate investments in your portfolio will ensure a steady stream of income, for REITs are directed to pay out a minimum of 90 percent of their taxable income to shareholders or investors as dividends. Income investors prefer investing in well-managed REITs with high-quality properties, stable occupancy ratios, and a long-tenancy period for they provide good potential for capital appreciation and cash-flow visibility.
Get to know different types of REIT
You can find different types of REITs based on the types of properties they own.
Those are real estate investment trusts particular to commercial properties like office buildings, hotels, parking lots, etc. The shares of these commercial properties are traded on Singapore Stock Exchange.
They mainly focus on industrial properties like manufacturing centers, warehousing, distribution centers, and business parks by owning and managing industrial rent spaces and facilities. Industrial REITs help eCommerce stores meet their quick delivery and distribution demand.
They primarily own and operate retail properties in upmarket areas and business districts. People looking for space to set up department stores, shopping malls, boutiques, and grocery stores can rent the retail properties.
REITs have a major role in the healthcare industry as they own and manage several specialized facilities that hospitals, nursing homes, medical offices, other health-related institutions, and healthcare systems deliver to take care of patients. Healthcare REITs rent space majorly under the triple-net lease, which covers expenses like property insurance, taxes, and maintenance.
Hospitality REITs are also called Hotel REITs and they make money through short-term leases of hotel rooms and spaces for accommodation and conducting various events.
They own and operate different types of residential properties like individual homes, apartment buildings, villas, and student housing.
Various benefits of investing in REITs
As with REITs, they are total-return investments. Other than earning high dividends, investing in REITs also gives you moderate capital appreciation. Here are some key benefits for the investors of real estate assets.
Offer affordable investments
You can have a diverse portfolio by adding real estate at an affordable price, for REITs are listed and traded on the stock exchange in small unit sizes of 1, 10, or 100 units.
Help have passive income
Income investors who want to have a regular income will find REITs appealing. REITs are required under the regulation to distribute at least 90 percent of their taxable income to their investors. Moreover, they offer attractive asset-appreciation potential in the long term.
Offer liquidity and transparency
REITs are listed on the Singapore Stock Exchange and can be traded on real-time pricing during the operating hours of the stock exchange.
With real estate investments, you can diversify your portfolio and reduce your risk. Investors can also have diversifications in a single transaction by investing in REITs located in different geographical locations.
With REITs Singapore, you can have easy, meaningful, and potential diversification opportunities.