Investing is one of the most successful ways to create wealth. You can attain your long-term objectives by making profitable investments. Nevertheless, successful investments require you to diversify your portfolio by including different asset classes. With diversification, you can reduce risk. Investing some money in real estate instead of only in stocks and bonds will help you have passive income with high yields.
There are companies like real estate investment trusts (REITs) that help you to diversify your portfolio by purchasing real estate assets. Singapore Exchange (SGX) trades in REITs giving everyone an opportunity to invest in real estate. You can purchase real estate assets through REITs Singapore much like you purchase equities, exchange-traded funds (ETFs), and mutual funds.
Know What Is a REIT
A real estate investment trust (REIT) is a business entity that owns and manages a portfolio of various real estate properties with the objective to produce rental income and promote asset appreciation over the long term.
By investing in a REIT, your funds, as well as those of other investors, are pooled in a collective investment scheme, making investments in a portfolio of real-estate assets like hotels, shopping malls, serviced apartments, and offices generating a relatively high income.
There are professionals who manage these assets by leasing them out for rent. The income generated, typically rental income is given back to REIT holders at regular intervals after taking into account management fees.
What Are the Types of REITs You Can Invest in Singapore?
Real estate investment trusts are generally categorized into:
1. Commercial REITs
These REITs specialise in commercial real estates, such as hotels, office buildings, shopping malls, and parking lots. You can find the equities of these commercial properties traded on the Singapore Stock Exchange.
2. Retail REITs
They predominantly own and manage retail properties in upscale neighbourhoods, business districts, and commercial areas. The retail properties are available for rent to those seeking a location to start supermarkets, shopping centres, boutiques, department stores, and grocery stores.
3. Industrial REITs
By owning and operating industrial rent spaces and facilities, they primarily concentrate on industrial properties like distribution centres, warehouses, manufacturing plants, logistics centers, and business parks. Industrial REITs assist online retailers in meeting their demand for quick distribution and delivery.
4. Hospitality REITs
Hospitality REITs, also known as hotel REITs, generate revenue by leasing hotel rooms and other accommodations on a temporary basis, as well as by hosting various events.
5. Residential REITs
They own and manage a variety of residential properties, including villas, individual residences, apartment complexes, and student housing.
6. Healthcare REITs
When it comes to the healthcare sector, REITs play a significant role, for they own and manage numerous specialised facility services that hospitals, medical offices, nursing homes, and other healthcare institutions and healthcare systems provide to care for patients. The triple-net lease, which includes costs like property maintenance, taxes, and insurance, is the most common type of lease healthcare REITs use to rent the space.
Get to Know How REITs Work
A typical REIT in Singapore runs on a simple business model. The real estate investment trust uses money collected from investors to invest in different types of properties. They generate income by renting out space in these properties, which it distributes to investors as dividends.
With real estate investments, you can have a diverse portfolio, which guarantees a steady income stream because REITs are required to distribute at least 90% of their taxable income as dividends to investors or REIT holders. If you are one of those income investors, you can invest in effectively-managed REITs with well-equipped properties, long tenancy periods, and steady occupancy ratios. They offer good potential for cash-flow visibility and capital appreciation.
Why Should You Invest in a REIT in Singapore?
REITs are total-return investments, for they help you earn high dividends and gain modest capital growth by investing in them. You can invest in real estate assets for some prime reasons, such as.
With a REIT, you get to invest in different real estate assets, which are listed on the Singapore Stock Exchange, and trade in unit sizes of 10 and 100 units. You can now have real estate assets in your portfolio at an affordable price.
You can minimise your risk by diversifying your portfolio by making real estate investments. By investing in REITs with various geographic locations, you can diversify your portfolios in a single transaction.
You can trade in REITs on real-time pricing during the usual trading hours of the SGX.
4. Passive income
Investors seeking a steady stream of income will find REITs attractive. According to the regulation, REITs must distribute most of their taxable income as dividends to investors. Further, they have attractive long-term asset appreciation potential. With REITs Singapore, you can get into real estate investment for better and higher-yield portfolio diversification.
Alex is fascinated with “understanding” people. It’s actually what drives everything he does. He believes in a thoughtful exploration of how you shape your thoughts, experience of the world.