Saturday, November 28, 2009

Real Estate Investment Trust (REIT)

Real Estate Investment Trust or commonly known as REIT or REITs is more like unit trust than stocks. REITs are listed on Bursa Malaysia and you can easily check the changes in prices everyday as long as the Bursa Malaysia is open for trading. REITs are quite for long term investors but it is not that suitable for short term investors.

What are REITs similar to Unit Trust:

Basically, REITs are a pool of money from investors and REITs companies will use the money to invest in real estate or commonly known as property such as houses, shops, shopping complexes and so on. The structure of REITs are similar to unit trusts.

What are the difference between REITs and Unit Trust:

The differences between unit trust and REITs are REITs are more liquid as compared to unit trust and you have the control to choose the REITs companies you wish to invest (In unit trusts, you cannot control which companies in the Bursa Malaysia to invest in because all the decisions are made by the unit trust fund manager.). Investing in REITs give you the control to choose the right REITs companies and you can buy and sell at lower cost (fees) as compared to unit trust funds (The minimum fees (RM1000) per Buy & Sell is around RM30 which is lower as compared to unit trust with fees around RM55. Some unit trust do offers free or no fees service.). The fees mentioned here is the fees incurred per trade, the fees might be different for different banks or stock brokers.

Most of the income of REITs companies are rental income from real estate. REITs are required to payout 90% of the income as dividend to the investors. So, this is a great advantage for investors who wish to invest for long term and invest for income.

Long term investors can really benefits from REITs because the dividend or known as Income Distribution for REITs is huge percentage as compared to stocks in Bursa Malaysia and of course, most of REITs income distribution gives much higher percentage than the fixed deposit interest rate. So, long term investors who seek to get income from investment will find this a gold mine of investments.

Huge Potential in the Future:

REITs is still considered new to Malaysian investors. The REITs sector in our Bursa Malaysia is very small. The total market capital of REITs is not even 1% of the total market capital of Bursa Malaysia. So, REITs still have a long way to go before it reaches maturity.

Invest in REITs provides us with high dividend income (income distribution) and higher chances of capital gain in the future. It is not a bad choice and I would say it is a good choice to invest in REITs. And, invest for long term.

REITs to Look at:

Axis (AXREIT), Atrium, AmFirst, StarHill REIT, Tower REIT, Hektar, UOA REIT, Alaqar KPJ, Amanah Raya REIT and BSD Reit.


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