Tuesday, December 20, 2011

Is REIT Investment Better Than Trading The Stock?

Recently, I am investing in Real Estate Investment Trust (REIT). I found that REIT is far better investment than any other stocks as it give investors annual dividends and investors can take advantage of the market fluctuation due to news and announcements.

In my previous post about REIT, I explain about REIT and the future. It is true that REIT is having good future. Why?

Why REIT is a Good Investment for Future
As we all know, REIT is real estate investment trust. REIT pool money of investors and invest in real estate. Those real estate such as offices, store, towers etc are rented for income. And, those income are shared among investors as dividend annually. Since most of the REIT are required to payout as high as 90% of the income, this is great for investors as an investment.

Reasons to Invest in REIT
1. How do you think the price of real estate properties will become in the future? 

"The price of real estate properties are always going up, if you want to buy real estate properties, buy fast or else the price will go up!". 
We always hear this everywhere - in fish market, in coffee shop, while talking to cousins, talking to friends etc. Everyone knows price of real estate will go up in the long term and it is going up FAST!

So, REIT is where we can make more money. As he price of real estate goes up, price of REIT will go up in the long term. Why? It is because rental income will go up as well - year after year.

2. Prices of real estate went up, rental fees when up, what is next?
Next, it will be dividend income from REIt investment will go up as well. In addition to dividend income, we can take advantage of stock price appreciation. The REIT stock price will go up as well because of net tangible asset (NTA) goes up.

3. Rental income went up, Earning Per Share (EPS) will go u as well
Eventually, earning per share (EPS) will go up provided that the total share in the market remains the same. When earning per share increases, it will be reflected in the stock price. So, stock prices have to change accordingly. EPS up, stock price up.

How to Choose REIT for Investment - Criteria for Great REIT 

1. Price to Earning Ratio (PE)
Low PE is good as we are buying at lower price at low PE. Try to find REIT stocks with PE lower than 10.
Refer to Fundamental Stock Analysis: Price to Earnings Ratio (PE)

2. Earning Per Share (EPS)
Earning per share (EPS) is another important factor. Try to find REIT stock that are giving positive EPS every quarter.
Refer to Fundamental Stock Analysis: Earning per share (EPS)

3. Dividends per year

The best yearly dividends for REIT investment should be around 6% to 14% per year. So, try to find REIT that gives around 6% to 14% dividend per year.
Refer to Fundamental Stock Analysis: Dividend Yield

When you can find REIT that meets these criteria, then it is a good investment. Hold it for long term and make money forever.


sigit hermawan said...

thanks for sharing information,great blogs..
best regards :sigit

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