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How Much to Invest in the Best REITs Singapore

Real Estate Investment Trusts (REITs) are a favorable investment you can consider to add to your long-term investment portfolio. There is a huge potential to earn handsomely over time as properties’ value continue rising. When you are new to the business, you may be at a loss as to how much to invest in the best REITs Singapore. This article guides you as a beginner to know how much you can invest and the returns to expect.

REITs enable you to invest in assets that otherwise you wouldn’t afford. A major advantage of investing in REITs is that you get a constant flow of passive income. This is because the law requires that REITs distribute at least 90% of their taxable income annually. Therefore, REITs pool investors money to buy real estate assets, a similar way to how you invest in stocks or bonds. There are several types of real estate assets you can buy in Singapore. They include residential, industrial, hospitality, healthcare, office, hotel, and retail REITs.

Once you invest in real estate assets, you can earn from capital gain as well as dividends. The best part of it is that they are among the assets classes that provide the best dividend yield in the market. As earlier highlighted, REITs allow you to own real estate assets easily with little capital. Buying a residential building alone would cost you hundreds of thousands of dollars to millions of dollars. However, with REITs, you can start with as little as $1,000.

What Returns You Would Have Gained from the Best REITs in Singapore

Here we shall look at the performance of the best REITs with the listing history of ten years. Such REITs are poised to continue in the same trend in the future. We shall use the latest share price as of 8th March 2019. You should then make a well informed decision from the exact picture of the shares performance. We shall consider one of the best REITs Singapore as an example.

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Let’s assume you invested $1,000 in March 2009 in Mapletree Commercial Trust REITs. It would have cost you $0.77 per share. As of 8th March 2019, the share price was $ 1.8. For $1,000, you would have bought approximately 1,298 shares. The year 2019 shows a share appreciation of 103%. Therefore, by selling the shares in 2019, you would gain roughly $1,336 {(1.8-0.77)*1298}. This is purely capital gain.  

Additionally, you would have collected dividends of around $1,483 (We assume the current dividend yield (TTM) of $6.35 holds throughout the years). Thus, you would carry home a whopping $ 2,820 for the $ 1,000 investment. Basically, the more money you invest, the more you make. And, the more you hold the shares, the more the dividends. (Here we also assume that you ignore right issuances).

The below table shows a summary of the best REITs and their capitalization which denotes their popularity. The data is as given by SGX Stock Screener.

Singapore REIT

Type of REIT

Market Capitalization

CapitaLand Mall Trust

Retail

$8,778.2m

Ascendas

Industrial

$8,740.6m

CapitaLand Commercial Trust

Commercial

$7,235.9m

Mapletree Commercial Trust

Retail

$5,201.4m

Suntec REIT

Retail

$5,146.6m

Mapletree Logistics Trust

Industrial

$5,101.9m

Keppel REIT

Commercial

$4,289.3m

Mapletree Industrial Trust

Industrial

$4,068.4m

SPH REIT

Retail

$2,636.1m

Ascott Residence Trust

Hospitality

$2,476.7m

Based on a long-term perspective, the above REITs are worth consideration. A typical scenario with stock items is that in short-term they may reveal some weaknesses. My advice is that you can offset them by a broader diversification. For instance, you can have a portfolio of the first five REITs or according to your risk appetite.

The Basic Considerations When Choosing REITs

The above table shows REITs according to market capitalization which does not picture performance but popularity. You may have a problem narrowing down among the ones that you choose. The best approach is to find those that are well managed. Good management escalates to good performance.

Poor management, on the other hand, can deliver poor performance as was the case with Sabana REIT. Unitholders felt disillusioned by consistent poor performance and ambushed the manager out of the office. Good management, therefore, ensures a steady stream of income. You shouldn’t rush into picking a REIT even when its yield is promising but instead read the prospectus to have a better understanding.

You can rely on SGX Stocks Screener to know where to begin. Use “sector” and “Equity” options to filter through the REITs to view stats from each listed company. If you wish to see something different from the default stats, customize your display. Then, you can choose a different data set points. This way, you can find out which REITs have the highest yield and know how much dividend to expect.

Another aspect to look out for is a REIT’s stability. Be wary not to take yourself down the drain. Check out the debt to equity ratio and the historical share price. If a REIT borrows beyond it means, it indicates a possibility of poor dividends distribution. That is why big names REITs are reliable for investment.

The nature of the industry can also influence a REIT performance. This fact holds because some sectors are more sensitive to the state of the economy than others. In a sluggish economy, the industrial property market may experience a drop in rental price. The pulling down of prices is to allow to retain as many tenants as possible. You should expect this phenomenon to cause a decrease in income; hence the dividends may be little or none.

The year 2019 looks more promising with the above-outlined REITs. Don’t sideline yourself from reaping handsomely from an investment that continues to gain popularity. REITs will be your source of long-term income if you put your money there. Having several thousands of dollars entitles you to own properties. The key is to diversify your investment to spread the risk involved. The secret is to start now.

Here is more for you:

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Men Here’s How You Can Protect Your Financial Interests in Divorce

(By Racheal Muriithi)

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