Want to grow your investment portfolio with real estate investment trusts? If you do, I’m sure you heard about REITs. Today, we discuss about REITS and how to make money investing in REITs in the Philippines in 2020.
With the news of a bill passing in Congress which allows foreign entities to open companies here in the Philippines and own it 100% for certain sectors, it is a welcome time to explore real estate once more.
What are REITs?
REITs refer to Real Estate Investment Trusts. They are companies that own and operate real estate properties to generate income. REITs include hotels, data centers, cell towers, hospitals, commercial areas, office spaces, shopping centers, apartments, warehouses and other buildings. Investors prefer REITs because of diversification, lower risk and higher returns.
How do REITs Make Money?
It is actually very simple and easy: rent income. Almost all REITs would simply lease out and collect rent on the various properties that they own. The company then generates income out of this and they then pay back investors through dividends. The best part is — REITs are required to pay out at least 90% of their taxable income to their investors. Most even pay out 100%!
Top 5 Reasons Why You Should Invest in REITS?
1. Higher Earnings Potential
Real Estate Investments Trusts are historically one of the best-performing asset classes in the market today. As we know, real properties grow in value over time and don’t depreciate in value easily, REITs also produce more income through regular rental revenue. They also have the ability to generate dividends.
2. You Don’t Have to Spend Huge Money
If you want to take advantage of the growing performance of real estate business without owning an expensive real property, invest in REITs. Let’s face it, buying real property is very expensive. And more often, you have to pay a reservation fee and down payment.
3. Zero Contract and Obligation
When buying a property, you have to take out a loan with a contract, scout the area, and make sure it is a good neighborhood, pay mortgages, parking spaces, etc. You can avoid those stressful contracts and obligations by investing in REITs instead of buying a property especially if your savings are not yet enough to start such risky long-term contract.
4. Portfolio Diversification
Some REITs are already diversified, meaning, they are invested in different real estate properties such as shopping mall units, commercial buildings, office spaces, hotels and the like. If you want to allocate a part of your portfolio with real estate business, REITs are excellent option. Diversification is one of the most effective strategies of investing.
5. Lower Risk
Because you are not locked in a contract, you can avoid a lot of risks. When you diversify your portfolio with REITs, you can also minimize risk by extending your earning potential to different asset classes and allocation.
How to Invest REITs in the Philippines?
- Open a trading platform that offers REITs
- Look for well-established REIT companies
- Invest in REIT ETF
- Choose the best performing REITs
A very trusted trading platform that we use in trading REIT is eToro. You can open an account and start investing REITs in the Philippines or wherever you are. eToro offers standalone REIT companies and also REIT ETFs.
When choosing your REIT investment, make sure you invest with companies with great properties and tenants. It can also help if you monitor the best performing REITs in the market.
If you are a beginner, leave the research and hard work to the experts. You can invest in REIT ETFs. REIT ETFs are composed of several REITs already. Investing in them will also offer the most diversification. Hence, a great advantage for you.
Starting July 27, 2020, the first REIT in the Philippines (Ayala Land REIT) or AREIT will be listed through an IPO (Initial Public Offering). IPO will begin on July 27 to August 3. That being said, investors can buy shares using any accredited online broker by the Philippine Stock Exchange. Listing in the PSE is expected to be on August 13 subject to approval.
Learn more about Ayala Land REIT here: “Top 5 Reasons Why You Should Invest in Ayala Land REIT“
Best Performing REITs You Can Invest Right Now
|Code||REIT / REIT ETF||Price Return Since Jan. 2019|
|RWR||SPDR Dow Jones REIT ETF||25.07%|
|USRT||iShares Core U.S. REIT ETF||29.39%|
|IYR||DJ US Real Estate iShares||33.84%|
|AOX.DE||Alstria Office REIT AG||55.13%|
|AMT||American Tower Corp.||56.92%|
|CCI||Crown Castle International||53.26%|
|SBAC||SBA Communications Corp.||80.94%|
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Leave your comments below if you have any question about how to invest REIT in the Philippines or you want any help regarding investing.