What is a Real Estate Investment Trust (REIT)?
REITs are shares of commercial properties listed on the Bursa Malaysia stock exchange that is owned and managed by professionals or property developers. Properties under a REIT are income-generating real estates such as shopping malls, hospitals, factories, warehouses, offices, and farms. REIT pools monies from numerous investors, similar to unit trusts, for investment in the aforementioned real estate ventures. Investors who buy shares in a REIT will enjoy dividend payments which are distributed either quarterly or semi-annually.
3 Benefits of Investing in REITs
A. You Don’t Need A Huge Capital
REITs are perfect for beginner investors. With as little as RM100, anyone can give it a go. The minimum share purchase fixed by Bursa Malaysia is one lot, which is equal to 100 units.
B. REIT Investment is Not Complicated
Unlike traditional real estate, REITs are traded on the stock exchange. Investors can get the diversification that real estate provides without being fastened down on a long-term basis. REITs shares are very liquid as they can be easily bought and sold.
C. Easy Conversion to Cash
Unlike physical real estate such as houses, REITs are a wise investment choice as it is listed on Bursa Malaysia and has high liquidity. This means you do not have to endure many processes and a long wait to convert your assets to cash. REIT shares can be converted to cash in less than a day. Just click ‘sell’ on an online trading platform and the money will be credited into your account based on the number of REIT units sold.
D. High Dividend Payouts
To qualify for tax relief, REIT will distribute at least 90% of its earnings to unitholders. The dividends enjoyed by investors are between 5% to 7% with distribution every three months or twice a year depending on the REIT fund manager. The returns from REITs are also said to be less volatile compared to other markets. This is because REIT uses property rentals as its main source of dividend yields. As long as there are tenants, dividend rates will remain stable.