3 Pitfalls investors must know before investing in REIT

Most investors are attracted by the high yield and passive income REIT offers. However, there are 3 important points to take note when investing in REIT.

(1) It is never wrong to buy a real estate at a discount (i.e. under value) in theory. However, beware of the value trap because some of the REITs are always traded below its book value due to the inherited risks. There is no free lunch in the investing world, cheap stuff may not be a good investment as the stock market is efficient and adjusted to the true value very fast. The smart money always buy up cheap and good REIT when there is an opportunity before the retail investors even have a chance to spot it.

(2) REIT uses debt and/or equity financing to raise funds to acquire properties, collect rental from the tenants and pay 90% of the net property income back to unit holders. As such, it is very common for REIT to issue additional shares (i.e. to the existing unit holders or to private investors to raise capital. Most of the time, the right issues are offered at a discount to the market price and immediately the existing shareholder will suffer capital loss if they are unable to folk out additional funds to subscribe to the rights.

(3) High return always associate with higher risk when it comes to investing. Similar to REIT investing, some of the REITs give very attractive distribution yield up to 7-9% but one must make sure they fully understand the risks in it. Most retail investors are just purely relying on the distribution yield as the selection criteria when come to REIT selection.

Investing is all about risk management, it is very important to understand all the risks before putting your hard earned money investing in REIT for your retirement. Get a professional help in building your REIT portfolio for your retirement because retirees cannot afford to make any mistakes when it comes to investing.

 

Kenny Loh is a Senior Consultant from Singapore Largest Independent Financial Advisor helping clients in building an investment portfolio for retirement. He specialised in Singapore REIT and has been conducting REIT investing courses for past 6 years. 

He won the Top Investment Asset Under Advisory (AUA ) 2nd runner up in 2017 and currently managing million of AUA. He also won the Best Practice Consultant Award in 2017. He can be contacted through kennyloh@fapl.sg if you would like his help to personalise a REIT portfolio for your retirement.

Singapore REIT Price / NAV Range Chart Nov-2018

Original post from http://mystocksinvesting.com

Singapore REIT Price / NAV Range Chart base on Nov 5, 2018 Singapore REITs Table.

See last Singapore REITs Price/NAV here to see the changes.

Disclaimer: This chart is NOT a recommendation to buy or sell. Do NOT use it if you don’t understand how to interpret it.

 

I have some free time in Nov & Dec because I am not conducting any REIT class or investment seminars in these two months. I will offer compliment Investment Portfolio Review for 5 of my blog readers (First come first served). You can send me your request to marubozu@mystocksinvesting.com with the following 4 information:

(1) Your Risk Profile (Conservative, Moderate or Aggressive)

(2) Your Investment Objective & What do you want to achieve (e.g. $2000 per month passive income,  5% p.a. capital gain, etc)

(3) Your Investment Time Horizon

(4) Your Investment Statement (e.g. unit trust holding, CDP statement, etc)

 

Based on the above information, I will give you my view on:

(1) Whether your current investment portfolio  is suitable to you

(2) Risk Assessment of your current portfolio

 

 

Safe Investing!

Marubozu

 

 

 

 

Check below on other events:

http://mystocksinvesting.com/course/singapore-reits-investing/REITs Investing Course 

http://mystocksinvesting.com/course/private-portfolio-review/REITs Portfolio Advisory 

http://mystocksinvesting.com/events/

Shariah Compliant Singapore REIT for Muslim Investors

There are 9 REIT in Singapore with a combined market capitalisation of S$11.2 billion are included in the newly launched FTSE ST Singapore Shariah Index.  The property assets of the REITs, span industrial, e-commerce, commercial and retail space. The nine REITs average an indicative distribution yield of 7.57%.

The FTSE SGX Shariah Index Series, launched by FTSE Group and the Singapore Exchange (SGX), reflects the stock performance of companies in the Asia Pacific region whose business activities comply with Islamic Shariah Law. The FTSE SGX Asia Shariah 100 Index is the first in the series to be launched. Independent screening is carried out by Yasaar Ltd, an organisation with a global network of expert Shariah scholars. The screening approach is described below.

Business Activity Screening

Initially, companies involved in any of the following activities will be filtered out as non-Shariah compliant:

  • Conventional finance (non-Islamic banking, finance and insurance, etc.)
  • Alcohol
  • Pork-related products and non-halal food production, packaging and processing or any other activity related to pork and non-halal food
  • Entertainment (casinos, gambling and pornography)
  • Tobacco; weapons, arms and defence manufacturing.

Financial Ratios Screening

The remaining companies are then further screened on a financial basis. The following financial ratios must be met for companies to be considered Shariah-compliant:

  • Debt is less than 33.333% of total assets
  • Cash and interest bearing items are less than 33.333% of total assets
  • Accounts receivable and cash are less than 50% of total assets
  • Total interest and non compliant activities income should not exceed 5% of total revenue.

More details on procedures for when companies that change financial compliance between two successive quarters in addition to the appropriate purification of dividends can be found here.

About Yasaar Limited

Yasaar Limited scholars represent all of the major Shariah schools of thought, creating a best practices approach that has credibility across the Islamic world. More information on Yasaar Limited is provided below or visit their website. For further details on the Shariah screening methodology, please refer to the FTSE Shariah Global Equity Index Series Ground Rules which are available here.

 

 

If you would like to build a Shariah Compliant REIT portfolio for passive income, you may contact marubozu@mystocksinvesting.com for more more detail (advisory fee applied).