The 5 Major Types of REITs to Have in Your Portfolio

For many who want to invest in the Singapore property market but do not have much capital, REITs (Real Estate Investment Trusts) provide a cheap way for investors to add this asset class to their portfolio.

But what should we be looking out for when we invest in REITs?

What to look out for?

Firstly, you want to look for low gearing, which is a measure of a company’s financial leverage and shows the extent to which its operations are funded by lenders versus shareholders. Next, you want to do a quite calculation to make sure it has a high NAV (net asset value), which is measure of what its actual assets are worth. However, there numbers could sometimes be misleading.

One of my favourite approaches is to simply look for a high distribution yield, since that would be the most direct measure of your potential returns. Based on the formula, the best time to buy would be when prices are depressed and yields are high, assuming the payout does not change. This means that we also need to check the consistency of payout.

My strategy is to have a shopping list on hand, and have a preset yield in mind, for example >8%, and simply wait for prices to drop and the yield to increase and hit your target yield. Since the market moves in cycles, all it takes is an understanding of Portfolio Strategies and a lot of patience.

5 Major Types of  REITs (Real Estate Investment Trusts) in Singapore

5 Major Types of REITs (Real Estate Investment Trusts) in Singapore

 

To help you plan your shopping list, here are the 5 major types of REITs:

 

I hope that this has given you a good idea on what to look out for in REITs, and how to start building your shopping list by having a mix of different types of REITs to provide both capital appreciation and passive income.

Stay tuned for our next post! 😀

Cheers
Spencer
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Spencer Li is a trader, investor & entrepreneur who achieved financial freedom at 27 (2013), having to date accumulated a diversified portfolio of properties, stocks, REITs, and 10+ businesses across different industries. As a professional trader, he has over 10 years of market experience, and has been featured on more than 20 occasions in the media.

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