There are a few critical criterion to check on before investing your money in REIT. They are listed below. However, how do you actually know if a REIT fulfils these criterion? No easy way to know except by looking at its annual or quarterly report. Now, don’t cringe yet, because you can actually do this in 10 minutes – I’ll show you how by using Capital Malls Malaysia Trust, a pure-play retail REIT, as example in the video below.
You asked, “Why REIT and not real property?”. Firstly, REITs are just like stocks – they are liquid yet track real properties trend in its portfolio, with minimal work required for the dividends. Secondly, there’s large capital upfront and definitely a lot more work in managing tenants in real property investment . It’s unwise to lock your capital if you need to use it for the next 3 to 5 years.
Personally, I am enhancing my knowledge in real properties investment before jumping into this. Having said that, I highly recommend KC Lau’s online Property Method course, (I don’t get paid for saying this) which I am currently enrolled in and InvestKK blog for really excellent resources on this topic.
Anyway, the criterion are:
- Dividend growth Y.O.Y (year over year)
- Growing its net asset value and enhancing existing asset
- Assets at strategic location
- Debt profile to gauge resiliency to downturn in business cycle
- Consist of reputable anchor tenants or tenants with long term tenancy (> 3 years)
- Defensiveness nature by having diversified assets or tenants
- Competent management team and trustee who knows the industry inside out
Reference: How to Invest in REIT in Malaysia
If you are squinting your eyes now, head over to my new LCF on Personal Finance Youtube channel to view this video.
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Disclaimer: This is not an invitation to buy or sell. I do not guarantee the accuracy or validity of the information above. Do your own due diligence before investing and invest at your own risk.