What is REIT?
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What is it?
A REIT is a trust company which pools together money from investors to purchase a group of property to manage, develop and later possibly sell.
How is it done?
Investors subscribe for units in the REIT during an IPO3 (or via subsequent placements or rights issues). Once the REIT has acquired a package of properties, it is regarded as a property owner where its properties are managed by a professional manager who will lease the properties. The rental income is then distributed to its unit holders. Renovation, rebuilding or even redeveloping or selling the property are one of the ways to maximise the income.
What to look out for?
Success of the REIT is often influenced by a government’s pro-active stance in providing favorable tax treatment.
Why does it matter?
REITs offer an opportunity to invest in a professionally managed portfolio of real estate, through the purchase of a publicly-traded investment product. It is mostly able to provide a fairly predictable and steady flow of periodic income while providing an opportunity of capital upside. In short, it is an unique investment instrument blending the traits of both stocks and bonds.
