Why real estate, REITs make for a good investment
It’s not enough for us to simply scrimp on expenses, especially when the prices of the goods and commodities we buy continue to increase.
It’s not enough for us to save. We stretch the muscles of our money. Make them work. Make them grow and make more money.
It’s not enough to just invest. It pays to understand your options, and which among these options work best during times of volatility.
Real estate has and will always be that time-tested investment asset against crises. It provides shelter. It appreciates in value. It can be passed on from one generation to the next.
Every Filipino dreams of owning one. Every investor aspires to have at least one. Most tycoons made billions by starting with one.
But real estate alone is not enough. The value appreciation on paper is good, but for it to be your best performing asset especially during a high inflation environment, you don’t necessarily sell your property. You can keep ownership of the asset and still get a regular stream of income from rental or lease income.
But let’s face it—not everyone can afford to invest in the property market. With its high cost of entry, it tends to be dominated by only a few who can afford to invest, wait for a while, make money and re-invest.
Good thing Filipinos now have the option to grab a piece of the real estate investing pie without having to shell out a considerable amount of money. Good thing we now have real estate investment trusts (REITs).
For starters, REITs are legit. They are regulated investments. It may have just been introduced to the Philippine market back in 2020, but its legislation was proposed to the regulators more than a decade ago. A REIT is an investment vehicle that gives us the best features of real estate, pooled funds, bonds and stocks all in one product.
Real Estate. REITs give Filipinos the opportunity to co-own and make money off income-generating commercial, industrial and residential real estate assets without having to buy an entire office space, a warehouse or a condo unit.
Pooled Funds. Similar to investing in mutual funds or UITFs, REITs offer investors the chance to co-own office buildings, malls, warehouses, power plants, hospital, parking lots, etc. simply by buying one or a combination of REITs. With pooled funds, you get to outsource the management to fund managers. But with REITs, you do not only have a fund manager working for you, you also happen to have an admin manager and a property manager on board.
Bonds. There is actually a law requiring REIT companies to distribute 90 percent of their income via dividends. These dividends are paid out every quarter. This law gives investors confidence that regardless of the investment climate, they are sure to get regular streams of income from their REIT investments. With inflation soaring to 4.4 percent in the first half of 2022, REITs offer investors dividend yields ranging from 5 percent to 7 percent.
Stocks. This feature makes REIT investing convenient and affordable as investors can simply buy REITs through their existing online stock broker without having to shell out a considerable amount of money because it follows the stock exchange’s minimum board lot. In peso terms, one can start investing in REITs for as little as P3,000 to P5,000.
And the best part is, REITs are available online.
REITs practically allow every Filipino to invest in real estate without having to think about shelling out millions of pesos; without having to think about the regular maintenance cost to keep a property in tip-top shape; without having to think about paying real estate tax, getting insurance coverage, or getting people to help you run and maintain the asset; without having to save money for renovation and remodeling.
Income-generating and/or dividend-earning real estate? Now you’re talking.