But, do you know you can actually own properties and still receive a portion of the rental collected paid to you with little money? From as low as $1000, you can start receiving rental from these properties. Here's how:
Owning a portfolio of properties with little money
Real estate investment trust or REITS provide you this opportunity to own a portfolio of properties. These properties are rented out and a portion of the rental that is collected will be paid to shareholders. You can buy these REITS through the stock market. Here are some examples:
1) Suntec REIT
Have you heard of Suntec or been there before? I'm sure you have if you live in Singapore. Suntec REIT owns their majority of properties in Singapore. This includes the Suntec shopping mall, the Suntec convention centre, the various Suntec office towers, a part of Marina Bay Financial Centre etc. If you buy the shares of Suntec, you are part of the owner of these properties and you are paid rental income from these properties. How much will you be paid?
For the whole year of 2013, Suntec REIT paid about $91 for every 1000 shares you own. If you bought at the current price of 1.64, this works out to a yield of 5.5%. Is this too low for you? Let's see the next one
2) Saizen REIT
You may not heard of Saizen REIT before as all of its properties are in Japan. They own a portfolio of residential properties. All these properties are rented out and a portion of the rent collected are distributed to shareholders. Sounds like renting out your house for extra income? I bet it is.
Saizen REIT owns a portfolio of over a hundred properties spread across Japan. You can own a part of all these from as low as $1000. Sounds like a good deal? The yield of Saizen REIT works out to be around 7.1%. Better still if you bought at the current price of 0.885, you are owning all these properties at a discount. The net asset value (NAV) shows us the fair value of the properties which Saizen REIT owns. The price of 0.885 is lower than the NAV of 1.17. This is a 20%+ discount to its value. Who doesn't like buying properties at a discount?
Buy low, rent out, collect rental
When we buy a house of our own, i'm sure many of us will find the best deals with a good location. If you're buying the property to rent out, you would naturally want to buy one which has a good location so you can rent it out at higher rates. If you can buy the property at below market price, that would be even better. But certainly you would not want to buy a property above the market price.
When we invest in REITS, its the same analogy. Buy the REITs below its NAV if possible and the properties should be in good locations fetching good rental income. From its annual report, we can see the properties occupancy rate, their locations etc. These are valuable information to look out for. Reading an annual report can be liken to reading a brochure of a property launch. It's fun and exciting sometimes.
Stock prices can fluctuate but it does not reflect the true value of the properties that the REITS own. It's more important to focus on the value of the properties and the income which it produces. In the long run, all else remaining equal, the stock price will reflect the true value of the properties it owns.
Investing in REITS can surely bring you that extra income. Not a lot but still better than nothing. However, when you have more money, it can become a lot. Invest $500,000 at 7.1% and see what kind of income you get. You'll be surprised.
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