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REIT – Real Estate Investment Trust

July 11, 2009 15:54 by Sze Hau 5 Comments

Recently, the investment term “REITs” come across my mind. I keep seeing news about REITs in newspaper, forums and personal blogs. A REIT or real estate investment trust is a real estate company that offers common shares to the public.

What is REIT? According to Wikipedia:

A Real Estate Investment Trust or REIT (pronounced /ˈriːt/) is a tax designation for a corporation investing in real estate that reduces or eliminates corporate income taxes. In return, REITs are required to distribute 90% of their income, which may be taxable, into the hands of the investors. The REIT structure was designed to provide a similar structure for investment in real estate as mutual funds provide for investment in stocks.

In Malaysia, REIT is a little bit different (source).

  • 1. Investors’ dividends will be taxed at investors’ books.
  • 2. Non-residents’ dividends will be taxed at 28%. It is an upfront and final withholding tax.
  • 3. There are NO explicit requirement of minimum payout ratio in the guidelines.

Like other stocks in Malaysia, public REITs are listed in KLSE too under “REITS” sector. Other than blue chip + high dividen stocks (e.g. PBBANK 1295 and BAT 4162), REITs seem to be a good alternative investment to me.

Like other stocks, stock prices of REITs fluctuate. However, as long as the rental properties are well managed, the rental markets are stable and the rental incomes are consistent, you can get consistent dividend incomes (as long as you buy it at the right price).

Due to the natural of REITs where they are required to distribute most of their income to the hand of investors, REIT stocks normally, consistently pay out high dividend yearly (normally around 10%) to investors. Other than that, you may also earn money from price changes (capital appreciation).

Currently (July 10, 2009), there are 13 REITs being listed in KLSE (stock code, stock name [price in RM per unit stock, dividend yield %]):

  • 4952, AHP [0.835, 8%]
  • 6696, AHP2 [0.590, 5%] (suspended)
  • 5116, ALAQAR [0.935, 9%]
  • 5120, AMFIRST [0.900, 10%]
  • 5127, ARREIT [0.720, 10%]
  • 5130, ATRIUM [0.700, 12%]
  • 5106, AXREIT [1.570, 10%]
  • 5124, BSDREIT [1.210, 9%]
  • 5121, HEKTAR [0.940. 11%]
  • 5123, QCAPITA [0.950, 8%]
  • 5109, STAREIT [0.840, 8%]
  • 5111, TWRREIT [1.020, 9%]
  • 5110, UOAREIT [1.180, 8%]

AMFIRST, ATRIUM, AXREIT, HEKTAR and STAREIT are top, favorite stock counter among REIT investors. I have put AMFIRST, ATRIUM, AXREIT and HEKTAR into my stock watch list. In fact, I have just bought some AMFIRST and HEKTAR (click the links to read the companies’ investment portfolio).

Since I don’t have that much money to buy an office or a building like those big companies do, I can invest in REITs. To me, buying REITs’ stock is like “having” a small part of the properties that the REIT companies owned.

I earn money from renting “really small part” of my “office” or “building” to the big customers (e.g. Nestle, AmBank and etc.). The best is that I does not need to worry about the occupancy rate of my “little properties” as they well are managed by the management team of my “REIT companies”. Ha..

I wish to keep at least 20% of REIT stock in my stock portfolio. If these REITs perform consistently well, it is definitely a good place to park my cash. They give far better return than putting my money in saving accounts and even fixed deposit (FD) accounts.

Hopefully these few stock counters will perform better in future and bring better return to investors.

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Filed Under: life log Tagged With: investment, KLSE, mutual funds, REIT, stock, unit trust

About Sze Hau

Geek. Love programming. Coffee addicted. Married with a child. Working towards financial freedom.

Comments

  1. Kien says

    July 14, 2009 11:56 at 11:56 am

    I wish to invest on it. Unfortunately, now i’m out of cash and will back to grab it when having enough saving.

    Reply
  2. szehau says

    July 14, 2009 16:11 at 4:11 pm

    This few days, most of the REITs already climbed up a few percent… making them a little expensive already… maybe have to wait for quite some time.

    Reply
  3. MC Tan says

    October 2, 2009 19:06 at 7:06 pm

    hi,
    the dividen rate u post is dividen before tax? or after 28% deduction?

    Reply
  4. szehau says

    October 3, 2009 12:09 at 12:09 pm

    It is before tax but you don’t need to pay 28% for the dividend. Depend on what type of assets the company have, you will need pay different % of tax.

    Resident Individual = 10%
    Non Resident Individual = 10%
    Resident Institutional Investors = 10%
    Non-Resident Institutional Investors = 10%
    Resident Companies = 0% ; Subject to Corporate Tax at Prevailing Rate
    Non-Resident Companies = 25% for Year of Assessment 2009

    For example Hektar announced “2nd Interim Dividend 2.4 Sen Withholding Tax”, you will receive 2.16 sen for each unit stock of Hektar from the company.

    Reply

Trackbacks

  1. Malaysia Fixed Deposite Rates | 2da6s says:
    August 25, 2009 00:18 at 12:18 am

    […] to be 99% safe and also to avoid the risk of value depreciation, I think I will invest my money in REITs (Real Estate Investment Trusts). REITs give quite reasonable returns (most of them have divididend yield of 6-12%) and their […]

    Reply

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szehau is a software programmer that has strong interest in the world of programming and Internet. He is graduated in University of Malaya, Malaysia with a Bachelor’s degree in Software Engineering. He draws on his passsion for web programming to share with others how to build a successful websites.

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