Rental Property vs. Asian REITs as an Investment

While some choose to purchase physical property to either resell or rent out, buying into a real estate investment trust, or REIT, may be a better option for many.

A REIT, in the most basic sense, is a company that owns a portfolio of properties. By holding shares in one, you indirectly own several different pieces of income producing real estate. A small fee every year, usually less than 1%, is paid for management expenses.

This is beneficial for more than a few reasons. First off, REITs are not only diversified, but they usually invest in assets that require a high amount of capital such as offices and shopping malls. These types of property are usually out of reach for individual investors, unlike residential property, but provide a higher yield in most cities.

Secondly, buying into a REIT also removes the hassle of needing to manage the property yourself. A landlord is required to spend time looking for tenants, making repairs and collecting income, but shareholders of a REIT can have more time for other things. It is also worth noting that this same benefit adds to the ability for a real estate investor to diversify internationally. While owning a REIT that focuses on property in another country works well, owning physical property and having to manage it from abroad may be completely impractical.

There are many different REITs available all throughout the Asia-Pacific region. They are common in countries that already have developed financial sectors such as Singapore, Australia and Japan, although they can increasingly be found in places such as Thailand and Malaysia as well. Most REITs are very general in nature, but others invest in a specific sector such as retail, industrial or residential.

This article by Reid Kirchenbauer first appeared on InvestAsian and was distributed by the Personal Finance Syndication Network.