How to Invest in REIT in Malaysia

“Next to the right of liberty, the right of property is the most important individual right guaranteed by the Constitution and the one which, united with that of personal liberty, has contributed more to the growth of civilization than any other institution established by the human race.”

This saying by William Howard Taft definitely best describes the significance and the importance of appropriating for one’s self real property and it applies to everyone which is living in the world today. Investing in real property which can provide cash flow to its owners through regular income and dividends is simply the best deal that you can get with acquiring real properties. Real Estate Investment Trust or REIT is now one of the various ways to indirectly invest your money on real estate.

What is REIT?

Real estate investment trust or REIT is a form of company which invests its shares in acquiring and running profit-making real estate or properties and dividing the dividend among its shareholders. It is a system where investment comes through the buying of shares and investing it to buy real-estate which is rented out in order to gain monetary profits. Some of these properties include hotels, office and warehouse spaces, hospitals and shopping centers.

How to invest in REIT Malaysia

Investing in Malaysian REITs.

Real estate investment trusts first started in the United States in 1880 in order to let investors avoid double-taxation on their business investments. It also allowed smaller investments to be made on such large-scale business undertakings which broke the tradition of control by only the wealthy businessmen and corporations.

Malaysian REIT

Malaysia has caught up with the trend and has used the model of both the US and Australia in their own form of REIT. The good thing about REIT investing in Malaysia is that it has brought a good amount of profits for its investors for the past few years. It brought an average of 6%-8% gains profit on dividend by the year 2005 which was greater than what other developing countries in Asia had done on that year.

Some of the more well-off REITs in Malaysia are the AXIS-REIT which focuses on renting-out warehouse and office buildings, the KPJ Healthcare REIT which caters to hospitals, and the YTL-REIT which owns properties for shopping malls and complexes.

Property developers are the common shareholders and owners of REITS as they specialize in the development of real estates. They have the advantage of knowing how to create and give the best improvements that can be made in real properties which lets them have a better business strategy for renting them out for business purposes. They also have that edge of knowing how to maintain and operate such establishments to get the best profits that can be had on that type of business.

Why Invest in Malaysia

Malaysia has come to be one of the leading nations when it comes to profits made in REIT in this particular region of Asia. In terms of economic development, it was able to have great strides which have now placed them as one of the best of the developing countries in the world. They are more competent as shown by the results of the initial gains profit made on the dividends of REITs.

Aside from this, REIT is still on its development stage in Malaysia and creativity and ingenuity in business strategy is still a welcome activity on its market. Managers of REITs can still make their own signature steps in how they want to improve the performance of their properties in the market.

What to Look For on an REIT?

You should always put your money where you can be rest-assured that it will be handled correctly – you would not want to invest on something which will not yield results. Careful thinking and a serious study of an REIT’s background is an important element before putting an investment in it. So what should you look for to get the best deal in an REIT?

  1. First, it should have an ever increasing dividend payout to its shareholders. Look at their past records and see if there is any improvement on the money that they return to their investors. If you do not see much improvement there, then you may want to reconsider.
  2. Second, it should not be a stagnant entity – it should be acquiring assets and making improvements on their assets for the past few years. Remember, you are not going to put your money on their shares for it to acquire the same amount of dividends each year or even to lessen. The management of that entity should be finding out ways in which to improve their financial and economic status.
  3. The assets and properties should be well-taken care of and should be located in a strategic location which will aid in the improvement of its sales in rent. Check if the property is located in an area where there are better chances of improvement or is accessible to the market. If you are thinking of investing in a shopping mall, ask yourself if it is located centrally to an area which will attract a lot of mall-goers? If it is a warehouse, is it properly maintained to ensure the safety and protection of the materials that will be entrusted to it?
  4. Fourth, it should cater to tenants which show a promising chance of longer-term tenancies. Is the property occupied by a business which has a greater chance of staying for about two years? Or are they letting in businesses which are small-scale or those which have chances for being easily dissolved or abandoned upon certain circumstance? The permanency of those who rent the space is an important factor that will determine the success of the REIT.
  5. Does it have sufficient numbers and variety of tenants that it will be able to continue functioning even if one large client should leave? It should be able to sustain its business without depending on a single particular client to keep it going.
  6. Sixth, the management is composed of competent and well-skilled professionals who will be able to handle the business’ ups-and-downs. All types of business experience problems either financially or organizationally but it is the way with which its administrative team is able to cope with it that they are able to come through. An entities staff is a reflection of the business and what it is eventually coming to be. If the REIT is staffed with excellent and knowledgeable personnel, you will be sure that it will be able to go through good and tough times.

Why Invest in REIT

Investing in REIT is now considered as a safer way of making an investment due to its nature and structure as an entity. Consider the following advantages that it has in contrast to other forms of investment such as in properties and banks.

The REIT form provides you with lesser risks as the burden is shared by a lot more shareholders and investors. Remember that it is a collective ownership made when you buy shares in it.

It provides people with the chance to become a part-owner of a large-scale business or businesses which would be quite impossible if you are going on the traditional type of investing. Control is also given to all who have shares and not just to the large shareholders.

Management is made by an administrative team which relieves you of some of the problems of owning a business. Giving the keys to the management will let you own a business where you would be able to gain profits and never have to worry about how to make it.

The shares that you own can be sold in the stock market as they are treated as regular stocks. Hence, you can make them liquid in a very short span of time as early as three days. The shares also gain profits as their price also increases and decreases depending on the economic market.

Buying REIT Investments in Malaysia

You can buy shares of REIT of any entity in Malaysia by going to Bursa Malaysia much like the same way that you buy stocks in other markets. You can also consult stockbrokers regarding what shares are currently being sold in the Malaysian market. You can use the online listings of Malaysia’s REITs at their IPO official website.

Real estate investment trusts are now one of the safer ways to make an investment. Malaysia is one of the countries in Asia which have made great strides in REITs and the present state of the country’s economy is certainly an ideal one which will definitely allow investors a chance for creativity and ingenuity in business strategy and a greater share of the market. Expansion is also one of the possibilities in an REIT in Malaysia.

So, what else do you want to know more about REIT? Post a comment or question below.

What to know more about REIT Investment? Visit REIT Method – REIT Investment Made Easy

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30 Comments

  • wongyc

    Reply Reply September 14, 2011

    I like the sharing, it is another way you can get more $ than our current FD rate of 3.0%~3.5% per annum and the capital outlay is relatively small compared to property investment. THe REIT return inclusive of dividend can be 6% ~ 8% per annum.

  • David Loh

    Reply Reply September 14, 2011

    Dear KC,
    Agree that the risk is reduced. There are also weakness points which can be realized. Firstly, it is clear that all decisions are being made by the 3rd party which may not be in same direction or is there a collective decision being sought? Also, while the entry and exit of the investment is flexible, there lies the price differential and no control at all of the price to be sold. Depending on the market. It is common that in the initial stages, the managing company shows good performance, it is often when the management go bad and there is no choice or authority to replace them. Hence, this is purely “dependent investment strategy”. Leaving it to the 3rd party which surfaces on the explanation of what has been written earlier by KC. Investors have to clear on the above factors.
    Thanks.

  • Jordan Lau

    Reply Reply September 14, 2011

    Good article, easy to understand and definitely like more posts on this topic!

  • Azfar Aizat

    Reply Reply September 14, 2011

    i think this was the 1st time heard about REIT…never knew such investment exist in Malaysia…well explained that I know what REIT is now…i think Amanah Hartanah Bumiputera (AHB) by PHB is considered under REIT, is this correct?…based on the current economic & real estate situation in Malaysia, which REIT is best to invest in?…

  • Chris

    Reply Reply September 14, 2011

    Can you provide some examples of the REIT shares that are currently listed and doing well in Bursa Malaysia? Many thanks.

  • Vincent

    Reply Reply September 14, 2011

    It depends on the objective of investing. REIT is more suitable for long term financial goal such as education fund or as seed money for the child to start investing or business. It is not a good choice for early retirement. Direct investment in property market is better.

  • Alex Tan

    Reply Reply September 14, 2011

    Hi KC

    What do you think of Investing in REIT during crisis time period, is it better to keep the cash and buy in blue chip share for better return?

  • HOW CK

    Reply Reply September 14, 2011

    Hi KC,
    For your first point on the increasing dividend payout, is it based on absolute number? As far as my concern, those REITS with increasing dividend payout, the REITS price will also be increasing along the way, and the calculation of the dividend yield (DY) will be based on the REIT price. In such scenario, even the dividend payout has been increased, but the DY still relatives lower, may be only about 6%. Do give your comment on this. Thanks

  • Bill Ooi

    Reply Reply September 14, 2011

    Good tips!! As a new investor, how many % should REITS account for in our portfolio?

  • Johnnie Walker Yong

    Reply Reply September 14, 2011

    It is a very interest article. Every investment there is an element of risks.
    As you said that REIT business must depend on sufficient numbers and
    variety of tenants. What ‘if’ that building is a bit old and the tenants , one
    by one decided to leave for newer pastures, newer buildings with latest
    attraction. So the owner of this Reit decide to either pull down or renovate
    the whole building, will the share-holders being ask to put in more money,
    will there be a EGM to seek shareholders approval?

  • Donald

    Reply Reply September 16, 2011

    Good investment tips due to the uncertain market outlook in Europe and US which have a significant effect on Malaysian market. It would be beneficial if you could produce a comparison of Malaysian REITS and see which REITS is the best among all. Would you please advise companies that will be able to thrive in this downturn and still pay high dividends?

  • remnant888

    Reply Reply September 16, 2011

    Good intro and write-up on REIT..
    REIT as a core holding in one’s portfolio for dividend yield is fairly good idea…

  • s w low

    Reply Reply September 17, 2011

    I want to let you know how meaningful your article was to me that I viewed yesterday. REITS is worth investment vehicle. Would like to receive more on
    REITS articles , as REITS is one of my investment portfolio. Thank for sharing.

  • Michael Tsen

    Reply Reply September 21, 2011

    I always look for who the REIT trustee is, if it is no one the industry has heard off, or its a personal name, not a proper trustee company then its most likely a no-no to me.

  • denny

    Reply Reply December 30, 2011

    Dear KC, the short article on Reits is quite easy to understand. So would you ” recommend” Axis, KPJ and/or YTl to a potential investor keen on investing in M’sian Reits? Is there another one or two ( the above 3) that comes to mind?
    thanks

  • Nav

    Reply Reply January 8, 2012

    this is my first on REITs. Good article and easy to understand. im currently actively investing in equity but the returns arent that high. really considering REIT ,how do i go about in starting an investment plan? My colleagues have advised me to check out Axis.

  • Steven

    Reply Reply January 9, 2012

    Any risk to invest REIT? How invest?

  • WJ

    Reply Reply February 4, 2012

    Hi there, I came across your article post while looking through for more potential information on REIT to invest in. I myself am already an investor in a singapore based REIT and even though I am from Malaysia, my preferred choice had always been participating in foreign investment platform. Reason due to the higher currency exchange of value I will have profit later on. Investing in REIT has always been my most stable portfolio as compared to other volatile investment I have tried on.

  • Joel Phang

    Reply Reply April 14, 2012

    do u know have 1 company name call APG reit??they from singapora cufzholding ?? malaysia office in midvalley north point ?is legal company reit or not??

  • dev

    Reply Reply April 24, 2012

    how to invest in REITs?

  • Jane

    Reply Reply February 9, 2013

    Currently investing in REIT as well.Btw i think it is relatively stable than stock .Good to hear more about this investment.

  • ABC

    Reply Reply June 1, 2013

    Hi, does the return of reits is more than the profit return of etf (for both long term and short term invest)? Thanks.

    • KCLau

      Reply Reply June 11, 2013

      Hi ABC, it is not an apple to apple comparison. Well, it all comes down to your own investment profile.

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