This is the most practical, highly actionable guide to invest in REIT in Malaysia.
The best part?
We are going to reveal how the really advanced property investors achieved breakthrough by using REITs as an smart alternative to property investment.
Knowing this will render you an indestructible investor in both realms – stocks and property.
Just like Thor – he dominates both in his divine homeworld (Asgard) and in the human realm (Midgard)
In short, this is your shortcut to profitable property investing using REITs as an alternative. Regardless you have RM 500 or RM 500,000 to invest, you’ll love this guide.
Let’s get started.
Table of Contents
“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 estate properties.
FACT: Real Estate Investment Trust or REIT has emerged as the best vehicle to indirectly invest your money into real estate properties without the hassle or problems that often comes with managing tenancy related issues.
My credibility in REIT investing comes from the fact that in addition to managing multi-millions equity investment portfolio for clients as an independent financial adviser, I’m also sought after by corporate financial organizations (like fund houses, financial associations and reputable banks) for my REIT investment expertise, to conduct workshops & seminars for their internal staff, whom consists of:
- CEO & CFOs
- Investment Analysts
- Financial Advisers
What is REIT as an investment asset class or sector?
Real estate investment trust or REIT is a form of public listed corporation which invests its shares in acquiring and running profit-making real estate or properties. The profit from rental income is then distributed to investors in the form the dividend back to shareholders.
It is a structure where investment comes through the buying of shares and investing it to buy real-estate proprty which is rented out in order to reap profits. Some of these real estate assets under a REIT include one of more combination of the following: hotels, office and warehouse spaces, hospitals and shopping centers.
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.
Get to know Malaysian REITs before investing
The first REIT in Malaysia started in 2005, but it was not until 2011 that Malaysia has really caught up with the trend.
The good thing about REIT investing in Malaysia is that it has brought a good amount of profits for its investors since the economic crisis in 2008-2009 caused by US subprime mortgage crisis.
Since then, REIT sector had effortlessly and consistently brought from an average of 6%-8% annual net dividend yield to double-digits yield (circa 12% to 15%) especially for investors who had the guts to go all in when the REIT prices bottomed back in 2008-2009.
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 hotels & resorts.
Property developers like Sunway Group are the common shareholders and owners of REITs as they specialize in the development of real estate. 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. Furthermore, 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.
Malaysia has come to be one of the leading nations aside from Singapore when it comes to profits made in REIT in South East Asia region. In terms of economic development, it was able to have great strides which have now placed MREITs as one of the best among the developing countries in the world.
Below is a REIT Malaysia list (Bursa Malaysia list)
|REIT||Asset Type||Stocks Ticker|
|Al-Aqar Healthcare REIT||Hospital, Retirement Home||ALAQAR|
|Al-Salam REIT||Retail, Office, Industrial||ALSREIT|
|AmFirst REIT||Office, Retail, Hotels||AMFIRST|
|Amanah Raya REIT||Industrial, Office, Hotel, Retail||ARREIT|
|Atrium REIT||Industrial, Warehouse, Office||ATRIUM|
|Axis REIT||Industrial, Office, Warehouse||AXREIT|
|Capital Malls Malaysia Trust||Retail||CMMT|
|IGB REIT||Retail, Hotels||IGBREIT|
|KLCC Stapled REIT||Retail, Office||KLCC|
|Pavillion REIT||Retail, Office||PAVREIT|
|MRCB-Quill REIT||Office, Industrial||MQREIT|
|Sunway REIT||Retail, Hotels, Office, Hospital, Industrial||SUNREIT|
|YTL Hospitality REIT||Hotels||YTLREIT|
REIT sector is on fast track to maturity in Malaysia with upcoming trends in e-commerce (Axis REIT is the main beneficiary with warehouse and logistics center assets) and big data (expect data center REITs to make a debut soon).
Dynamic REIT Managers can still make their own signature steps in how they want to improve the performance of their properties in the market, with lots of room for improvement & development.
Malaysia REIT dividend payout
This table below will show exactly which month you will be expecting guaranteed dividend payout from REIT stocks in Bursa Malaysia. Guaranteed as in the certainty of getting a dividend payout, not the dividend amount, OK? Now, as you can see, REIT pays dividends either quarterly or half yearly, although some investors wish they are paid monthly 🙂
What to Look For before Investing in a 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 analysis and a serious study of an REIT’s background is an important element before putting an investment in it.
That being said, what should you look for to get the best deal in an REIT?
- Firstly, a REIT 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 investing in that REIT.
- Secondly, a REIT should not be a stagnant entity – REIT should be acquiring assets and making improvements on their assets for the past few years. Remember, you are not going to put your money into something that distribute the same or reducing amount of dividends each year. The REIT manager should be competent enough to continuously improve their net rental/profit which translates into growing dividends for shareholders.
- The REIT assets or real estate properties should be well-taken care of and located in a strategic locations which will aid in the improvement of its sales in rent. Check if the property is located in an area where there are high chances of improvement and it highly accessible to its target customers. If you are thinking of investing in a retail REIT, 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 goods that is stored in it and strategically located within the vicinity of major transportation hubs?
- Fourth, a REIT should favorably 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 2 years or more? Or is the REIT letting in businesses which are small-scale or those which have chances for being easily dissolved or abandoned upon certain circumstances? The permanency of those who rent the space is an important factor that will determine the success of the REIT.
- Does the REIT have sufficient numbers and variety of tenants that it will be able to continue functioning even if one large tenant should leave? It should be able to sustain its business without depending on a single particular tenant to keep it going.
- Does the REIT management comprise 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.
REIT Malaysia Analysis
This is an example of how you do it (watch video lesson below).
In short, you analyze its financial statements, whether pre or post IPO. Important things to look at include tenancy profile, weighted average lease of expiry (WALE), net property income which affects Distribution per share (DPU), gearing ration, net asset value, and to a certain extent, SWOT analysis.
Why Invest in REIT
Investing in REIT is now considered as a safer way of making an investment due to its nature and entity structure (trades like shares, structured like a unit trust).
Consider the following advantages of REIT investing in contrast to other forms of investment such as in direct brick & mortar real estate properties or small-mid cap stocks.
Any REIT is obligated to distribute minimum 90% of its net profit
In order for any public listed REIT to be exempt from corporate tax, it will almost always distribute at least 90% of its net profit – rain or shine.
Nothing fancy here – a REIT net profit purely comes from rentals collected from all commercial real estate properties under its management.
Compared that to any other profitable public listed company – which is not obligated to pay any dividends if it needs to conserve cash flow for, say, expansion. For example, even though Public Bank has been historically paying great dividends, if the board of director/management chooses not to pay any this year or pay significantly lower, it can do so and you can complain until the cows come home.
But REIT cannot do that and surely will not because it gets incentivized to pay 90% or more of its net profit. Therefore, in terms of dividend paying investments, there’s no asset class or investment vehicle like REITs that can provide investors with such a consistent and almost-guaranteed dividends.
In other words, a truly defensive asset class come what may – even in economic crisis, dividends is sure as eggs is eggs!
Investing in REIT = Informed Diversification of your Property Investment
Real estate property investing in REIT form provides you with lower downside risks – but how?
REIT essentially provides investors the opportunity to become a part-owner of a large-scale business cum commercial real estate property portfolio; this would be quite impossible if you are going on the traditional path of direct (residential) property investing.
Watch this lesson below on WHY REIT could be your best option to scale your property investment when you are working in an job with uncertain future prospects or need to deal with a lot of financial uncertainties in your business
Even if you can afford to build a sizeable property portfolio, there’s no guarantee that you’ll achieve improving diversification. On the contrary, you could be heading to diworsification, where subsequent real estate property purchase worsen you overall property portfolio rental profitability.
On the contrary, for example, by investing in Sunway REIT, the REIT manager need to ensure that any assets or properties injected into its existing asset portfolio will improve overall long term profitability, not worsen it, otherwise they will be out of job very soon comes the next AGM.
Furthermore, investing in a diversified REIT means your funds are already spread out among several properties types and also geographically. Your funds could are invested in malls, hotels, offices across several states in Malaysia.
Now that IS informed diversification.
Investing in REIT means Cash Flow Liquidity
Compared to a brick & mortar real estate property, you’re able to purchase and dispose of any REIT shares in KLSE within seconds.
Think of the hassle you have to go through just to sell a condo unit now. The lawyers, agents, potential buyers, it’ll be at least a few months before you’re able to get the liquid funds from the sale of the condo.
You will realize how important liquidity is if you ever been in a financial emergency. Liquidity will save you a huge amount of time when disposing of REITs, for a fraction of the costs compared to disposing a physical real estate property.
In other words, the REIT shares that you own can be sold in the stock market as they are treated as regular shares.
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 conveniently use any stockbroking platform and filter by sector – REIT to see all the REIT shares trading in KLSE.
The easiest way to open an online brokerage account without much paperwork is shown in the video lesson below.
Evidently, real estate investment trusts (REITs) is indeed one of the safer ways to invest in real estate property. Malaysia is one of the countries in Asia which have made great strides in REITs market. 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 many 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 in detail about REIT Investment? Visit REIT Method – the #1 online course on REIT Investment in Malaysia.