What are REITS?
A real estate investment trust (REIT) is a company owning and typically operating real estate which generates income.
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Why invest in REITS?
REITS investing offer a good way for individuals to invest in real estate. They are more liquid and offer a predictable stream of dividend income. This is because REITS are legally required to distribute at least 90% of their taxable income to investors.
Factors to Pick your REITS
1.Highest yield – 5- 6% – to beat inflation rate
2. Distribution Per Unit (DPU) consistency
3. Net Asset Value Per Share (NAVPS) < Bid Price – to see if undervalued
4. Adjusted Funds from Operation (AFFO) – the ‘real’ Cash Flow
5. Leverage < 30%
6. Debt/ Equity ratio < 60%
7. Interest Coverage Ratio > 5%
8. Rental Occupancy
9. Rental Reversion – Positive is better
10. Undervalued Price/ Book ratio < 1
11. Diversification – property categories
12. Weighted Average Lease Expiry – improving market, choose shorter lease. Deteriorating market, choose longer period.
READ: Common Investing Myths
Investing in REITS is a good way to earn dividend income and not let your cash lay idle. Readers who are keen to trade with Interactive Brokers can sign up via my referral link today.