Be a Trump in your own right!


           

We all know that The Donald made his fortune through the Real Estate markets and if you want to live the high life like him, you can begin right here , a favourite amongst passive investors here in sunny Singapore; Real Estate Investment Trust (REIT).
We all know that if you weren’t born with a silver spoon(or platinum spoon in Singapore’s case) in your mouth, you wouldn’t be able to afford to buy properties to rent out and generate passive income. I mean like, people here spend half their lives to pay off their own house, how the heck are you able to own multiple properties!? But what if I told you that you could own part of the buildings you see in the above picture? Well you could, through REITs!
REITs are able to own buildings by funding it through debt and collective funds from retail and institutional investors! It is a relatively low risk form of investing due to the highly regulated REIT scene here in Singapore. Futhermore, it provides diversification which individuals may not be able to achieve with their own capital, lowering risks even more! REITs also help you to generate a regular income stream through its quarterly or annual dividend payouts!
Without further ado, lets dive into why Singapore REITs (S-REITS) are a great investment tool for your money! Here are a few reasons why the S-REITs are made to help you achieve your financial goals thanks to the government!(This is no form of political advocation, Elections are still far away )
Reasons why S-REITs should be in your portfolio:


 1. Low Gearing rates.
Thanks to MAS in 2015, they raised the approved gearing ratio of S-REITs to be capped at 45%. What this means is that; S-REITs are only able to use debt to finance their portfolio of buildings of up to 45%, making it a relative safer form of investment. Why you might ask, good question my fellow friend, this is so that S-REIT managers do not generate returns on high levels of debt which would leave the REIT extremely vulnerable in times of economic recession; making this a more recession hardy investment vehicle. (Note that this doesn’t mean that their share prices do not fall in downtimes, but rather they are less likely to go bankrupt in times of economic distress)
 2. Guaranteed dividend payments!
Even the best dividend paying companies are not able to claim this for themselves as they are not expected to do so. However, S-REITs are obliged to give out at least 90% of their income to their unit holders or pay hefty corporate taxes to the big G. (Yikes, of course they’d pick the option to distribute!). This means that you can expect to receive regular dividend payments which you can choose to reinvest back into the S-REIT of your choice!
 3. Passive behaviour of S-REITs.
REITs in other parts of the world tend to increase revenue by involving themselves in property development to increase their revenue, resulting in high expenditure and exposure to the volatile economy. This is because of the relatively cheaper cost of land to build infrastructure upon. However , such behaviour here would be exponentially riskier due to the sky high prices of our precious land in the little island.
In a bid to curb such actions by overly optimistic S-REIT managers, MAS ruled that S-REITs may only develop properties up to 10% of their portfolio value and a further 15% may be used for property they have currently owned for at least 3 years and are going to own for 3 further years after redevelopment! This keeps S-REITs in check to remain their role as landlords and not venture into property development!
4. Tax Free Income
I'm almost sure that you heard this before, either from your parents , uncles or aunts at that chinese new year dinner; If I got money confirm buy one condo go rent out, make big money ah!
No. Do not do that. If you did that, you would have to first of all pay a 10% annual property tax and a further tax on your income... On the other hand, dividends arising from an investment in S-REITs are tax-exempt!(Yippie! Three cheers for MAS) The exponential growth in your portfolio will be able to afford you that condo to live in, all it takes is patience and a good amount of research as always, a pinch of luck.
In conclusion, S-REITs are a highly viable option if you are looking for your next investment to include in your portfolio! They are not only low risk investments but also a great source for passive income! Next time, Bring your friends out and tell them you own the shopping mall! (I mean you technically do… But maybe just that one tile you’re stepping on!)

For Honour and Glory,

CDOInvestor

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