Last updated September 15th, 2018.
Some people buy physical property to either resell or rent out. However, purchasing shares of a real estate investment trust (REIT) or property fund is a better option for many.
In the most basic explanation possible, REITs are companies that own a portfolio of properties. You indirectly own several different pieces of income producing real estate by holding shares in a REIT.
A small fee every year, in most cases less than 2%, is paid for management expenses.
That’s all great for several reasons. REITs and funds are not only diversified, but often invest in assets that require a large amount of capital such as offices and shopping malls.
Such commercial properties are usually out of reach for individual investors. They provide higher yields in most cities though.
A Good REIT is the Best Way to Invest in Property
Secondly, buying into a REIT or property fund also removes the hassle of managing the assets yourself.
A landlord must spend time looking for tenants, making repairs, and collecting income. But shareholders of a REIT or fund can have more time for other things.
It’s also worth noting that this same benefit helps investors diversify abroad. While owning a REIT in another country works well, owning physical property and managing it from abroad is often impractical.
There are lots of different REITs and funds available all throughout the Asia-Pacific region.
Property funds are common in countries that already have developed financial sectors such as Singapore, Australia and Japan. Although you can increasingly find them in emerging and frontier markets like Thailand, Cambodia, and Malaysia too.
Most funds are very general in nature. Yet others invest in a specific sector such as commercial, industrial, or residential.
In summary, most people are better off owning shares in a REIT, property fund, or even just a business which owns real estate. This is especially true when investing in frontier markets.
It’s hard to do things yourself in places such as Cambodia or Vietnam unless you speak the language and have local connections.
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- Best Way to Invest in Property? REITs and Funds - April 20, 2014