How to Invest in REITs in the Philippines 2023
What are Real Estate Investment Trusts (REITs)? How to Invest in REITs in the Philippines? Is it a good investment and how risky is it to invest in one?
Investing in real estate involves shelling out tons of cash because property prices are quite expensive. Fortunately, real estate developers and financial institutions have found a solution to make property investing very much attainable to more people.
What are REITs in the Philippines?
- Real Estate Investment Trust or known as “REITs”, is a unique asset class of investment in the market today. It specializes in income-generating properties, making it a stable form of asset.
- REITs can be a public or privately listed stock corporation which owns properties that generate income. With REITs, you will buy stocks of real property companies. It works like investing in stocks but the focus here is real estate.
- It is similar to a mutual fund. But with REITs, the income is being generated from real estate properties that have rental income or any derivatives of a real estate project.
- These income generating properties are offices, apartments, hospitals, resorts, shopping malls, hotels, or any rental properties that produces income on a recurring basis.
- The portfolios of REITs offer a cheaper or lower investment amount compared to buying an actual property. So, buying or selling your shares is so much easier. This makes them accessible for everyone to invest in real estate.
- REITs also make it easier for people who do not have sufficient knowledge, edge, resources, or capital to experience and be exposed to investing in real properties.
- REITs help people who want development and growth in their investment portfolios, let’s say, a span of 3 to 5 years.
- One advantage of investing in REITs is its liquidity.
If you are a conservative investor, it is more advisable for you to invest in liquid real estate assets just like REITs. Why? Simply because you can buy and sell it when the need arises, unlike with real estate properties that require some time and expenses to run.
- When investing in REITs, if you’re suddenly in need of money, there is an option to withdraw funds from your investment within 5 days (depending on the platform used).
- Most real estate properties being sold are big and you need the effort to look for buyers who can spend a huge amount on houses and lots. So, it’s really a great choice if you would be investing in more liquid real estate assets such as REITS.
- Similar to any investment vehicle, investing in REITs still has risks involved. You earn from the rental income of properties that the REIT manages.
How do REITs make money?
REITs get their capital by initial public offering (IPO). Similar to stocks, REITs are managed like a stock portfolio.
REITs rent out, lease and sell properties. The company will collect rent income on properties they own. This is how they generate income, and out of this, they then pay back investors through dividends.
One of the benefits of investing in REITs in the Philippines is that they are required to distribute 90% of their annual income to shareholders.
How can I invest in REITs in the Philippines 2023?
Just like other businesses, once you start investing in REITs, you need to prepare for some capital. It is not that risky because it does not require a contract and obligation, unlike when buying a real property.
A real estate investment trust is publicly traded by the means of an IPO or Initial Public Offering. This means a company can sell their listed stocks in public. When you buy this IPO, you will automatically be invested in real estate that is presiding over a stock portfolio.
Some REITs are already diversified, which means they are already invested in existing real estate properties.
What to consider when Investing in REITs in the Philippines
Before delving into REITs, you might want to consider the following:
- Location of the properties. Different property locations have varying property values especially those in Metro Manila. Similar to investing in stocks, learn about the planned infrastructure projects of the government first so you can get a glimpse of what locations are going to thrive in the future.
- Company’s track record and reputation. Their reputation and credibility is enhanced if their history of past real estate projects in terms of capital appreciation and rental income has been steadily growing.
Online REITs Brokers
To invest in REITs in the Philippines, you have to go online and find a platform that offers REITs, then choose a trusted and worthy REIT company to invest with.
As of this writing, here is the list of online REIT brokers in the Philippines that allow investors to buy, sell and trade REIT shares through their online platforms.
BPI SECURITIES CORPORATION
No minimum investment required
|FIRST METRO SECURITIES BROKERAGE CORPORATION
Metrobank Account Holder Initial Deposit – ₱2,500.00. Other Bank Depositor Initial Deposit – ₱2,500.00
INVESTORS SECURITY INC.
Initial deposit atleast P25,000.
GLOBAL LINKS SECURITIES AND STOCKS, INC.
Initial deposit P20,000.
HDI SECURITIES, INC.
Initial Investment of at least P25,000.
As low as P1,000.00
RCBC SECURITIES, INC.
Minimum initial Deposit is ₱5,000.00.
COL FINANCIAL GROUP, INC.
Starter accounts P1,000. Plus -P25,000. Premium account P1,000,000.
UCPB SECURITIES , INC.
No minimum maintaining balance.
UNICAPITAL SECURITIES, INC.
Minimum initial deposit of P10,000.
VC SECURITIES COPORATION
Minimum initial deposit of P10,000.
MERIDIAN SECURITIES, INC.
Initial Investment is P150,000.
I’m a BDO Nomura user. As of this writing, I’m a bit saddened that they will not be participating in the IPO listing of AREIT (Ayala Land REIT), Philippines’ first REIT IPO, because of a lack of regulatory requirements. But once the listing is live, we can buy it on the Nomura Platform. I will try to keep you guys updated regarding this.
Is Investing in REITs in the Philippines worth the risk?
Remember, real estate performance is greatly influenced and dependent on the performance of the economy. The majority of businesses and offices nowadays are renting office spaces, condos, and buildings. But considering the rage of the pandemic – loss of jobs, bankruptcies, and business shutdowns – these may have a big impact in the real estate industry today.
Business confidence and expectations about the future will affect earnings. Low real estate earnings will eventually lead to low dividends.
Though there are still investors who want to take advantage of the low offer today and have already invested in AREITs.
Either way, my take is that you should do your own due diligence and do your research first before placing your hard-earned money in any investment vehicle.
How about you? Are you interested in investing in REITs despite the boom and bust cycle our economy is facing today?
As an enthusiast with a demonstrated understanding of real estate investment, particularly Real Estate Investment Trusts (REITs), let me share my insights on the concepts covered in the article "How to Invest in REITs in the Philippines 2023."
Real Estate Investment Trusts (REITs) are a unique asset class that specializes in income-generating properties, providing a stable form of asset for investors. In the Philippines, REITs can be public or privately listed stock corporations that own properties generating income, such as offices, apartments, hospitals, resorts, shopping malls, hotels, or any rental properties.
Key Concepts Covered in the Article:
Nature of REITs:
- REITs function like mutual funds, but instead of a diverse portfolio of stocks, they invest in real estate properties.
- Income is generated from real estate properties with rental income or derivatives of real estate projects.
Advantages of REITs:
- REITs offer a more affordable investment compared to buying actual properties, making real estate investing accessible to a broader audience.
- Liquidity is a significant advantage, allowing investors to buy and sell REIT shares more easily compared to traditional real estate assets.
How REITs Make Money:
- REITs raise capital through an initial public offering (IPO), similar to stocks.
- They generate income by renting out, leasing, and selling properties, collecting rent income, and distributing dividends to investors.
- While REITs provide liquidity, like any investment, there are risks involved.
- Earnings are derived from rental income, and economic factors, such as the impact of the pandemic, can influence real estate performance.
- Investing in REITs requires capital, and it involves buying listed stocks through an IPO.
- Considerations before investing include the location of properties, the company's track record, and reputation in terms of capital appreciation and rental income.
Online REIT Brokers in the Philippines:
- The article provides a list of online REIT brokers in the Philippines, including minimum deposit requirements and online trading platforms.
BDO Nomura's Participation:
- The author mentions being a BDO Nomura user and notes that, as of the writing, BDO Nomura won't be participating in the IPO listing of AREIT (Ayala Land REIT), the Philippines' first REIT IPO.
- The article suggests that real estate performance is influenced by the economy, and factors like the pandemic can impact business confidence, affecting real estate earnings and dividends.
- The author emphasizes the importance of due diligence and research before investing in any vehicle, acknowledging the boom and bust cycle of the economy.
In conclusion, the article provides comprehensive information on the nature, advantages, risks, and the process of investing in REITs in the Philippines, catering to both novice and experienced investors. It also offers practical insights into online REIT brokers and encourages cautious decision-making based on individual research and economic considerations.