Now that you have a better understand of what REITs are, why you should (or shouldn’t) invest in them, and the different types of REITs available in Malaysia, it’s time to clear up some common questions about REITs.
Sounds interesting! So how do I buy REIT units?
Publicly traded REITs are bought and traded just like normal stocks in the stock exchange. You will be required to have a Central Depository System (CDS) account and a trading account maintained with a broker. You can then buy or sell units through your broker, remisier or via online trading. Like buying and selling stocks, investors need to pay brokerage commission, stamp duty, clearing fees and GST, where applicable.
Will I be taxed for REIT unit earnings?
The short answer is no. The payouts your receive from the units you buy are already subjected to tax. Think of it as something along the lines of “GST included”.
How do I judge which REIT to buy?
That depends on your personal investment style, but the best way is to always do your homework, research the trends of the REITs you are interested in, and make your own decisions based on what you have found out.
How many % should REITs take up in my portfolio?
As the saying goes, don’t put all your eggs in one basket. If possible, have a good mix of stocks, REITs and physical property in your investment portfolio. However, if you are planning to just stick with REITs, the best strategy is to buy units from REITs which invest in different types of real estate, including retail, hotels, healthcare and offices.
If it’s so good, why aren’t more people investing in REITs?
Maybe they just don’t have the REIT idea! Okay, that’s a pretty bad one, I’ll admit.
Jokes aside, this is one of the first questions that will invariably pop up when discussing REITs. There can be several reasons. Some people prefer to invest in physical real estate, in which they can see and touch the properties that they own and enjoy the huge capital gains from a successful sale, while others simply enjoy playing the stock market. Also, REITs are considered a fairly new ‘product’ in the market, and not as many people are aware of them. Nevertheless, savvy investors realise that having a diverse portfolio is vital as a hedge against uncertainty, therefore you can be sure that REITs will definitely be a part of their investment strategy.
Should I be worried if property prices go up/down?
REITs’ earnings depend on the rental of their real estate, whereby the tenants sign a tenancy contract for a certain number of years until the next tenancy renewal cycle. Therefore, even if prices go down, the amount of rental being paid is still the same, resulting in higher yield, and thus higher payouts to unitholders.
For more information and frequently asked questions about REITs, head over to Bursa Malaysia’s FAQ section.