1. Why invest in property?

- Provide long-term reliable stream of income in forms of rents and potential for
-

capital gain (bn c l).

There is a prospect that multiple year leases with fixed rents may reduce

cash flow impact from economic shocks.

Provide diversification. Real estate investments can be differentiated
according to their underlying assets:
+ residential property ( family homes)
+ commercial property
+ loans with residential or commercial property
For example, some basic forms of real estate investment:

Private

Debt
Mortgages
Construction lending

Equity
Direct ownership of

Public

Mortgage backed

real estate
Shares in real

securities
Collateralized

estate corporations
Shares of REITs

mortgage obligations
-

Provide potential inflation hedge because rents and real estate values tend to
increase with inflation. Recently, according to the UK Office for National
Statistics, the housing prices in UK increased by 0.1% in last month the
slowest growth since March, this is said to be related to the inflation cooling

down from 12% in September to 10%.

Direct investment in property is lack of liquidity and subject to high transaction

cost, so it is suitable for long-term investment.

Indirect investments allow diversifying smaller portfolios by making property
more accessible.

2. REITs
Definition: trong sach.
- Use a pool of money to invest in property; act like mutual funds.
- 3 types of reits:
+ equity reits: allow investors to own property, generate income by renting out the
property.
+mortgage reits: allow investors to own property mortgages, buy mortgages from
lenders, loan mortgages to owners. Profits are earned from interests from the
mortgage loans.

+hybrid reits: the combination of these above 2.

+ m ci at least

Advantages of REITs:
Tax transparency: It is regulation that there is no capital gain tax or
corporation tax on REITs.
Can potentially yield high returns: because:
+ 90% of income must be distributed to shareholders in terms of dividends
+there is no capital gain tax or corporation tax on reits.
+there can be potential capital gain on real estates.
Reits allow investors to get access to the property that they may not have
enough capital to invest. For example, it is usually difficult for a small investor
to invest directly in a shopping mall or a warehouse, but he surely can buy

reits which invest in shopping malls.

Low/controlled gearing
Allow portfolio diversification: reits typically own multiple of property
portfolios with diversified tents, which reduces the risk of relying on a single
property and tenant when you directly own a real estate property. For
instance, if the mrt station near you flat just closed down, the value decrease
impact is reduced when investing in a pool of property through reits. Investors
can select reits based on the types of property and regions. REITS listed in
Singapore have wide range of assets (hotels, shopping malls, office buildings

in Singapore and other countries (for example, China).

Reits are beneficial because of their liquidity. They are easily bought and sold

on the stock exchange like stocks.

REITs are subject to Strong corporate governance. The process of buying and
selling reits is transparent and flexible. Investors can find information on reits
prices, trading process easily. Besides, a lot of external controls of reits help
to improve the transparency and corporate governance of reits. For example,
it is required that reits must distribute at least 90% of income each year to

enjoy the tax exempt status by IRAS (Inland Revenue Authority of Singapore).
Another benefit is that many reits are accompanied by dividend reinvestment
plans so that investors will skip dividends but receive more proportion of reits.