If you’re looking to get into the real estate market, but you don’t have masses of capital, you should consider buying shares in a real estate investment trust (REIT). These trusts/companies are set up purely to invest in real estate, typically with the intention of earning passive rental income from the underlying property investments
There are 29 REITs listed on the JSE, and you can invest in any of them via EasyEquities. Most South African REITs own several kinds of commercial properties like shopping centres, office buildings, factories, warehouses, hotels, hospitals and even, to a lesser extent, residential properties. Some REITs invest in properties in other countries.
“There are many advantages to investing in REITs,” says EasyEquities head of operations Craig Margolius. “Firstly, they give you exposure to the property sector without having to invest directly. This means you can invest as little as R5 in a company like Growthpoint Properties, which has interests in 525 properties in SA and Australia with a total value of more than R100bn.
“Secondly, there are a number of tax advantages. There are no capital gains taxes when the REIT sells underlying properties; investors are not taxed on dividends in the form of a dividend-withholding tax; and the REIT is allowed to deduct all distributions to investors at corporate level*.
“Thirdly, REIT shareholders enjoy greater liquidity in their REIT stocks than they would in the underlying assets. It’s far easier to sell shares than shopping centres, after all!
“A fourth advantage that REITs have is that they are subject to the oversight and transparency rules that govern public companies, which means you have access to all their financial and corporate governance information.”
More than 25 countries in the world use a similar REIT model including the US, Australia, Belgium, France, Hong Kong, Japan, Singapore and the UK.
The following REIT stocks are available on EasyEquities:
- ACUCAP Properties Ltd
- Arrowhead Properties Ltd
- Ascension Properties Ltd
- Capital Property Fund
- Delta Property Fund Ltd
- Dipula Income Fund
- Emira Property Fund
- Equites Property Fund
- Fairvest Property Holdings
- Fortress Income Fund Ltd
- Fountainhead Property Trust
- Freedom Property Fund Ltd
- Growthpoint Property Ltd
- Hospitality Property Fund
- Hyprop Investments Ltd
- Investec Property Fund Ltd
- Octodec Investments Ltd
- Oasis Crescent Property Fund
- Premium Properties Ltd
- Rebosis Property Fund Ltd
- Redefine Properties Ltd
- Resilient Property Income Fund
- SA Corporate Real Estate Fund
- Safari Investments
- Sycom Property Fund
- Synergy Income Fund Ltd
- Tower Property Fund
- Vukile Property Fund Ltd
- Vunani Property Inv. Fund Ltd
We’ve set up a Property Tag on the Browse Companies section of the EasyEquities website to make it easier for you to find these companies.
If you’d like a more detailed understanding of what REITs are, download our special REITs Report.
* These distributions are generally high because REITs must maintain a high dividend ratio, typically around 80% to 90% of earnings. SA REITs listed on the JSE are required to maintain a minimum pay-out ratio of 75%.