You dont always have to manage physical real estate to invest in real estate!


Many think that the only way to invest in real estate is to buy and rent the unit out. Little do they know it takes a lot of effort to arrange for a loan, pay the interest, ensure the unit is rented out at a fair price, repair the home and manage the tenant. Are there easier ways to gain from the real estate price increases without having to own a house, an industrial unit or a commercial shophouse? Yes there are and we call these instruments REIT (Real Estate Investment Trusts).

Real estate has very unique risks compared to stocks. They are illiquid. If you own a home and want to sell it, you will need a few months to find the best buyer and the transaction is usually costly. Think about the broker fees. If you want to sell a stock, you can do it on your phone today within a few seconds. Real estate is also very chunky. Each transaction can range from a few hundred thousands to a few millions.

REITs are investment vehicles that can be traded like stocks on the market if they are listed. They can also behave like normal funds distributed by fund houses. There are also REIT ETFs.
                     
Take a look at the table above. The main point we want to make is that buying homes or physical spaces isn’t the only way to get exposure to the real estate market. In fact, you can get rental exposure, received in the form of dividends when you buy real estate funds. For others, you can even choose to buy stocks of real estate development firms

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