5 Reasons Why You Should Invest In Malaysian REITs Now
Malaysian property investments have become less attractive these days due to the skyrocketing prices and also the various cooling measures implemented by the authorities. This has set many people from the middle and lower income groups back from buying their first home or investing in property.
However, other than investing in physical properties, Malaysians can consider investing in Malaysian Real Estate Investment Trusts (MREITs). Unlike business trusts, Malaysian REITs are trusts which invest in properties only. They are traded on stock exchanges and are eligible for special tax exemption.
Here are five reasons why you should invest in REITs in Malaysia:
1. Small starting capital
Most property investments require a significant amount of money to start. Even with a 90% loan, a RM500,000 property would require at least RM50,000 down payment plus extra for legal fees and stamp duties. But to get started with MREITs, you just need to buy a minimum of 100 shares on Bursa Malaysia.
2. Get exposure to top shopping malls and commercial buildings
With MREITs, you will be able to buy into the top shopping malls in Malaysia. Malls such as Pavilion (Pavilion REIT), MidValley Megamall (IGB REIT), Sunway Pyramid (Sunway REIT) are all available on Bursa Malaysia. As an individual property investor, you would have little chance of owning such popular shopping malls, other than certain strata title types like Berjaya Times Square. With MREITs, your dream of owning a part of these popular commercial properties can be a reality.
3. Earn regular dividends
Like property rentals, MREITs also generate income in the form of dividends. Since MREITs are usually diversified, vacancy rates are generally low so they are a more stable form of income as compared to physical properties which could have periods of vacancy.
The frequency of dividend payout for REITs is quarterly or bi-annually, making them an ideal investment for retirement income. To make it even more attractive, the dividend payout for REITs tend to be pretty high (4 to 8%) as they need to pay out at least 90% of their net income to be eligible for tax treatment.
4. Ease of buying and selling MREITs
As MREITs are traded on the stock market, buying and selling them is generally easier compared to physical properties. MREITs are bought and sold like normal stocks so the prices are transparent and the transactions take place instantly. By contrast, physical property transactions can take between six to twelve months at least to find the right buyer at the right price and go through the sales and purchase agreement (SPA) process.
5. Minimal effort required
One of the key advantages of MREITs is that there is minimal effort required to maintain these investments. MREITs hire professional management teams to manage the tenants and upkeep of the properties, leaving you to enjoy the fruits of your labour. Anyone familiar with property investments will know that there is in fact a lot of work involved in managing your own properties.
At current market condition, dividend yields of most MREITs are pretty attractive compared to other investments, ranging from 4% to 8%. Given the stability of the dividend income and quality of the properties, MREITs are generally good investments to consider.
About the Author
Calvin Yeo, CFA, CFP is the Managing Director of DrWealth. Dr Wealth is ASEAN’s leading site on personal finance. We offer users high quality articles and research on all areas of Personal Finance including Retirement Planning, Investments, Savings, Insurance etc. In addition, we provide effective and simple to use mobile and desktop software tools that help you track, model and plan all your finances.
This article was first published in October 2014 and has been updated for freshness, accuracy, and comprehensiveness.