Types of REITs―Which is the Best Investment for Beginners in Malaysia?
Asia is known as a very profitable market for business. There is currently international interest for investment in places like Singapore, Hong Kong and Malaysia for various reasons. One major reason is the local public regulations which are set up to encourage investors to come and start businesses in Asia.
Talking about Malaysia specifically, it is a great country to start investing from the perspective of investors. In Malaysia, long-term investments are considered the best, but you can also try your luck with other types of investments. When it comes to investment options in Malaysia, REITs are considered to be among the best and the most lucrative investments. If you’re not already familiar, here’s a detailed look at REITs and which of them are the best for Malaysian investors.
What are REITs?
REITs are companies that have rented real estate spaces which bring in monthly rent. Business people can invest in a REIT and own a small share of the income from the buildings that a REIT manages. The investor would receive dividends from the profit made through those real estate properties. REITs or Real Estate Investment Trusts are a great start for any novice investor. Investing in a REIT is a great option if you are looking to get into the real estate world, but it would be too complicated or too expensive to own a property at this point.
There are various types of REITs to invest if you are interested in this business path. These include retail REITs, residential REITs, healthcare REITs, office REITs and mortgage REITs, amongst others. Each of these real estate investment trusts has advantages and disadvantages, but the most important question to ask before choosing where to take your first step is what kind of portfolio you are looking to build. Consider taking the advice of a financial specialist who can help you set objectives and find the perfect match for your future business persona. Before that, let’s look into these different types of REITs in more detail.
- Retail REITs – These types of REITs focus on buildings that fall in the commercial category and include shopping malls, freestanding retail, etc. This type of REIT can be very profitable, but what is important here is the retail market in the country where the REIT exists. Is it growing? Is it appreciating? These clues can let you know if a retail REIT would be a good idea for your portfolio or not.
- Residential REITs – Residential REITs refer to properties where people live and include rental apartment buildings or manufactured housing amongst others. Before investing in this type of REIT, it’s important to research the residential market and see which areas are preferred by tenants. Also, see how large the living centre is. Generally, large urban spaces tend to be the most lucrative residential REITs.
- Healthcare REITs – These REITs include healthcare centres, such as hospitals, which are home to people that need medical treatment. Healthcare REITs are growing continuously and so can be a very good investment. It is advised that you look for healthcare REITs that have been operating for a long time and have a strong balance sheet and easy access to low-cost capital.
- Office REITs – Investing in office REITs means investing in office buildings. This can be a very profitable way to be part of the real estate sector, especially in a place where the economy is performing well and the unemployment rate is quite low.
- Mortgage REITs – This is a more special type of REIT as it doesn’t require you to invest in the real estate sector. Specialists say that this type of REIT is riskier than others because the interest rate could go up and unbalance the market.
- Industrial REITs – These REITs operate in the industrial sector and can be a very good choice if industries in the country are performing well.
- Hospitality REITs – REITs in the hospitality sector refer to hotels, motels, inns and other accommodation options for tourists.
Benefits of REITs
Investing in REITs comes with various benefits for beginners. There is greater accessibility to the real estate market than any beginner investor would normally have. Plus, there is greater ease of liquidity because the REITs shares can be easily converted to liquid money when needed. REITs will also give regular income to an investor because they work on dividends, which will not stop coming unless you stop the REIT itself. An extra bonus is that you will have the help of REITs managers who are professionally trained to manage real estate properties. So, you do not have any worries about entering the market as a novice.
Which REITs To Invest In Malaysia Now As A Beginner?
There are 18 REITs in Malaysia to choose from if you are interested in this sector. Not all kinds of REITs can be found in Malaysia, but there is still some diversity to choose from:
Some great retail REITs to invest in Malaysia as a beginner are:
- Amanah Harta PNB
- CapitaMalls Malaysia Trust
- KIP REIT
- IGB REIT
- KLCC REIT
- Sunway REIT
Office REITs for beginners to invest in Malaysia are:
- MRCB – Quill REIT
- Tower REIT
- Pavilion REIT
- UOA REIT
- AmFirst REIT
- Atrium REIT
In Malaysia, if you want to invest in healthcare REITs, it would be recommended to go for Al-Aqar Healthcare REIT. It is the most famous REIT in Malaysia for this sector.
There are some good industrial REITs in Malaysia to invest in. Some top options include:
- Atrium REIT
- AXIS REIT
- Amanah Raya REIT
One good example of hospitality REITs to invest in Malaysia is YTL Hospitality REIT.
REITs are an attractive option for investors interested in real estate, especially for those who do not have the capital to invest in this sector. These REITs in Malaysia are the best choices for beginners that are just entering the market.
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