Real estate investment opportunities Trust -Two Dirty Little Secrets
Most Investors have no read idea how to handle their which is the reason fund managers and lots of investment instruments have sprung up to cater to this need from the market for "return on investment". Real Estate Investment Trusts or Asset Securitization the legal term of art accustomed to describe the phenomenon of convert asset cash streams into tradable securities and selling them to investors.
This short article from a short explanation about REITs, reveals two dirty little secrets that Property Developers use unsuspecting REIT investors.
Asset Securitization as it is known within the legal industry in their Non-Enron form is legitimate because of the cheaper of raising funds. Property Developers take the possiblity to put their best properties to the reits singapore in the beginning as it will be cheaper for them to raise funds in comparison to getting loans in the Bank which will enhance their debt minimizing the finance rating for the company. These property developers having effectively sold their properties away, then manage exactly the same properties through their management companies and charge fees. Then they consider the money to produce and purchase other properties and their capital gets larger.
What most REIT investors have no idea of is the fact that, some unscrupulous Property Developers start sneaking within their underperforming assets in the REITs to have reduce property duds and also the investors within the REITs end up receiving poorer returns on their own investments. This could diminish your returns substantially.
For example, in Singapore which has probably the most thriving REIT markets in Asia, there was clearly talk that some of the worst properties almost being sold into among the REITs, before someone intervened to prevent this trend. Investors should therefore take greater than a perfunctory glance at the Annual Reports and Market Announcements regarding the REITs that they are purchased.
One other thing that most investors are not aware is the first step toward valuation produced in most prospectus documents for REITs. The prospectus is this large document that states the first step toward an investment and explanations why you should invest in it as well as the risks that any reasonable investor should note when purchasing units inside the REIT.
By way of example, there was clearly this REIT Company that wanted to list some properties so when one needs a closer consider the basis the Financial Analysts calculate the potential rental income, its all guesswork. It took the historical rental income and calculated the opportunity yield for that investor. This is why investors should remember fondly the adage of past performance isn't indicator of future returns and scrutinize the premise of valuation from a investment that they make whether it is shares, bonds or REITs.
To conclude, will be your take advantage safe hands? Are you purchasing a REIT today that has ancient property rental return valuations or have you been buying into a REIT that features a few good properties rolling around in its stable with the rest being duds? Take active charge of your money today and you may start to see more visible returns on your own investment.
