The downsides of direct property investing
You ask your spouse to pass the salad. He/she lifts the bowl as your handphone rings. Taking calls during family dinners isn’t really your thing.
But your tenants have an emergency. A pipe broke in their bathroom and the place is starting to stink. No surprise here—you’ve just lost your appetite.
Many people have plenty of luck buying a second home and renting it out. Others are fighting a constant battle.
Sometimes, it’s an untrustworthy property manager. It could be a loopy, destructive tenant. Overdue rentals are common. Illegal activities could be thriving in your rented property. Unlike in developed countries like Australia, property managers are very professional. And you have a database to conduct tenancy check before renting out.
Like any investment, real estate comes with risks. It also comes with hassles. Investors who want exposure to property without the PITA (Pain-In-The-Ass) factor have an alternative. They can buy a portfolio of Real Estate Investment Trusts (REITs). Some put their money in REITs to get dividends from real property assets while while searching for that right property to buy.
REITs are real estate companies that buy income-producing properties. Some focus on hospitals. Others focus on office buildings, shopping malls or warehouses. They collect rents from tenants, as you would with a second home. But nobody bugs you—ever.
REITs trade on the stock market - like KLSE. Dividend payouts tend to be higher than they are with common stocks. That’s because REITs must return 90 percent of their income to investors. This could be attractive for yield hungry folks.
Historically, REITs and traditional stocks battle like David & Goliath. Sometimes REITs reigned supreme, especially in depressed economic conditions. Other times, traditional stocks knock them out in bullish market. Guess which kind of market are we in now?
This is not my opinion only. Google for A. Hallam article: REITS: How To Invest In Real Estate Without The Added Stink