Direct property investment vs property funds vs REITs

This is a discussion on Direct property investment vs property funds vs REITs within the The Foyer forums, part of the Off the Grid category; We all know a fair amount about buy to let. I'd like to discuss the advantages and disadvantages of other ...

Reply
 
LinkBack Thread Tools Search this Thread
Old Aug 1, 2007, 7:26pm   #1
BF2
Joined Jan 2007
Direct property investment vs property funds vs REITs

We all know a fair amount about buy to let. I'd like to discuss the advantages and disadvantages of other means of property investment.

Property funds:
These are pooled funds that buy and sell commercial properties and collect rents. Presumably you benefit from both rental yield and appreciation, and they are more liquid than BTL. You don't have any management overhead or BoE rate worries but on the downside the buy/sell decisions are out of your hands and you have to pay the management charges.

REITs
By law, they have to distribute at least 90% of their profits as dividends so the yield is expected to be better, but these are traded like stocks in the exchange and I don't fully understand the supply-demand dynamics. Maybe someone here can explain? I don't see any huge benefit over property funds.

All comments welcome.
BF2 is offline   Reply With Quote
Old Aug 2, 2007, 5:28pm   #2
Joined Jan 2006
BF2 a big subject - firstly by value, investment in commercial property in the UK dwarfs that in buy to lets and the like.

The property funds (mostly unit trusts) which the man in the street can buy such as New Star - their value is directly correlated to the underlying value of their property assets. In many ways they face the classic conundrum of long term (relatively illiquid assets) but have to offer their investors pretty much immediate redemption. For this reason they are required to carry a certain amount of cash and have limits on their gearing.

REITS grew out of the quoted property sector _ the biggest, Land Securites REIT was Land Securities plc the largest quoted property company - REIT status has certain tax advantages the biggest being almost complete tax transparency (effectively no double taxation) - and it was generally thought that their pricing would more closely follow that of direct funds - and indeed that is what happened in the run up to conversion - however sentiment has switched again and most REITs are now trading at a significant discount to NAV just as the remaining quoted property companies are.

Does that help
__________________
You have to lose to win.
Baldwreck is offline   Reply With Quote
Old Aug 3, 2007, 1:12pm   #3
 
fibonelli's Avatar
Joined Oct 2006
BT2,

There will be many more opportunities in the quoted REITs/non-REITs sector in the event of significant redemptions from the open ended property funds.

I would rather own a REIT on a discount to forward NAV of 30%+ than an illiquid open ended property fund.

Hope this helps.

Fibonelli
__________________
Audere est Facere

"The trend is your friend and divergences are your best friend until the bend at the end"

Party on like it's 1930, until Mr C (Wave) gatecrashes the party.
fibonelli is offline   Reply With Quote
Old Aug 4, 2007, 9:57am   #4
BF2
Joined Jan 2007
BF2 started this thread All good points. I am not still 100% sure about REITS. The way I understad it in my simple mind is that property funds are affected by mainly one variable: the prevailing property situation. REIT prices are affected by that factor plus all the stock market factors.
BF2 is offline   Reply With Quote
Old Oct 30, 2008, 12:46pm   #5
 
2 Posts
Joined Oct 2008
hi there,
I am agree with BF2. Property funds really effected by mainly one variable and REIT ups and down prices are affected by that factors and all other shareholders and all stock market factors.
azeemi121 is offline   Reply With Quote
Old Aug 30, 2011, 6:40am   #6
Joined Apr 2011
Re: Direct property investment vs property funds vs REITs

In real estate, investment is money used to buy a property to be held for resale or rental income, and there is an element of risk capital.
Johnkarner is offline Software vendor   Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search

Similar Threads
Thread Thread Starter Forum Replies Last Post
Property Traders Jofstar General Trading Chat 2 Jul 3, 2007 1:29pm
Property Options aricho Futures & Options 2 Nov 24, 2005 8:04pm
CGT on property the blades The Foyer 4 Nov 17, 2004 1:58pm
PROPERTY seminars al-motor The Foyer 24 Jul 31, 2004 10:41am

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)