Countries and Property Returns

[UK/HKboy]

The peasant in me likes to own real estate, at the end of the day it is property, not a piece of paper. Even when it loses value, still can rent it out...in the US, it is still relatively reasonable to buy in many areas. I also have just a pure speculative 100 acre parcel on a major road, just waiting for expansion of the nearby city. So I don't make any money on it, just watching it appreciate (300 percent so far, in about 15 years- at one point was 500 percent but then came back down). It makes me feel good...hoping that it will help finance my daughter's retirement, that's how long I am planning to hold it...

My one house rental (suburban MD) is about 10 percent net and my suburban VA flat is about 8 percent net then I have other property (one house, two flats) that relatives live in rent-free so not great returns on those... but they pay the taxes and maintenance fees so no cost to me... I have property managers do the house and the flat that are rented and it's been very smooth. What I really need to do is buy some more because I feel like the US stock market is headed for a a crash and would rather own more real estate. I haven't financed property since 1992 although probably should but, like I said, I am a peasant who just wants land...

The other way I look at it is that if my life screws up and I only have the investments i made. If i had invested in stocks and they tanked... i can only sell them at a loss. But if i had invested in property, even if the price tanked, I can still have a roof over my head.

[john_1122]

I wonder why you are not discussing REITs. I think they are better than directly owning investment properties. If you look at Link Reit or Sunlight (0435) or Fortune (0778), they have gone up as much as properties, while giving a higher yield and you don't need to worry about a tenant, renovations, etc. (and no agent to pay).

Link is a bit of an unusual case because they got a lot of undervalued properties, renovated them and spiked rents to impossible levels. Sunlight might be more representative of the potential of reits.

Over the last 10 years::
Centacity index up 200%
Fortune up 236%
Sunlight up 275%
Link Reit up 630%

Another advantage is that it's more responsive to price swings, so you can buy some if the price drops (momentarily). I read that June was the top price for properties, but the Centacity index has hardly moved, while Sunlight has gone down by 15% since 15 July, Fortune by 14%, and Link by 5%.

Of course if you buy a house you can easily leverage, but with a revenue of 2.5% and a mortgage interest rate of 2.3% it doesn't make much sense. And the yield of these reits is much higher than that of properties: That of Link isn't very high (2.92%), but Sunlight is 4.94% and Fortune is 5.47%. Good luck finding that with a property in HK. Also, you don't need to pay taxes on the dividend, but you need to pay taxes on the rent of investment properties, right?

I have recently found what seems to be a good REIT ETF in USA: RQI, although perhaps a bit pricey right now? It's up 180% since 2009, and it has a dividend of 4.5% (after taxes), with monthly distribution. Tell me what you think !

https://seekingalpha.com/symbol/RQI

[john_1122]

Original Post Deleted

Of course companies pay taxes, but I mean that the dividend you receive isn't taxed, while I believe the rent you receive is taxed. You should take this into consideration when you compare yields.

[shri]

Of course companies pay taxes, but I mean that the dividend you receive isn't taxed, while I believe the rent you receive is taxed. You should take this into consideration when you compare yields.

If you own a US listed REIT and not a US citizen/resident operating an account of HK - do you have a actual statement of dividends received which does not show a 30% WHT?

[MABinPengChau]

I cannot live in a REIT. Same as a stock to my Irish peasant self.

[john_1122]

I cannot live in a REIT. Same as a stock to my Irish peasant self.

I am talking about investment properties, rather than properties for residence. It usually makes sense to buy a house for yourself, but if you are buying an investment property, specially in another country, REITs are a safer bet, in my humble opinion.

[MandM!]

I am talking about investment properties, rather than properties for residence. It usually makes sense to buy a house for yourself, but if you are buying an investment property, specially in another country, REITs are a safer bet, in my humble opinion.

REITs I think sound good but are subject to being overcharged on fees and they don't have to share the profits monthly, it's quite optional. Whereas if you have a rental, it's likely you'll get a return that increases with time.

Of course location and being available is key as well. Whereas a REIT you can buy it and keep hands off. I think the returns for REITs would not match if you bought an investment property yourself. Yet REITs are more liquid than physical property.

[MandM!]

Original Post Deleted

I'll have a read then. I'm skeptical

[traineeinvestor]

Original Post Deleted

REITS are regulated not only under the HKEX listing rules but under the SFC Code on REITS. Among other requirements is one that they are required to distribute 90% of their annual net profit after tax to unit holders (REIT Code paragraph 7.12). The Trust Deed will define "net profit" in a manner which better aligns the term with cash flow rather than accounting profit.

https://www.sfc.hk/web/EN/assets/com...ent-trusts.pdf

[traineeinvestor]

Original Post Deleted

I actually worked on several of the early REITs in my professional capacity so not going very far at all - no further than my memory of deals past. Unfortunately, it meant I was barred from investing in them.