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Property Or Shares

One of the perpetual questions asked of popular financial experts and inestment columnists in Australia is whether it is preferable to invest in property or shares. An Australian Real Estate Investment Trust, or A-REIT for short, combines aspects of each. Previously referred to as Listed Property Trusts or LPTs until early 2008, this type of managed fund pools investors’ money in order to acquire property assets that, due to their size or value, would be extremely difficult for any but the wealthiest of private investors to acquire on their own. By the articles on, hospitality reits investment are listed on a stock exchange – generally the ASX in Australia – and investors can purchase shares in a real estate managed fund as part of their portfolio in order to gain some exposure to property. Thus, although A-REITs are share market investments, they derive their returns from the performance of the commercial property market.

Generally the principal income generated by a listed property trust is rents from tenants. These are usually quoted as a certain figure per square metre. Other sources of income may include money from mobile phone companies in exchange for agreeing to host phone towers, naming rights, and car park fees. Obviously some of these are more applicable to some types of property than others. Hotel real estate investment trusts would be less likely to generate any return from the sale of naming rights than a trust that owns a stadium, for instance. A minimum of ninety per cent of an A-REIT’s net income must be distributed back to its unit holders, with the remainder able to be retained by the trust to provide stability from year to year.

Some regard the Net Tangible Assets, or the value of the properties held by a real estate trust, to be the best indicator of the true value of an A-REIT. Have a look at these details about real estate investment trusts from Singapore. Historically, the share price of A-REITs has tracked their Net Tangible Assets fairly closely. If an A-REIT is trading above the value of its Net Tangible Assets, this may indicate that is overvalued. Conversely, an A-REIT which is trading below the value of its Net Tangible Assets could possibly be undervalued.

Although everyone’s circumstances are different, and only you, with the aid of advice from qualified professionals, can determine whether an investment decision is appropriate given your goals, real estate may be a trust investment worth considering. This may be true if you wish to gain exposure to both the share market and property. You may not have to choose between investing in property and the share market: why not have both?