Real gains from real estate: How REITs can boost your finances

Ready to dive into investing but feeling a bit lost? Real estate sounds cool, but buying and managing property can be pricey and quite the hassle. That’s where REITs (Real Estate Investment Trusts) come in. REITs let you get into real estate without the stress of owning property. Let’s break down what REITs are and how they can make real estate investing a breeze.

What are REITs and how do they work? 

Real Estate Investment Trusts are companies that own, finance, or operate income-producing real estate. Imagine having shares in a corporation that owns office buildings, shopping centers, hotels, warehouses, hospitals, and apartment complexes. REITs let you invest in these properties without having to buy or manage them yourself. 

REITs are managed by fund managers who decide where to invest the REIT’s money, choosing the best properties to generate income. They are complemented by property managers who take care of the properties, handle tenants, ensure buildings are maintained, and keep up to the code. 

Key features of Philippine REITs under R.A. No. 9856 

To qualify as a legitimate REIT, several criteria must be met.  

 
First, it must be officially registered with the SEC and possess a minimum capital of P300 million. Additionally, it must be listed on the Philippine Stock Exchange and ensure that at least 33.33% of its shares are available to the public.  

The REIT must also have independent fund and property managers to oversee its operations. Investment-wise, it should allocate at least 75% of its capital to income-generating real estate, with a minimum of 35% of these properties located within the Philippines. Furthermore, it is required to distribute 90% of its income to investors as dividends annually.

Benefits of investing in REITs 

REITs offer several advantages for investors. They are traded on the Philippine Stock Exchange, making them easily accessible with just a brokerage account. 

Additionally, by law, REITs distribute 90% of their income as dividends annually, providing a reliable source of regular income. Unlike owning physical property, REIT shares can be quickly sold on the stock exchange, offering significant liquidity. They also allow for diversification, enabling you to spread your investment across various properties and locations without requiring a large amount of capital. 

REITs are also required to regularly disclose their financial status, enhancing transparency and reducing investment risk.

Open a brokerage account: You need an account with a brokerage firm like BPI Trade.  
 
Buy REIT shares: Once your account is set up, you can buy REIT shares during an Initial Public Offering (IPO) or on the open market just like any other stock. In the Philippines, you can choose from eight publicly listed REITs at present.  
 
Investing in REITs can be a great way to start your journey in real estate investment. With lower capital requirements and the potential for regular income, it's an accessible and rewarding investment option for young investors.  
 
Stay tuned for Part 2, where we will dive deeper into specific investment strategies for REITs and how to maximize your returns.  
 
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