Does margin apply after T+3?

Good sharing, thanks for your responses.

I actually have several REITs in my pocket but now fiddling with the thought of 'upgrading' (if it is considered an upgrade) to direct property. I'm a young executive and comfortable with my cashflow so considering to either to continue channelling more money into REITs or enter the complicated task of handling tenants.

This is different from T+3. This is pledging shares as collateral in order to get a loan to buy more shares. I'd imagine it's not much different from a loan to buy a house or a car, except that if the value of your collateral suddenly falls, you face a margin call, i.e. an order from your bank to provide more capital or have the bank force sell your shares off.

Margin can last indefinitely.
Margin mean use existing share or reit as collateral to get more loan money.

For me, I consider as "downgrade" become more hassle.

Reit is an upgrade version, and comfortable version.

Also risk involved is higher than reit.

But it depends on individual appetite on this issue, nothing right or wrong.

Fyi, residential rental market is not that lcurative compared to commercial.

The 10th Malaysia Plan with massive property constructions around KL/Selangor would once again change the prospective of KL properties.

Frankly, is it good for Malaysia ?

This post has been edited by SKY 1809: Jun 11 2010, 01:45 PM

Funny enough analysts are not extra bullish on the construction sector, meaning they already factored in the benefits long ago.

Other than that, more traffic jams for us

Do you really believe that directly investing in property is more risky than REITs? At least it seems to me that you have more of a sense of control when you invest in a piece of your own property. It's up to you to put in the legwork to scope out a property, interview tenants, periodically check up on them etc. With REITs, yeah, you can read all the reports and filings, but at the end of the day, it still comes down to trusting that they aren't lying about they say.

As I've said before, I like REITS a lot, but I'm still scared of a day when one of them goes belly up and it turns out that they've been playing games with their accounts, not being paid rent, didn't maintain their properties well, get scammed by their related party big brother company etc. I hope that day will never comes, as REITs grow larger, it seems almost inevitable to me that something bad might happen with one of them.

This post has been edited by wankongyew: Jun 11 2010, 01:57 PM

The supply would well exceed the demands.


Why the Govt wants to spend the money to create such an over supply situation ?

Then later you need to use good money to bail out the bad money. liao.

The property crisis is in the making, if we are not careful.

Need to study the history of Dubai carefully.

Again, it is just my view.

This post has been edited by SKY 1809: Jun 11 2010, 03:05 PM

Invest a new or own properties, risk involved :
1. Developers abandon the project
2. Particular properties out of favour, due to whatever reason, little people interest in those area. We had seen many completed/OC passed shoplot being abandoned due to non-strategic location, due to whatever reason, no single tenants interested.
3. Particular property has low demand, cannot/difficult to sell.
4. Tenants don't pay, and don't want to move out either.

I no doubt you worry about trust is logic, just invest into own property, means there are more factors involved, and risk involved.

While for individual less wealthy, the max one can invest into own properties, won't more than a few.
A mistake of 2 in choosing the property, could means significant impact as well, particular those property cannot be sold out, abandoned one.

In reit, you could spread the investment into a few, while even one play foul, it won't impact individual as severe as 1 mistake in real property.

While in reit, market is liquid in general, you still can get out with losses in reit share price only, but for real properties, once the property is not in demand, you cannot sell at all. That's where why I said risk is smaller.
Also, existing law is not protecting enough for purchasers if anything happening.

Rent being paid or not, can see through the cashflow statemet.
Cashflow statement is something not easy to play with.

Account playing, any company can do, not limited to reit.
RPT, so does with ordinary listed company. In fact, RPT is worst in some ordinary listed company than reit.
Properties well maintained or not, it depended on the management company, rental market won't lie.

So as you said, the most important aspect in choosing reit is the management company prudent in managing the properties.

At least reit will distribute 90% of the income to us as shareholders, and cannot foul play on this issue. Unlike ordinary company, can report millions or billion of profit, but keep those cash in company, then suddenly kaboom, those cash gone.

If really worry about the foul play issue, ordinary listed company stand 10x bigger risk than reit.

This post has been edited by cherroy: Jun 11 2010, 02:17 PM

Hmm true. It's almost a part-time job keeping up tabs of our own property, dealing with bad tenants is also a major PITA. Yields not much better, but you stand to gain a lot from appreciation.

REIT is like, okay, read some research docs, put in an excel, key in transaction online, lepak and wait every year for dividend check

Ya if you have done your home works, REITs are practically a Safe form of Internet Investing, without leaving your house or Office.

The beauty of it.

the E dividends make them more attractive.

This post has been edited by SKY 1809: Jun 11 2010, 02:27 PM

I think have to evaluate case by case. For me, I might be enticed to liquidate my REIT to buy the physical property if it is at an absolute bargain. There are many such opportunities like that around. It seems like most of those property millionaires get rich that way (like Rich Dad). However, I think I have not heard any sharing from REIT millionaires
(Note: I may be wrong, please give some examples of REIT millionaires, so that we can be encouraged )

In some cases, the capital appreciation can be astronomical esp for land. (Should have bought some land in bangsar twenty years ago, etc).

There are odeli Billionaires like EPF invested in REITS.

And Tamasek is going to buy some Sunreit. Another Billionaire .

REIT is about Asset Allocation if you believe you need one.

This post has been edited by SKY 1809: Jun 11 2010, 02:56 PM

The real appreciation side of story is always land, not the properties itself.

Yes, case by case, different investment approach has its own good and bad, so does reit vs real own properties.

But for me, as working class, that have little time to deal with those troublesome documentation, dealing with problematic tenants, travel half to 1 hour just to collect rental each month, reit is better in term of conveniences and risk issue.
As buying a property could mean extension time spent of reseach, exploring the issue, legal cost etc involved, too hassle and less diversified.

Reit investors majority is reallly big one, instituitional investors.
As it is a form of fixed income instrument for them.

Companies like EPF, Temasek don't qualify because they are already billionaires
I am talking about hardworking individuals who invest primarily in REITs. (Maybe taikor Cherroy would be the first one )

We have lot of people made good buck of money through reit, particular Axreit.

Our forumer, Neo making quite a lot through reit as well.

How about capital gain, these few hot years (2009-2010)capital gain from physical properties are quite high (30% a year), but REIT's has been on the slow side (5%~10%). Is it because the properties held by the REIT is already over valued, or commercial properties are less 'hot'? How come there are no residential REITs which invest in an entire condo block? Plenty of those overseas.

Actually, CAP gains from REITs can behigh too depending on when you buy it.

For e.g. my first purchase of AXREIT in 2008 was at RM 1.01. Now AXREIT is at RM2. Thats almost 100% cap gain (not counting the divy yet). Having said that, I bought at height of economic crisis thus didnt dare to buy much.

Since then I have bought at different price (1.49, 1.95 and most recently at 2.0).

However, my reasons for REITs are for generating income with capital appreciation considered incidental.

Commercial properties particularly office space is expected to be under some stresses due to over-supply problem. While with economy downturn and severe recession previously, company is more "thrifty" in term of hiring, expanding office space rental etc. Rental market is not very strong.

The physical properties appreciation has something to do low interest rate environment, speculation and inflation expectation/threat.

Residential yield is low to start with, so not attractive enough.
Even one invested on their own on residential properties, the net yield, after deducting all the expenses like assessment, maintenance fee etc, the net yield could be around 4-5% only. Not to mention property manager need to charge 1% on the management fee side, so chance is left is 3-4%. You want to invest in a reit that carry 3-4%? Might as well put in FD then.

Unless you are runnning at high leverage, then only residential properties seems viable, if not, there is no incentive for people to invest in residential reit.

Reit every year give you around 7%.
While capital appreciation side, you need to see your entry price.

It is different league to compare reit price appreciation with physical properties price appreciation. As even physical properties appreciation, you cannot liquidate a single cent while reit you can do it anytime.

Reit price primary affected by its yield.

Actually don't look at physical properties appreciation price tag alone, you need to take in net cost or net gain. In order to realise the physical properties gain, you need to sell, legal fee, stamp duty, RPGT, involved, which easily cost a few thousand up to ten of thousand.

People always neglect the net expenses incurred but only looking at surface figure only.

All that is still anecdotal data however. If we want to compare anecdotes, there are members on the Property Talk side of the forum who claim that they can get yields of 40% or more.

Anyway, if someone is the type who would be persuaded by anecdotes, REITs is probably the wrong place to be. You'd expect slow and steady gains from REITs, not dramatic returns. I don't think you can "get rich" through REITs. You need to have a significant bit of capital already to make it interesting. It is theoretically more possible to "get rich" through direct property investment if you manage to make exactly the right bet at the right time, but more often than not, you just get your hands burn.