do REIT subject to RPGT?

Got the cheque in the mail, guess ARREIT not yet move to eDividend.

ok got the cheque via the mail as well. they shld have moved to edividend.

guys..im totally new to all this investment stuff, still a student..but i have a question

why REIT instead of buying property and collect rent yourself?..i think you can avoid being tax for 10% by government, you own the property and you have the freedom to sell it at higher price. you also have the freedom to increase rent..for places like bandar sunway, you can easily squeeze 2k out of your tenants, and for low cost apartment (spectrum apartment), i saw people selling 160k (probably a leasehold)..my naive calculation (business not my major) estimate that's about 10-12% pa return..

the reason i can think of is low entry investment (lower risk) and more liquidity?..broaden my mind please, tell me what's the pros and cons..very interested since i have a few k to play around..

sorry if i've repeated the questions..

This post has been edited by H.K. Lee: Oct 9 2011, 02:54 AM

For me it's because of convenience and risk. I don't know if you've ever handled tenants or not, but it's a lot of work. You need to interview tenants, sign contracts, make sure they pay on time, make sure that they don't thrash your place, check to see that they pay their utilities bills and so on. If you get a bad tenant, you end up with a lot of trouble. Tenants can run away without paying rent, can damage your place. Non-paying tenants can be hard to evict etc.

As for risk, most people won't be able to afford more than a couple of properties to rent out. If you're having a hard time getting a tenant for a place for a few months, the hit you take on your returns is really bad. REIT companies will tend to have a broader range of properties, and so will always have at least some income even if some tenants leave.

But dont you think the profit outweight the trouble you have?..of course there's must be a certain group that you would want to take as tenants (students, oversea students, or some working professional). plus people usually collect deposit of 2 months right?..i really haven't seen a real case before..

i agree with your second statement, because most people would buy a property using loan and hope that the tenants can cover up the loan..anything as long as you get positive cash flow..but i think that this type of investment should not go above a range..maybe 300k, i duno..because with this amount, you can always pool you money with your family and buy a few attractive places..

i don't mind the low return, since we are able to start it with lower investment cost, but i just dont like the fact that we have to pay tax for the earning when other people are happily collecting rent ever month..the gov should look into it because i think that's how the rich get richer..

and another thing, when the value of the property increase, you don't really earn the capital gain until they sell the property correct? so the question is, in what case you would be able to enjoy the capital gain? put it another way, in what situation do they will sell the property?

This post has been edited by H.K. Lee: Oct 9 2011, 10:08 AM

Income/profit made from property rental also need to pay personal income tax one.
It is not tax exempted.

Pool money with family members? wait until dispute happens time, it is worst and complicated than reit.
This is not new, we can see many many cases brother, sister, even parent dispute with joint name property. Under joint name property, either one refuse to sign, the property is doom, cannot do anything.

I bet you haven't deal with tenant before.
Sometimes, depended on luck what kind of tenants you meet.
It is not the like rent out, trouble free, every tenant pay on time one especially those low cost one.

Working profession want to rent your low cost properties?
Shouldn't go beyond 300k?
what kind properties you can get with below 300K nowadays.

You need to maintain the properties, you need to pay the maintenance fee, lot of stuff, it is almost impossible nowadays to get a residential property that can have a net yield 10%, based on current pricing of property.
Commercial yes, may be, but not residential.

Don't get me wrong, I don't mean reit is better than owning property yourself.
Both have its own advantage to the others.

Reit has one distinct advantage, you need money time, you straight away can get with 3 days, you don't need to do anything, sit back, wait pay check.
Owning property, has full control on the properties, but can be hassle.

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Added on October 9, 2011, 10:35 amYou cannot avoid tax.
Rental income is not tax exempted.

Low cost 160k apartment can rent 2K per month? wow, this must buy then.

I only know 700k condo that rental is about 3-4k with fully furnished.

This post has been edited by cherroy: Oct 9 2011, 10:35 AM

i'm serious, come to sunway and ask the students here..but let's forget about it, it's just different in the investment style..

On the tax issue, if 10% is already accounted for, then personal tax is exempted right?..maybe i know what is the figure?..i don't understand how the gov will know exactly what is the amount you're earning from your property (they probably can check how you pay up your loan)..what if those rich people pay up in one lump sump?..

anyway, i read the news in thestar http://www.starproperty.my/PropertyScene/P...Scene/15494/0/0
so the singapore and hong kong REIT do not need to pay withholding tax, but people still have to pay personal income tax correct?..

and of course, my previous questions, when the value of the property increase, you don't really earn the capital gain until they sell the property correct? in what case you would be able to enjoy the capital gain? put it another way, in what situation do they will sell the property?

Please forget about reit, if you can buy 160k and rent out 2k per month with prompt payment and hassle free. go ahead to buy. it is a good investment, extremely difficult to find.

I am serious too.

Both reit and self own, you don't sell property, you also not earn, little different.
Reit is about fixed income instrument, you aim for rental income, which is primary goal of the reit.
It depended on reit manager to sell or not sell. Some do sell, but majority didn't as pointed reason above.
Reit valuation is about market price, if they sell and register hefty gain, or can generate better yield, then generally higher reit price in the market will be.
By then you capital gain come from reit price increment, not actually or directly from selling property money, until reit manager decided to pay back in the form of special dividend or capital repayment (very rare).

Seriously, owned a property is good, but when tenant reluctant to pay, repair and maintenance, especially condos paiping problem. It can caused a big hassle on your cash flow sometimes but not REITs.

Got the dividend via mail today, agree with you, they should move to edividend. Thinking to buy more since my abp is 0.91. Want to average some...

For many time is a cost factor and the more assets you have the more valuable your time is.

That said choosing REITS over owning-letting out physical property should yield you considerably more free time that you can spend doing something either more profitable or more enjoyable than looking for tenants, chasing rent, paying maintenance fees, worrying over student tenants thrashing your property, etc.

Like you said, its a different style of investment, but often investment choices are also factoring in time and effort required to yield positive gains.

If REIT counter is priced at RM0.80, what is the minimum RM I need to invest in that counter to earn Dividend ?

RM80.
Minimum lot is 100 shares.

Yeah they dun exactly know....but if u are "LUCKY" enough and kena suspect from the TAX dept...u better have all the proper documents ready to answer to them....else the backdated taxes that u r going to pay if gonna cost you a bomb Ppl actually lose half or more or even all of their assets becoz of this.
Btw...if u r lucky enuf....when come to title transfer especially when u wanna transfer to your wife/kids/etc or after you are dead will also be a big prob if the tax dept suspects you

So dont pray pray

Plus another RM1 for gomen stamp duty, plus between RM8 to 15 min. brokerage fee, plus a few sens for klse transaction fees.

Hmm.. I haven't received my ARREIT dividend yet...

Why REIT?
1. I think you get the misconception of that rental income is exempted from tax. This is not the truth as many people do not know that rental income actually is subjected to tax, on whether you assess it under S 4a Business Income or S 4d Investment Income. If you assess under Business Income, then your tax rate will be at the personal tax bracket rate dependent on your amount of total chargeable income. If you setup a company with less than 2.5m authorized capital and on the first 500k chargeable income for that year assessment, the rental will be taxable at 20% or else at 25 % corporate rate. REIT only tax you at 10 %, which is an incentive by government to spur up REIT company

2. Any capital gain when you sell off your REIT stocks at any time is not subject to any tax due to the nature of the tax law " Capital gain in stock is not subject to tax". This is different from property, as any property gains are subject to RPGT (Real Property Gain Tax) if it is disposed in less than 5 years.

3. Hassles in finding tenant, collecting rent and etc if you want to rent it out. It is more difficult if you want to unlock your fund in property as you need to find buyers and after a long time sign S & P only after the buyer able to get the released loan from the bank. As for REIT? Any time, as long as got willing buyer, 3 days later, money will be credited to your broker trust account and you can cash or cheque out any time.

10-12% p.a return

Did you include the property value appreciation as well? Else, for you to get a 10 - 12% p.a return base solely on rental income is near impossible with current property price, unless you tell me that you were using the old property price which dated years back in calculating your yield. For some REITS, you can easily get 6 % to 9% base on some REITS current price out there.

You make a final call on which is a better option for you to invest, REIT or Real Property Rental Income. cheers

This post has been edited by andrewckj: Oct 11 2011, 01:11 PM

Received already, still in the form of snail mail cheque, not yet e-dividend.

Wonder why I haven't received it yet, I purchased the shares on 11aug. I thought registered before 11sept is eligible for dividend right?