A product which provides a fixed income which is better than FD & an upside like equity.
Should you invest in Real Estate Investment Trusts (REITs)?
A Thread 🧵👇
In listed REITs, Most of the completed properties are pre-leased to big companies.
Why no residential? As yields of 1-3% make them unattractive to investors.
REITs have to distribute at least 90% of their taxable income to their shareholders.
Both listed REITs trade at 6-7% dividend yield (which is also tax-free)
What about debt then? There's a restriction there too.
Not more than 49% of the total equity.
REITs are traded on the exchange (like stocks). Yes, Instant liquidity in a very illiquid product (Bulky Commercial Real Estate)
An investor can take part by buying 200 units at a time (60-70k rupees)
Under the current structure, Dividends remain tax-free (6-7% yields vs pre-tax FD yield of 5%)
On capital gains, while selling your units:
STCG of 15% on gains (if sold in less than 3 years)
LTCG of 10% on gains (if sold after 3 years)
US REITs have 5 decades of history behind them & they have continued to outperform the broader equity markets
Interesting fact: US has 194 listed REITs with a combined market cap of $1.3Trillion
This leaves an upside potential once contracts expire.
Moreover, REITs have contractual escalations of 10-15% every 3-5 years.
Directly buying RE? Get ready for 👇
- Huge Ticket Size (vs limited capital)
- Hassle of managing operational cost
- No valid data source
- Illiquid investment with high transaction costs
- Committed Occupancy & collections efficiency (higher the better)
- Weighted Average Lease Expiry (WALE)
- Sector Concentration (lesser the better) & Quality of tenants
- Healthy Balance Sheet
- Upcoming portfolio
No (in the context of India)
- Rents are a fraction of global rents
- Indian Outsourcing is a big opportunity given the resilience & performance in COVID
- Young Population needs direction via physical interactions.
Commercial RE supply is hit, especially for Single Building Projects, Speculative construction, Strata Title assets
Most are facing a cash crunch
Great for future rent scenario, if demand increases
- Slowdown in Commercial RE (follow vacancies)
- Oversupply: Renegotiation at lower rates
- Concentration risks (tenant & location wise)
- Difference b/w REIT yield & FD rate
- Broader stock market movements will have an impact on unit price
More from JST Investments
More from Economy
What a year: 203 essays about degrowth in English since the beginning of March. Here is a selection of some of my favourites. Thank you @fem_degrowth, @beth_stratford, @thedownshifters, @corbinkbarthold, @degrowth_info for these brilliant texts.
THREAD/
https://t.co/1lFaJM52RX
https://t.co/i5HOfZ19r7
https://t.co/DuPSrrqnzz
https://t.co/0ANveWdvFO
THREAD/
https://t.co/1lFaJM52RX
https://t.co/i5HOfZ19r7
https://t.co/DuPSrrqnzz
https://t.co/0ANveWdvFO
Does raising the minimum wage reduce the number of low-wage jobs?
No.
"We also find no evidence of disemployment when we consider higher levels of minimum wages."
https://t.co/vlgagEHeyy
Minimum wage increases reduce crime.
https://t.co/1G1clXqF9t
When you increase the minimum wage, you decrease infant mortality among poor families.
https://t.co/iwW1FDsLYG
Increasing the minimum wage improves kids' health.
https://t.co/66DLHERpOJ
The minimum wage reduces racial income inequality.
https://t.co/wkn9Ajotlx
No.
"We also find no evidence of disemployment when we consider higher levels of minimum wages."
https://t.co/vlgagEHeyy
Minimum wage increases reduce crime.
https://t.co/1G1clXqF9t
When you increase the minimum wage, you decrease infant mortality among poor families.
https://t.co/iwW1FDsLYG
Increasing the minimum wage improves kids' health.
https://t.co/66DLHERpOJ
The minimum wage reduces racial income inequality.
https://t.co/wkn9Ajotlx
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1/“What would need to be true for you to….X”
Why is this the most powerful question you can ask when attempting to reach an agreement with another human being or organization?
A thread, co-written by @deanmbrody:
2/ First, “X” could be lots of things. Examples: What would need to be true for you to
- “Feel it's in our best interest for me to be CMO"
- “Feel that we’re in a good place as a company”
- “Feel that we’re on the same page”
- “Feel that we both got what we wanted from this deal
3/ Normally, we aren’t that direct. Example from startup/VC land:
Founders leave VC meetings thinking that every VC will invest, but they rarely do.
Worse over, the founders don’t know what they need to do in order to be fundable.
4/ So why should you ask the magic Q?
To get clarity.
You want to know where you stand, and what it takes to get what you want in a way that also gets them what they want.
It also holds them (mentally) accountable once the thing they need becomes true.
5/ Staying in the context of soliciting investors, the question is “what would need to be true for you to want to invest (or partner with us on this journey, etc)?”
Multiple responses to this question are likely to deliver a positive result.
Why is this the most powerful question you can ask when attempting to reach an agreement with another human being or organization?
A thread, co-written by @deanmbrody:
Next level tactic when closing a sale, candidate, or investment:
— Erik Torenberg (@eriktorenberg) February 27, 2018
Ask: \u201cWhat needs to be true for you to be all in?\u201d
You'll usually get an explicit answer that you might not get otherwise. It also holds them accountable once the thing they need becomes true.
2/ First, “X” could be lots of things. Examples: What would need to be true for you to
- “Feel it's in our best interest for me to be CMO"
- “Feel that we’re in a good place as a company”
- “Feel that we’re on the same page”
- “Feel that we both got what we wanted from this deal
3/ Normally, we aren’t that direct. Example from startup/VC land:
Founders leave VC meetings thinking that every VC will invest, but they rarely do.
Worse over, the founders don’t know what they need to do in order to be fundable.
4/ So why should you ask the magic Q?
To get clarity.
You want to know where you stand, and what it takes to get what you want in a way that also gets them what they want.
It also holds them (mentally) accountable once the thing they need becomes true.
5/ Staying in the context of soliciting investors, the question is “what would need to be true for you to want to invest (or partner with us on this journey, etc)?”
Multiple responses to this question are likely to deliver a positive result.
