Saturday, February 28, 2009

REIT Variety

The Variety of the Malaysia REIT Market

If you have a diversified investment portfolio, you probably have put some money into the real estate sector. But have you considered REITs? What about foreign REITs?

Let's start with the basics. REITs are Real Estate Investment Trusts. These are funds that invest in real estate ventures. Consider these as holding companies that take your funds and money from other shareholders then purchases and manages real estate interests such as apartments, condominiums, business buildings and industrial parks.

The way you profit from a REIT is not through the sale of land, but rather the leases and rent that are paid on the properties that have been purchased by the management group.

If you are purchasing REITs that are based in the United States there are specific rules that dictate where the money in the REIT can be spent as well as how the profits from the REIT must be given back to the shareholders.

But if you are planning to purchase REITs overseas, the rules are not the same. One of the countries that have seen a number of REITs open up in recent years is Malaysia. But before you ever invest in a foreign property, you need to know what you are getting yourself into.

Here's a look at some of the rules related to their investments:

Types of Real Estate – When investing in the Malaysian REIT market, your money is only allowed to be used to purchase land, single purpose companies, and companies whose main assets are real estate. With this said, the government of Malaysia also allows REIT funds to be invested in other real estate investment trusts as well as debt securities that are backed by the government.

While this may seem that the government is allowing the company to purchase more things that are not as clearly defined as in the real estate market, they do also have a rule in place that demands at least 50% of the funds in a company must be in real estate or single purpose companies in order for the REIT to be valid. Additionally, their investments into assets that are not real estate related cannot be more than 25% of the fund.

In many respects, this does offer a little more variety, and possibly a little more stability in Malaysian REITs. Since there can be more diversity within the REIT, that often leads to more chance for profit, or at least a larger opportunity that there will be stability overall if one part of the REIT is having a bad time.

Getting involved in REIT investing overseas should always involve a lot of research on your part. Make sure you know what you are getting into, and the rules for that country before you buy. Also, if you are looking at Malaysian REIT investments, you need to remember that no two funds are alike and what one fund has inside may be completely different than the stock that another holds.

Websites like can help you sort through the maze of Malaysian REITs, find the purchases that are best for you and start filling your portfolio as they are also an investing real estate broker.

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