If the only thing that comes to your mind when you think of property investment is a bond or a physical property, then this article is for you. Direct property investment (the fancy term for buying, renting and/or selling physical properties) is not the only way to get into property investment. We will cover what other ways there are, as well as how you can get involved. The great thing is that you do not even have to be an expert in property!
But let’s get into the other ways you could invest.
1. Real Estate Investment Trust (REIT)
A REIT is a company that invests and manages income-producing properties. You can buy the shares of these companies on the JSE.
Now as a shareholder, you should receive dividends regularly. These dividends are mainly from the rental income produced by the properties being managed by the REIT.
In time, the value of the shares should reflect the value of the properties that the REIT invests in.
How to get involved:
You should be able to invest in REITs through most online platforms. Buying shares online is not rocket science. Follow this simple three-step plan:
- Find a good online platform – considering costs. (Here is a great starting place!)
- Open an account and load your money.
- Search for REITs that you want to buy, and buy!
2. Unit Trusts invested on property
Another way of investing in property is through a Unit Trust. A Unit Trust combines money from many different people and uses it to invest in various assets; including property.
The value of the units that you own would reflect the value of the properties bought by the Unit Trust. As the value of those properties increases over time, so will the value of your units. (The opposite is also true!)
More on general Unit Trusts here!
How to get involved:
You can buy units in a fund from a unit trust management company. A list of all unit trusts in SA is here.
Investing in a Unit Trust is easy. After choosing a reputable property Unit Trust, go to their website and download an application form. If you fill your details in and send it to the required mailbox, you should then be issued a policy number. From there you can start! Easy as that.
The benefits of investing in REITs and Unit Trusts
- REITs and Unit Trusts are well regulated, so you can be assured that you are putting your money in an investment that is well-governed.
- You can own many types of property without necessarily having a large amount of money and without the hassles of managing it.
- You can buy a REIT for as little as R10
- Some Unit Trusts have minimum investments of R20 000
- You do not have to be an expert in property to invest. The real experts are the ones managing your money in the fund.
- You do, however, need to have some knowledge to know which REIT or Unit Trust is suitable for you.
- They provide great diversification – since you effectively own a small piece of many types of properties. If one were to fail, then you would not lose all your money.
- You can sell and buy them very quickly!
- Buying and selling REITs is like any listed share. You can trade at the click of a button.
- Unit Trusts trade once a working day, and have cut off times. As long as you submit your buy or sell instruction before the closing time, you should be fine. The transaction should be completed within a few days.