Many times people ask experts that how to select the best REITS. Some will ask you why you bought FEHT (Far East Hospitality Trust) when the share prices were reducing and the company was not depicting progressive growth. What was the reason to invest in REITS like IREIT, Sabana REITS? What strategies one must follow if he or she is looking forward for an investment in REITS.
So here, I come up with three basic strategies one must follow too,
1.Never Mind Investing In Premium REITS:
You have commonly heard about the Premium REITS like FIRST REITS, PLIFE REITS, ASCENDAS REITS, IREIT, MAPLETREE COMM, KEPPEL DC, ETC.
You might also know that these companies always trade with additional premium when compared to their net asset value (NAV). Many investors have perceived thought that the shares are overvalued and thus, wait for the prices to fall so that they can buy the shares.
But what the traders overlook is such companies’ organic growth ability is huge, also they are plugged in with efficient management teams, and optimum capital utilization skills. Because of such factors, these companies use to grow and benefits their shareholders as well.
Let us look at an example: a long-term lease with downside protection and organic relapse in the rentals with the help of linked CPI indicators is always present when we talk about Plife, or First REIT’S . This dedicates the huge premium trading with their NAV.
So making investments in Premium REITS might not affect you rather will throw an opportunity towards you to maximize profits.
At times, prices of shares changes due to the sectoral cyclic performance of the company. Every product has a lifecycle through which it passes, and during such phase, the share prices keep changing. It also falls when; the management of the REIT’S are incompetent or the valuation of properties changes.
Investors must look for chances when the company’s stock prices fall and thus they can invest in the equity. Because the possibility is high that the company will respond appropriately to overcome such issues because of which company can face DE-growth. Thus the share prices will soon regrow and later you will be sitting on maximum profit books.
3.Relapse to mean
This strategy is for various stable companies like CapitaComm Trust, Suntec REIT’S etc.
It is expected that the mean will soon reverse if the titled risk reward is in your favor when compared the past 10 year metrics of either Dividend yield or NAV. This theory works with a short-term investment strategy and appropriate due diligence is required before investing.
Financial Expert last Note:
There are n numbers of strategies, which traders are using to invest in REITS, but not every strategy might be good for every investor. Thus, always plan your investments and accordingly decide on specific strategies in order to gain maximum returns with REITS.