If you are new to the investment world, it could feel overwhelming. After all, there are lots of excellent investing choices available. Starting a real estate business in the Philippines is one of the more well-known investment options because it offers several advantages, including high return on investment.
But before making an investment, just as with any other, you should arm yourself with information. You must set aside time to attend online real estate courses or simply study up on novice property investment advice if you want to manage your condo for rent.
This article will teach you how to start a real estate investment trust for OFW’s (REIT) in the Philippines, which is a successful and popular way to get into the real estate industry.
Please Read: Best Investment for OFWs
What are REITs in the Philippines?
Corporations that invest in real estate are known as REITs. These are not just ordinary properties; they are also income-producing structures like hotels, offices, warehouses, and condos that make wise investments.
There is a thriving REIT market in the nation despite the pandemic. This rising sector may be attributed to the Philippines’ 2020 revision of the 2009-enacted REIT law. These revised regulations resulted in more readily available investment properties for both large and small investors, as well as additional tax breaks including VAT exemptions and fewer requirements.
Benefits of REIT
Operations transparency
The Philippines’ REIT is a major step forward for operational openness. They adhere to the major stock exchange rules and laws. For a newbie, it will be a tremendous plus to read up on the basic real estate regulations in the Philippines. In this manner, you can quickly determine if your REIT complies with the most basic laws.
They are also exchanged and listed publicly. Another victory for the REIT investor, as this distinctive element may be useful in operations reports and other regulatory procedures that the investor might research or take note of.
Equity liquidity
REITs adhere to the major stock market rules, as was already mentioned. This only means that REIT shares can be traded on the stock market, enabling you to purchase and sell shares quickly and conveniently without the inconvenience of direct purchasing and selling.
It costs more money, takes longer, and requires more work to sell or buy real estate property shares. This factor might lead some investors to question the overall advantages of investing, but purchasing REITs helps to dispel this concern. You can quickly reach millionaire status in the real estate market with REITs.
Stable source of Income
The fact that REIT investments produce a steady income stream is one of the things that draw individuals to them. Condos, apartments, and warehouses are all considered income-producing properties for a reason. These locations will always be required by other industries as a residence or a place of business.
REITs are not just restricted to these kinds of structures, though. REITs may also include other businesses that generate income by offering essential services like energy, water, internet, or healthcare like hospitals. Because of this, REITs can offer a steady stream of revenue to the business, with 90% of that income being paid to REIT investors each year.
Diversity of Holdings
That REITs in the Philippines appear to survive even the pandemic’s losses is not surprising. The reason for this is that REITs are beneficial diversifiers for any investment portfolio. In addition to increasing returns and lowering risks, they also generate money from essentials.
REITs are still strong because they have no link with the patterns of other assets, even though the pandemic drove certain stocks and other investment options in a downward trend.
Long-term and reliable investment
REITs have a track record of withstanding societal upheaval. One is that various types of people will always find condos in great real estate areas in the Philippines to be successful. For students and professionals, prestigious universities, businesses, tourist attractions, or just peaceful places will never go out of style.
Because of the increased value of real estate in well-known areas like Manila City, Mandaluyong City, and Cebu City, these real estate properties will also continue to generate a consistent increase in income.
More favorable tax treatment
Better REIT regulations coming into effect in 2020 will make Philippine REITs a more appealing investment option for both novice and seasoned investors. The 10% OFW tax exemption is one of these fantastic policies. Due to this tax arrangement, OFW are exempt from the 10% dividend tax for a period of seven years.
Value added tax, or VAT, exemption for transferring properties to a REIT business with the condition of swapping stock shares, is another advantageous clause. The elimination of income tax collectibles and the 50% documentary stamp tax are two further interesting tax breaks for REITs.
Do I need to know anything before making an investment in REITs?
REITs are investments just like any other. Before choosing this investment option, there are some things you should keep in mind. Before making an investment in a Philippine REIT, consider the following points.
Evaluation of the REIT’s quality
Every REIT in the Philippines makes money by providing a service. However, you shouldn’t assume higher yields simply because it does. Check the REIT’s quality first. Consider the location, the standard of the facilities, and the length of the leases, for instance, if you have chosen a residential REIT. These elements might impact your gains. Excellent amenities, long lease terms, and prime locations could result in profitable investments for you.
Be sure to monitor the business decisions made by your REIT. Do they create new facilities, projects, or products? How has the consumer base changed over time? These inquiries could help you determine whether the revenue growth of your REIT is declining or increasing.
Read the disclosures for your REIT
You need to be aware of your REIT’s disclosures, just like with everything else that involves contracts and disclosures. Recognize all of your REIT’s investments, including both real estate-related and non-real estate ones. On the website of the Philippine Stock Exchange, you can review corporate disclosures such as financial reports and significant company announcements.
It is best to consult with investment experts if you have any questions. Before investing any precious resource, including your time or money, take the time to learn more about real estate investment trusts.
Know the market your REIT operates in.
There are several businesses that provide requirements, which also means there are various REITs. It is crucial that you comprehend the precise sector to which your REIT belongs. Check to see if your REIT is involved in any of the following: medical services, utilities, business usage, residential properties, or food, book, or other necessity storage.
You can learn more about the trends in your REIT’s sector and evaluate the profits and losses for your REIT by doing this.
Conclusion
Understanding the fundamentals of the real estate rules is crucial in the Philippines. This will help you in a variety of ways, but most crucially when you own property.
Knowing the current real estate regulations in the Philippines is good because they protect both the buyer and the owner of the land or property.
