What Are The Ways To Invest In Properties Without Buying Actual Properties?

Property investment in Singapore is pretty common for Singaporeans and they would love to afford invest in properties to build their wealth. Singapore’s land is scarce and when there’s scarcity, there is demand. It is a great investment choice for some of the richest people in Singapore and it is still the top investment choice in Singapore. There are many online property platform in Singapore with thousands of property listings like ST Property, PropertyGuru and others platform that you can easily hunt for properties. But, we all know that property is requires a hefty price to commit and being one of the most expensive places in the world to own property and it will be challenging to invest without deep pockets. Luckily, there are ways to invest without going through the traditional method of buying a physical property. Here are few alternatives for investors who are looking to invest in the lucrative property market. 

Real estate investment trust (REIT)

REIT is a structure where investors can buy shares from companies that own or manage portfolio of income-producing properties. It is popular among investors looking to earn some yields because there are regular dividend income. There are couples of benefits investing in REITs - liquid investment tool, low entry barrier where you don’t need huge sum of capital and you have the options to choose a real estate type like residential or hospitality. Though what seems like the most accessible way to invest in real estate with lesser upfront cost and almost zero management but there’s risk that is determined by macro and micro in nature like the political risk, interest rate hike or the market situation. 

Property stocks

One of the easiest and most directly method to invest in real estate market without buying any property. Companies that owns number of properties that either lease out or sell out are the property counters and these property counters may have diversified into other business that may affect the overall stock’s valuation. The difference between property stocks and REITs is that you can pay at least 90% of their net income after tax as dividend. But then again it is up to the management of property counters to pay out dividends. Although REITs are tax-exempt but it is up to management fees that is needed to be deducted from their yields before the dividend distributions.

Property Exchange - traded Fund (ETF)

Exchange - traded fund (ETF) is a type of fund that pulls the money from many investors to own an underlying asset and divides the ownership of these assets into shares. It may seems like complex but ETF can trade like listed stock and you can buy and sell easily. Recently, Singapore Exchange (SGX) announced that they will offer new REIT ETF in the later part of year 2016. Now it has launched an index that tracks a basket of 30 REITS across the Asia Pacific region. The index is based on REITs from various countries that you get to diversify your investment risks and also capture the returns from other countries that have higher yield properties. 

Real estate crowd funding

Crowd funding has been a great enabler for most startups or creators over the past few years and it is finally in Singapore’s real estate. Although it is still in it’s infant stage with many platforms that offers investors how it works. Here’s how it works; by collecting small amounts of money from individuals using online platform. After the money has been pooled enough, it can be used to fund developing real estate projects. However, it depends on the project as investors can look towards earning the high-interest rates between 6 to 20% on the amount for crowd funding (normally between $10,000 to $50,000). The key attractive feature is the promise for high-interest rate returns, considering how low the local banks offering you to deposit your money in savings account. But, it could come with high risks where most developers in crowd funding are those boutique developers with higher chances of failure. The fear is that project may not be complete on time or the project might need more funds. There have been many successful projects through the crowd funding platforms in Singapore and it doesn’t guarantee success all the theme, there are some cases where similar schemes have gone sour. 

There are variety of ways that require lesser capitals, shorter investment period and liquid market but we would advise you to do couple more research before starting to pour your money into the investments.