Y
ou don’t have to buy physical
property to invest in the real estate market. This is the beauty
of listed property, which allows
you buy a stake in property assets - be they
companies, unit trusts and other tradeable
vehicles - that are listed on the Johannesburg Stock Exchange (JSE).
These vehicles allow you to own property indirectly, but with more control over
your investment, as opposed to buying a
physical asset, which brings with it all the
hassles of bad tenants, maintenance obligations and the risk of having a lot of money
tied up in one illiquid asset. It allows you
to own a share of a more diversified portfolio, including commercial and residential
properties, at a fraction of the cost.
While listed property has been an excellent performer for investors on the JSE
over the last decade, one needs to remember its values fluctuate, very much like
share prices on the stock exchange.
REITs
South African real estate investment trusts
(REITs) are widely understood to be the
best vehicles for investing in listed property. Since they were introduced in May
last year – to put South Africa’s property
sector on a par with international best
practice and give foreign investors a better understanding of the local listed property market – a number of listed property
entities (particularly property loan stocks
companies (PLSs) and property unit trusts
(PUTs) have converted to the REIT structure, which has allowed them certain tax
benefits.
“REITS are a special structure of property companies that do not pay taxes.
These are the best for novice investors as
they are simple and pay out a high income
y