Are REITs worth investing in?

kramyelnek

Does anyone know anything further about Real estate investment trusts (REIT's) and weather they are worth investing in this country as I believe they are quite big abroad but are only becoming available in this country.
Do you also have to pay tax on these.

Aegis

They're probably worth investing in if you'd like to invest in property without the rather large costs of buying a place as an investment.

They're taxed as regular investment trusts, which is to say that CGT applies to capital growth, and income tax is 10% deducted at source for the dividends, with an additional 22.5% due for higher rate taxpayers.

munk

From what little I know of REITs, they don't add as much diversity to a portfolio as investing in funds which actually own the physical bricks and mortar. REITs are more vulnerable to fluctuations within the markets in general since they're just shares after all, whereas physical bricks and mortar funds are less vulnerable to those same fluctuations - just because the price of xyz markets drop doesn't usually mean the value of a physical property will go down in value as a direct result (although it could have a knock on effect over time).

You can usually spot the physical bricks/mortar funds because the portfolio breakdown consists of a list of actual property addresses rather than a list of shares held in various companies - for example see:

New Star Property Fund

If you scroll down to the bottom of that page you can see that the first few items of the portfolio breakdown are actually physical property addresses to indicate the fund actually owns or has some share of the physical property:

60 Gracechurch Street London

etc etc although with that fund there are also some holdings in shares in companies related to property.

dunstonh

They are generally higher risk than a mixed equity fund and have suffered around 20-40% losses year to date. There is probably another 10% in there before it bottoms out (although it may have bottomed out, it may go down and it may recover quickly).