Wednesday, November 2, 2016

Basic knowledge about real estate investment trust REIT

Real estate investment trust REIT is a great dividend investment.

When you buy a unit of Real estate investment trust, you are buying a piece of real estate.

When you get the dividend from REIT, you are collecting rent.

The difference between a landlord and an investor in REIT is that the landlord has to maintain the building.

That means the landlord has to arrange for repairs and whatever little tasks that all landlords must do.

The building or the house is in the name of the landlord.

When you buy real estate investment trust, you are a part owner of the company that owns the building.

The company functions like the landlord. 

You do not have to wake up in the middle of the night to arrange for plumber to repair the leaking toilet because the maintenance team in the company does that.


You, as the part owner, collect the profit from rental income after paying off all the expenses.

In the context of Singapore, there is another big difference.

If you are a landlord (as in you have a second house for rental), you have to pay income tax on the income generated from your asset.

REITs are exempted from corporate income tax when they pay out at least 90% of the profit.  You, as an investor, do not need to pay income tax from the investment return.

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