As Singapore property looks set to remain as a preferred long-term investment asset with growing opportunities, it is good to explore the different options available in real estate investment.
Traditional property ownership is usually seen as the only way to invest. Yet, owning and managing more than one residential property directly may incur additional costs such as Additional Buyers’ Stamp Duty (ABSD) and may be time-consuming and effort-intensive for some investors.
Here are other forms of real estate investments available.
- Real Estate Investment Trusts (REITs)
REITs own an underlying portfolio of mostly real estate assets. It is an excellent choice for investors looking for exposure to the property market without having to worry about the intricacies of directly investing in properties.
- Property Developer Stocks
Purchasing property developer stocks such as CapitaLand, City Developments etc is another option that allows you to invest at a lower capital with potentially solid returns, as opposed to buying your own property as investment.
- Property Crowd-funding
Often conducted by boutique developers, property crowd-funding is common amongst developers who lack financial strength to fund their own projects. Such developments are nascent and often based overseas, hence are more loosely legislated, leading to a possibility of loss of capital, should the developers fail to follow through with the project. (Note: Some of the real estate listings on crowdfunding platforms group investors together to buy an end unit at a discount, essentially making them liable as a retail property buyer)
- Real Estate Private Equity
A Real Estate Private Equity investment such as a Direct Development Fund, allows investors to partake into the development of a property, through an Investment Special Purpose Vehicle (SPV). This allows the investor to enjoy the higher margins of a developer without the hassle of facilitating and managing the development project, or having to handle any of the tax issues that come with it.
Traditionally, private equity real estate opportunities are only available to institutional investors. In recent years, private investors are able to enter such investments when developers work with joint venture partners that also have fund management capabilities.
To be able to offer such funds, the institution must be a Registered Fund Management Company (RFMC), or hold a Capital Market Services (CMS) Licence issued by the Monetary Authority of Singapore (MAS). Firms must also provide absolute transparency on their charges, their track record, projected investment performance and exit strategies.
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