REITs (Real Estate Investment Trusts) is a globally recognized investment platform established on September 14, 1960, after being signed into law by US President Dwight D. Eisenhower with a view to radically reducing the gap between rich and poor. Since then, the real estate market witnessed a revolution when all investors, especially small investors from over 30 countries had access to portfolios of income-producing real estate.
REITs is an approach active in the capital market. It was formed to mobilize funds from organizations and individuals that want to have a long-term portfolio investment in real estate. Investors who purchase individual company stock/ a mutual fund/ exchange-traded fund become stockholders, which allows them to earn a share of the income produced without actually having to go out and buy, manage or finance the property.
REITs’ development — from the USA to all over the world
In the 1980s, the real estate market faced a wave of inflation, which led to a plummet in property values. Nevertheless, REITs did offer investors a comprehensive solution, which brought them the opportunity to purchase valuable real estate with a low budget. More than 10 years later, the market gradually recovered and brought profits to the investors.
The positive results in investing in REITs have helped this model of investment attract the attention of a great number of investors. In 1991, Kim Realty became the first company to be founded. It was followed by a series of other large companies entering the market. A typical example is Simon Property, which successfully raised $839.9 million in 1991 — a much greater number compared to the IPO at that time. REIT has naturally become an effective and welcomed form of investment all over the world. Total market capitalization was estimated at 44 billion USD in 1994. In 2016, it increased to 938 million USD. The REIT fund holding the largest amount of capital so far is American with 102.3 billion USD; followed by Crown Castle International with $58.9 billion, and Prologis in third place with $56.6 billion.
Although the above figures have successfully proven the popularity of REITs in the global real estate investment market, REITs are experiencing different levels of development in 37 countries. For example, REITs appeared for the first time in South America and Ireland about seven years ago, but with their rapid growth, these two countries are on their way to surpassing Italy and Malaysia. Australia, Canada, the UK, Japan, and Singapore are in the market-building phase. The United States is the only market that has really matured.
What makes REITs so attractive to foreign investors?
There are 5 reasons why REITs attract investors around the world.
1. Create an effective passive source of income
This is the biggest motivation to inspire investors to pour money into REITs. Unlike normal real estate trading, with REITs, investors can also receive dividends corresponding to their investment level or sell fund stocks to get the capital back.
2. Comfort in investing
Buying and selling real estate is quite difficult since not everyone who wants to sell land succeeds in finding a suitable buyer. REIT enables you to wash this worry away because you only need to “deposit” the fund and then wait until the profit-sharing is transferred to your account.
3. Diversify your sources of income
REITs help you deal with volatility in bonds and other asset classes. The correlation between REITs and bonds is estimated at 55%, which allows the REIT’s volatility to be unaffected by the bond’s price, and vice versa. This is because real estate and other bonds have different cycles. For example, a bond has a life of 4 years, and a real estate cycle can be up to 18 years. Therefore, the value of other stocks depreciates during an economic downturn while stocks that invest in real estate remain stable. In this way, your investment portfolio is ensured.
4. High liquidity
Selling a property is not an easy task, as it is a high-value property. Because of this feature, real estate investment becomes a long-term model. However, thanks to REITs, investors can withdraw capital after a short period of time. Because you only buy and sell fund stocks, not the whole real estate.
5. No need to invest a large amount of money
The main purpose of the formation of REITs is to open up investment opportunities for individual investors with low budgets. The minimum capital for public fund certificates is only from 1 USD to 25,000 USD, which is much lower than buying a whole property at this time.
REIT — The foundation for the development of METAIN
Throughout the REIT’s history, the greatest value that this form of investment can offer is to create equality in real estate investment. You don’t need to have hundreds of millions or even billions Vietnam dong in your account to be able to enter this market.
With a view to creating values of humanism, METAIN desires to share the burden of investment capital for young people, especially those with an average income, which means that they can still enter this market and make efforts to create a solution for their own lives. In other words, everyone is provided with a chance to invest in real estate in the central areas of big cities — something that is quite difficult for an average person to do.
METAIN “forces itself” to operate according to REIT regulations to provide the highest security for investors’ interests. METAIN also applies blockchain technology to make “investing in a million-dollar real estate” a reality, even if you are not a millionaire.
With only 10 USD, investors can have a chance to co-invest a part of properties located in the center of Ho Chi Minh City and Hanoi. Thereby, METAIN can help investors with a small amount of idle money to earn extra monthly income safely and effectively.