I’m too lazy to get involved with buying and letting a property as an investment. So instead, I’d rather put money into some real estate investment trusts (REITs) listed on the London stock market.
And it looks like a good time to consider REITs. Many have seen their share prices crash because of the well-reported headwinds in the property market, such as higher interest rates.
Some are yielding 7% and higher, which strikes me as a decent return from any property investment.
REITs are property companies that own, develop, and rent out multiple buildings. Some provide office space, others warehousing, and some provide retail space, residential accommodation, or industrial premises.
Diverse property assets
So owning shares in a REIT can be a great way to achieve diversification across many underlying property assets in the business. And that’s something I could never do by owning physical property because of my relatively shallow pockets!
But REITs have tax advantages too. And according to professional services firm PWC, REITs aim to simulate direct investment in UK property. So investors can avoid the additional layer of taxes that arise when investing in ordinary listed companies.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
REITs strike me as being an attractive way to get involved in property investment. And I’d be inclined to run the calculator over a few of them right now and dive in with deeper research.
The following table shows five that recently caught my attention because of their discounts to asset value and projected yields.
It’s worth bearing in mind that asset values can decline and directors have the full power to reduce or stop shareholder payments at any time. And, that might be what investors have been fretting about given the weakness in the property market. It seems clear that poor investor sentiment has been driving REIT stock prices down.
| Name | Ticker | Recent share price | Price-to-book value | Dividend yield |
| LXi REIT | LXI | 88p | 0.69 | 7.8% |
| Urban Logistics REIT | SHED | 116p | 0.68 | 7% |
| Newriver REIT | NRR | 85p | 0.7 | 8% |
| Supermarket Income REIT | SUPR | 74p | 0.75 | 8% |
| Target Healthcare REIT | THRL | 76p | 0.71 | 7.7% |
At first glance, I think all these REITs look like they have cheap valuations right now. But it’s worth carrying out due diligence and further research before buying any of their shares.
What’s in each company’s portfolio?
For example, I’d want to understand more about each company’s property portfolio to ensure that my investments in REITs are diversified across the property market.
Meanwhile, it’s always possible for these cheap-looking stocks to become even cheaper. So there are timing risks involved with buying REITs now. And it’s possible to lose money on REIT stocks.
However, REITs could add valuable diversification in a portfolio and I’m considering stocks in other sectors as well as property. My aim is to hold shares for the long term as economic conditions hopefully improve over time.
