Tibits I learnt from "Building Wealth Through REITs"

Had a discussion with a classmate during a wedding of another (Congrats again, P!), where we also knew almost no one on the table as well. Was having some discussion about condo rental in Singapore.

That got me thinking, so I decided to find some ebooks on the subject (with many people being able to publish ebooks easily nowadays, it is quite annoying to find the gems as there's many infomercial like books, meh), as I don't know much about property rental/flipping.

After which, I realised I have not really read much into REITs (Mostly know them through Fifth Person's Dividendmachines course as well as online blogs such as from B and GV), as compared to dividend stocks.

Going to the Singapore Library eReads, I found two books I could borrow, one was "Building Wealth Through REITs" and another was "International REITs". I decided to borrow both and load them into my Kobo ebook reader (yea, it works with Overdrive and Adobe Digital Editions, yay!).
I began reading the former first as it was recommended by B in his blog.
Reading the latter book now though.

So here we go.

This is actually a clear and concise book without heavy jargons. Rather easy to read.
Even better, this book is focused on S-REITs too, compared to many books that focus on US companies/US context.

The author believes that generally, information about property is more accessible and transparent compared to companies (it is something many Singaporeans are versed with I guess) and easier to see it with your own eyes.


Some main factors to look out in REITs:

• High quality assets, in terms of earnings power, it need not be prime
• Strong value creation (increasing DPU, NAV, etc)
• Alignment with Shareholders, rather than focusing on their own pockets
• Financial prudence, as debt can be a double edged sword
• Track record of yield accretive acquisitions
• Management has a personal stake in REIT

Other stuff I learnt:

• Further in-depth information nature of each type of REIT 
• i.e. stable RevPAR throughout various economic cycles is something you wanna see for a hospitality REIT
• Cyclical nature of hospitality, commercial and even industrial REITs (probably because I appreciate the credit/capital cycles now)
• Increasing gross revenue of malls to see the earning power of malls
• Net Property Income shows the Operating Efficiency of a REIT
• Sources of financing of REITs (I used to thought it was all the same, just focused on looking at the cost of debt and weighted loan maturity)
• i.e MTNs, Bank loans, perpetual bonds, etc
• a short discussion on how the manager utilises sources of financing
• What to look out for in yield accretive acquisitions
• Valuation of REITs
• Other methods, as I am only familiar with the yield approach and NAV approach mostly, and a bit of the capitalisation approach.
• For the rest, we have Discounted Cash Flow method, Replacement Cost method (sounds interesting, might wanna dig further into this in the future for supply issues), Comparable Sales method (the most commonly used method for purchasing housing here).
• Would be nice if he had some examples to demonstrate it though, or even resources where we can get the information
• Limitations of each method of valuation as well
• Interviews with the various CEOs
• A little dated, but it helps to provide insights in how are they running the REIT. Helps to give me more conviction of some of my picks.

One thing that kinda irritated me was the heavy promoting of REITs and downplaying other instruments. More about the risk of REITs would be better, take it with a grain of salt as always.

At the end of it, I realised I was reading the 2012 edition of the book instead of the expanded one with rising interest rates. Not sure how useful is the additional chapter, maybe some folks could enlighten me on this :)

Overall, it was a joy to read and learn from it.
I would place this book as one of my favourite investment books, with "The Five Rules for Successful Stock Investing" by Pat Dorsey.

Time for me to continue reading, until next time!~