What is Real Estate Investment Trust (REIT)

How REIT Works in the Philippines

Real estate investment is one of the safest and most guaranteed ways to generate profit despite the economic conditions and dynamic market. There are various options when investing in real estate, from renting a condo and commercial unit to flipping houses. However, if you have limited finances and can’t purchase a property, consider investing in REIT Philippines.
 
In this article, we will discuss what Real Estate Investment Trust (REIT) is all about, how it works, and why you should invest in this passive income.

What is REIT

Founded based on the Revised Corporation Code of the Philippines, Real Estate Investment Trust (REIT) is a stock corporation that owns real estate assets generating revenue. REIT adheres to the Securities and Exchange Commission (SEC) rules and regulations. It includes various properties, such as apartment buildings, hotels, resorts, shopping malls, office spaces, hospitals, medical facilities, and warehouses. Due to their high returns, lower risk, and diversity, many investors opt for REITs.
 
Here, investors can earn from the rental income and other relevant fees from real estate assets. Then, it is allocated as REIT dividends. In a nutshell, REIT investors will earn from rental income and become part-owners of the real estate property. Therefore, you can earn passive income in REIT without buying an actual real estate asset or investing a huge amount of capital. However, based on prevailing laws and regulations, REIT is not similar to "trust." This term is only designated to adapt to the company's globally recognized description.

How REIT Works in the Philippines

As stated, investing in REIT Philippines provides rental income since most of these real estate assets are leased out. The company will generate profit and distribute the earnings of investors via dividends. But before it happens, a REIT corporation should collaborate with a Sponsor offering and transferring revenue-generating real estate assets. In return, the Sponsor will obtain ownership of the REIT corporation.
 
The Sponsor should barter at least ⅓ of the REIT's outstanding capital stock to public investors in adherence with SEC REIT Implementing Rules and Regulations (IRR). SEC also requires the reinvestment of sales proceeds within the country. Another benefit of investing in REIT is that companies are required by law to distribute at least 90% of their gross income to investors.
Entities Implementing REIT Rules and RegulationsApart from SEC IRR, the following entities must be appointed in REIT Philippines:

• Fund Manager – This entity is responsible for implementing the REIT investment plan. It also supervises the financial reports, acquisitions, leasing, and operation of properties.
• Property Manager – The REIT Property Manager determines prospective tenants and plans their combination. This entity plans and implements leasing policies and ensures the maintenance of real estate assets' physical structures.
• Property Valuer – It is tasked to fulfill the REIT asset's full valuation and generate appraisal reports.

Why Invest in REIT

In the Philippines, Filipinos, foreign residents, and licensed corporations can invest in REITs. Furthermore, it is recommended for first-time investors or those looking for conservative to moderately risky investments that offer solid dividends, stable continuous profit, and long-term capital gain. To invest, you can subscribe or buy shares of REIT stock. This investment is also safe and regulated by Republic Act (RA) 9856, also known as the Real Estate Investment Trust (REIT) Act of 2009. Hence, buying REITs in the Philippines is a guaranteed way to generate passive income.