There’s property and there’s property trusts
With the residential property market going gang busters many investors are now turning their attention to alternative property investments such as commercial or industrial property.
Commercial and industrial property are considered to offer a better yield, or net rental return which is attractive to investors seeking income, such as retirees.
There are essentially three ways to invest in property.
2. Listed Property Trust, and
3. Unlisted Property Trust
The main advantages of buying the property directly, is that you know what you have purchased, you know the rental return and the terms of the lease. You also know the costs directly associated with this investment such as council rates, land tax, the state of the premises and if it will require repairs or improvement in the near future.
The main disadvantages is that a direct investment of this nature would generally mean it is a ‘lumpy’ investment with a significant portion of your investment resources tied up in this one investment asset.
Listed Property Trust
Listed property trust trade every day on the stock exchange. The market or unit price of this investment will fluctuate depending on the perceived economic climate and the expectation of interest rates to rise or fall.
Whilst the stock market can be volatile, one of the advantages is, if you want to sell and realise your investment today you can.
Generally with listed property trust, there are a number of investment properties within the listed trust, therefore you are not just investing in one large asset.
Unlisted Property Trust
By way of comparison, unlisted property trust are not listed on the stock market and are less volatile but are also less liquid. However, the ability to realise your investment may be very difficult until the underlying investment building is sold.
Also, it is generally considered that the level of gearing is higher in an unlisted property trust which is generally a good thing when property prices are growing and interest rates are declining but a major disadvantage if interest rates increase.
If you plan to invest in a property trust consider the following;
1. Is it listed or unlisted?
2. What is the ability to realise your investment?
3. Are you locked into the trust for a period of time?
4. What is the liquidity of the trust?
5. What is the level of gearing of the trust?
6. What are the terms of the lease agreement on the property within the trust?
7. What are the expenses on the property(ies)?
8. What is the net rental return?
9. Where is the property(ies) located?
10. What is the experience and credentials of the people managing the trust
Should you require any further information regarding listed or unlisted properties please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.