Investing Into Commercial Property BETTER Than Buying REIT???

I'm naturally biased towards REITS but there may be points we can learn from investing into commercial property. Hence, I'd put on the critical thinking cap and try my shot at explaining investing into commerical property is better than buying reit!

Have I covered the points well? Hear your thoughts =)

#propertyinvestments #buyproperty #property #commercialproperty

0:00 - Intro

0:58 - Leverage
How does leverage in REITs look like. REITs can also be further geared up with margin.
Commercial property LTV could be 70% or 80%.
Apparently, UOB could loan up to 90%.
The bigger the leverage the higher the probability of outsized gains.


3:05 Difference between cost of funding between REIT and Buying reit yourself
Is personal guarantee needed for a commercial property loan
Reits may have locked in old rates that could be revised further downwards.
Reits do not amortize the loan. Only interest is paid to bond holders or banks.

5:16 Case study of $1m commercial property
Interest cost is about $11,500 if interest is about 1.28%
Net rental income from a $4k/m rent is about $28,500/year
Downpayments lets assume at $210k. Then yield works out to be 14.25%

7:04 Case study if rent is lower, couldn't find tenant and interest rate rises
Net rental income from a $4k/m rent is about $28,500/year
Downpayments lets assume at $210k. Then yield works out to be 8.88%

If interest rate goes up to 2.8%, interest cost beomes $27,000.

8:58 REIT manager does the managing of the business
This includes finding tenants, managing the property and buying and selling of property.
It is usually 5-10% of revenue.
But it is absolutely passive to you as an investor.


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We do not make any recommendations on whether a security is a buy/sell as every investor has different investment goals and risk profiles. The presentation of ideas from Josh Tan and TheAstuteParent are strictly for education purposes. You are advised to perform independent research yourself or seek a qualified financial adviser. We will not be liable for any losses directly or indirectly from the material. Some of the referral links in the video summary are products and services personally used by Josh Tan and they may pay an affiliate commission or referral bonus. It is not an endorsement of the product unless explicitly stated and we will not be liable for any losses. The content in this video and any promotions mentioned is accurate as of the posting date.

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Did you miss our previous article...
https://trendinginrealestate.com/home-remodeling-trends/charts-point-to-a-pullback-for-homebuilders