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delboypass

Reit's?

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What is a REIT. I know its a trust to store property in but how do they work and how does a person make money from them??

I.e. tesco are planning to dump their 12 billion of property assets into a REIT.

In the budget, gordon Brown set the percentage at 2% for gross assets in fund, much less than the expected 20%.

Is this his backout plan for binning property in SIPPs??

2% seems very low.

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Guest muttley

It's a way of investing in property without going out and physically buying.The advantages over BTL is that you are not required to manage the property (the cost is paid for by the trust) and you don't have to invest a large amount.

If you think property is about to boom,then this is the investment for you!

The price of REITs can go down as well as up

Edited by muttley

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Hrm, for residential property this is rather like dropping the level of stamp duty on dotcom shares just as they've started their inexorable plunge. However, it's good news for commercial property, Tesco's for example are considering converting their property holdings into a tax efficient REIT.

I suspect the removal of double-taxation and consequent drop in revenue for the Treasury will result in a new tax burden for BTL landlords as the registration system is almost in place.

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However, it's good news for commercial property, Tesco's for example are considering converting their property holdings into a tax efficient REIT.

I suspect the removal of double-taxation and consequent drop in revenue for the Treasury will result in a new tax burden for BTL landlords as the registration system is almost in place.

Does this mean the taxpayer will be paying for this?

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I believe they are open to residential property as well, but most institutional property investment in the UK is in Commercial which is where REITs will have their biggest initial effect. Commercial Property is coming off the back of a massive boom as well as resi.

Re: Commercial prices. This year may be the first year of stability after the bubble, it may be a year of falls, and maybe another year of bubbling prices (if so next year could be nasty!!!!

The idea is that -

The UK can compete with other economies such as the US where there are REITs.

UK investors can get into property without the large funds that are involved with buying a BTL or a commercial property direct.

Tescos. The consensus is that the guy from Tesco's has no idea. A REIT owns property and does little else, and no shareholder may own more than 10% of the REIT. To put it's property into a REIT Tesco would need to transfer the property into a separate property company and the core retail company would then lease the shops back. It would then need to sell at least 90% of the shares in the property company.

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Reit's have pretty strict rules on dividend payouts (>85% I think) that makes them almost like a property backed bond.

Not a bad idea from Tesco's. REITS in other countries have shown that buyers are happy to buy such stuff at very low yields.

I.e. Tesco might be able to sell & leaseback all its property at a lower cost than borrowing the money, and certainly a lot lower cost than it's own equity.

Same principle as hotels - ownership of the property and running it are often different

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I have a suspicion that REITS are a way for GB to fiddle his figures.

Essentially the value of all propety transferred into a REIT is subject to a 2% tax charge. By offering future tax savings what he is doing is bringing forward future tax flows by offering a discount to the taxpayers. It's just borrowing by another name.

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From my experience, residential yields are too choppy (too granular, too short term) unless you own a huge block, so these funds do indeed focus on retail outlets, office blocks etc.

Go to: www.rubiconpartners.com.au

If you're really interested, read the prospectus on the web site. You'll note that these funds can be geared, too.

Edited by aussieboy

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It's a way of investing in property without going out and physically buying.The advantages over BTL is that you are not required to manage the property (the cost is paid for by the trust) and you don't have to invest a large amount.

If you think property is about to boom,then this is the investment for you!

The general Australian experience (where they are called Property Trusts; some are listed, some are not) is that they are also a good annuity alternative. You get a pretty fair yield and growth in line with rents which for commercial property tends to track inflation over the long term.

Not investment advice, and make sure you spread your risk.

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I am tempted to say that if Reits extends to residential property, blocks of flats or housing estates will account for the bulk of residential property rather than individual freestanding houses scattered here and there.

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Tescos. The consensus is that the guy from Tesco's has no idea. A REIT owns property and does little else, and no shareholder may own more than 10% of the REIT. To put it's property into a REIT Tesco would need to transfer the property into a separate property company and the core retail company would then lease the shops back. It would then need to sell at least 90% of the shares in the property company.

The FD at Tescos is probably one of/the most respected in UK at present, so I think it very unlikely if he made the call to open a seperate REIT company it would be a consensus view that he was out of depth or making a big mistake. If Tesco makes good inroads into Asia and America it will need to raise huge capital to finance this and a REIT will surely be cheaper than both equity and debt

I strongly feel that current sentiment regarding property is still strong, with both companies and retail investors willing to put money in such safe bets and with large financial institutions falling over themselves to raise capital and find projects to put money into meeting these needs while the belief is still there. As such I think REITs will be a success due to the global property boom.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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