REIT yields are starting to look attractive again.
And that is usually when income investors relax.
History shows that income mistakes are often made when things start to feel comfortable again.
In the rush to lock in these yields, it is easy to overlook that several REITs had to cut their distributions during the last tightening cycle just to keep the lights on.
Even with rates stabilising, sector gearing averages remain near regulatory limits, meaning not all landlords have the flexibility they need.
In 2026, Singapore REITs (S-REITs) present a real opportunity, but sustainable income still requires discipline.
Here are three critical mistakes to avoid to ensure a portfolio holds up through the next market cycle.
Chasing the Highest Yield
When looking for REITs, many investors start by hunting for high yields.
The highest number often feels like the best opportunity, but that assumption can be misleading.
Take Suntec Real Estate Investment Trust (SGX: T82U) as an example.
While it reported a distribution per unit (DPU) increase of 13.6% for the full fiscal year 2025, the headline yield can mask volatile income history.
Suntec’s DPU has fluctuated in recent years, falling significantly in 2020 and 2023.
While the Singapore portfolio remains robust, performance has been dragged down by weaker contributions from overseas assets.
Yield is not the same as income quality.
Yield rises when the share price falls, and the share price usually falls when risk rises.
Instead of focusing on yield alone, investors can look at a REIT’s DPU growth over the last few years.
A sustainable 4% growing income often beats an unstable 7% that gets cut when conditions change.
Ignoring Balance Sheet Risk
Falling interest rates reduce pressure, but they do not erase debt.
This is a common mistake when investors assume lower rates remove balance sheet risk.
Even if refinancing pressure has eased, slower growth can still weigh on rental income.
This means quality of earnings matters more than ever.
Look at the balance sheet, not just the brochure.
REITs should operate like a disciplined household budget.
They should have a manageable level of debt relative to the value of their properties, ensuring they aren’t over-leveraged.
Furthermore, they need to generate enough rental income to comfortably cover their interest payments, even if rates were to rise again.
A good example is Frasers Centrepoint Trust (SGX: J69U) or FCT.
The REIT owns nine malls with S$8.3 billion in assets under management, reported a full-year DPU of S$0.12113 for FY2025.
FCT has successfully maintained a robust balance sheet with high committed occupancy.
With relatively low debt and locked-in long-term fixed rates, the REIT’s balance sheet can remain robust.
When reviewing a REIT’s balance sheet, investors should consider metrics like gearing ratio and interest coverage ratio.
The gearing ratio represents the debt load, functioning much like a mortgage-to-income ratio; a lower number signifies less burden and more flexibility.
The interest coverage ratio acts as a buffer, measuring how easily a REIT can pay its interest expenses using rental income, with a higher number ensuring a comfortable cushion.
Overconcentrating in REITs for Income
Because REITs distribute cash regularly, many investors gradually become overly reliant on REIT distributions.
They gradually let REITs dominate their income portfolio because they enjoy the frequent cash flow.
While REITs are excellent income tools, they should not be the entire income strategy.
Consider Keppel DC Real Estate Investment Trust (SGX: AJBU), a high-quality data centre REIT with S$6.3 billion in assets under management as of 31 December 2025.
If a portfolio is concentrated in one segment, income becomes tied to a single industry cycle.
If tech spending slows, the entire income stream slows.
Despite a strong reported DPU of S$0.10381 for FY2025, that income stream remains closely linked to data centre demand and technology spending trends.
To build a truly resilient income portfolio, it is important to look beyond just the frequency of payouts.
Concentrating only on one type of REITs exposes a portfolio to the volatility of specific real estate sectors.
Balancing these investments with diverse property types and established, dividend-paying blue-chip companies ensures steadier cash flow.
Ultimately, a properly aligned portfolio should provide peace of mind, not anxiety
Get Smart: Building a Resilient Portfolio
The easy income from cash is fading, but the next decade will reward investors who look past headline yields and focus on balance sheets, cash flow visibility, and business resilience.
Instead of asking, “Is this yield attractive?” ask, “Is this income sustainable for a few years?”
Income investing has never been about chasing the highest number; it has always been about resilience.
Discipline in comfortable times is what protects your income in difficult ones.
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Disclosure: Joanna Sng owns shares of FCT, and Keppel DC REIT.
