The local property market has enjoyed strong growth despite the pandemic.
A combination of low interest rates, a nascent recovery and excess liquidity sloshing around have produced impressive returns for many investors.
Looking ahead, there could be further growth in real estate unless the government clamps down on it with another round of cooling measures.
One way of accessing it is through buying real estate investment trusts (REITs).
This sector provides diversity, a great source of passive income through dividends, as well as growth potential over the long term.
By owning a portfolio of REITs with diverse exposure to resilient or fast-growing sectors, you could improve your chances of getting rich and retiring early.
Diverse exposure
REITs can offer long-term growth potential but investors need to be aware that the property industry has historically moved in cycles.
In the short run, there is always the potential for property prices to move lower and for investors to experience paper losses.
As such, it is prudent to own REITs that offer a degree of diversity.
For example, you may want to seek REITs that hold a wide variety of assets in different locations or countries.
Or, it could mean that a REIT holds different types of assets, such as retail, commercial and industrial, to reduce their reliance on any specific sector.
Through buying REITs that offer greater diversity, an investor may also be able to access a wider pool of growth opportunities in a rapidly-changing world economy.
Growth focus
In addition, investors may wish to focus their capital on growth areas.
One such sector is data centres.
They are becoming more in-demand as more people shift online due to the pandemic and more businesses digitalise.
The explosion of data on smartphones and the upgrade to 5G networks are also contributing to this higher demand.
Positioning a portfolio with a heavier weighting on faster-growing sectors such as data centres could lead to higher returns in the long run by tapping into a long-term, sustainable trend.
Low valuations
Global property prices have made gains in the last decade but a number of REITs continue to offer good value for money.
In some cases, they may trade below their net asset value, which represents a low valuation that could produce an impressive rate of capital growth over the long run.
Due to the cyclicality of the property industry, it may take time for undervalued REITs to narrow the gap between their market value and intrinsic value.
However, by holding on to these undervalued REITs with quality properties over the long run, the gap should slowly narrow and investors will be rewarded for their patience.
Get Smart: Building wealth through REIT investments
REITs offer an effective method of not just building wealth but also generating a stream of additional, passive income.
By allocating money to this asset class over time, you can slowly build your investment portfolio’s value.
And as you reach your golden years, you will have a comfortable nest egg with which to rely on.
Here are 5 cash-rich companies so healthy, they can pay you dividends for life. The names of these SGX stocks are in our special FREE report. Download it here and start building your dream retirement portfolio today!
Follow us on Facebook and Telegram for the latest investing news and analyses!
Disclaimer: Royston Yang does not own any of the companies mentioned.
