Why not invest in both?
Some REITS are offerring fantastic value at the moment.
It gives you exposure to the property market, you do not have sh*tty tennant issues, your equity is liquid.
You could not buy property at such depressed prices as you can buy a REIT. At the bottom of this post, I have cut and pasted some text from a report that illustrates my point.
Have a look at Valad Property group or Abacus Property Group and do your own research to see what I mean.
In regards to buying residential property, there is no hurry to buy at the moment, there is still downward pressure on prices. You should be able to pick up a property at 5% less than todays prices if you hold off until next June / July IMO.
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from Orbis report Q4 2008
Perhaps it is easier to see the value by reducing the parameters above into a single building. Take a
building that costs $1 million to build and generates $70,000 in annual rental income with leases fi xed
for six years (the average length of leases in the table above). The building has a $570,000 mortgage
which you have to take over with interest costs of $35,000 per annum. The equity should be worth
$430,000 with annual pre-tax income of $35,000. The market currently offers this opportunity to us
for somewhere between $30,000 and $40,000, down from more than $500,000 last year.
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