Tuesday, March 3, 2009

About Investing in China: Chinese REITs

Investing in Chinese REITs

If you like to be on the top of your investment game, it may be time to look east, Far East. There are a number of new markets for investing coming online in Asia.

China has now joined the REIT market. REITs or Real Estate Investment Trusts are a way to allow you to be a shareholder in expansion and management of properties in China.

Consider the population of China. With over 1.3 Billion people living in China, there is always a need for homes and businesses. All those people need places to live, and they all need stores to get their essentials like groceries, clothes, etc, as well as services. That means there are plenty of residential and commercial real estate investments available in China.

If you add to this the fact that the Asian land prices had tumbled for a while then leveled out a few years ago, many believe the only way to go is up!

When many people think of investing in real estate, they think of purchasing a property outright and then owning it. That leads to a number of difficulties in this case. First, owning a property in China means you would have to be able to be there (at least periodically) to maintain it. That's a tall order if you live here in the US. Also, not all governments will allow foreigners to own properties, especially larger properties like apartments and businesses, so you may have a tough time getting through the legal hoops. And finally, it takes a lot of money to claim an ownership stake in a property.

This is why REITs have become so popular. REITs are a way in which you can put your money into an investment fund that will allow a real estate management group to purchase and manage properties in their area.

Since China has just come on the market for REITs more recently, there are a number of investment opportunities out there to choose from. This means you can really diversify. You can choose to purchase shares in REITs in each sector (commercial, industrial and residential) or focus on those that you know.

Michael Hart, head of research in Shanghai at Jones Lang LaSalle told the New York Times there is plenty of room for growth of international investments, "What we're seeing is just the first wave. Of the top 50 office buildings in Shanghai, only two or three are owned by foreign institutions."

As always it is wise to do your research before you begin. Here are a couple of things to consider

REITs in foreign countries are not the same as REITs in the United States. First, the rules of 90% of the profits being returned to investors do not hold up there. Instead, you need to research a REIT before you ever make a purchase.

Start by doing your research online. A website like REITBuyer.com is a great place to begin and once you find the properties that you want to buy into, you can make the purchase through them as they are also a full service investing real estate broker.

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