Property investment is attractive for its potential to generate passive income and protect against inflation. However, owning property comes with challenges like high upfront costs and ongoing maintenance. For those who want the benefits without the hassle, there are alternative ways to invest in property. In this article, we’ll explore three methods to invest in property without actually buying one.
1. Real Estate Investment Trusts (REITs)
A REIT is an investment vehicle that pools money from numerous investors and passes it to a professional management team to purchase, develop, manage, and sell real estate assets.
Benefits of Investing in REITs
Great dividend returns To qualify as a REIT, a company must distribute at least 90% of its taxable income to shareholders annually in the form of dividends, that means you’ll get money from the company at the end of the year.
Opportunity to own significant properties
We’re not talking about big houses or bungalows; we’re talking about owning parts of huge commercial properties like shopping malls. For instance, when you invest in Pavilion REIT, you become a part-owner of the Pavilion shopping malls. So, the next time you walk into Pavilion, you can tell yourself, “I actually own a part of this mall.” For most average people, owning a big commercial property like a shopping mall is almost impossible, but with REITs, you can do just that. You can become a co-owner and enjoy rental income from top brands like Chanel, Hermès, and Rolex.
Liquidity
You can buy and sell your REIT shares anytime you wish, unlike owning real property, which takes months or even years to sell. If you own an apartment and want to sell it, you have to contact a real estate agent, do multiple viewings, wait for the buyer’s loan approval, and only then can you complete the sale, which could take 3 to 6 months. But with REITs, which are listed on major stock exchanges, you can sell your shares immediately and receive your money the next day.
REITs are especially popular in places where property prices are very high, like Singapore, where rising property and rental prices generate high rental income that is passed on as dividends to shareholders. Malaysia also has some good REITs, such as KLCC Property Stapled, IGB REIT, and Sunway REIT.
How do I Invest in REITs?
All you need to do is open a stock brokerage account and buy them on the stock exchange. In Malaysia, you can use Bursa, and in Singapore, you can use the Singapore Stock Exchange. You can open an account with platforms like moomoo Malaysia, which allows you to buy Malaysian stocks, US stocks, and even Singaporean stocks.
2. Subletting a Rented Property
Subletting a rented property might sound confusing at first, but it’s actually quite simple. It’s where you rent a whole unit from the landlord, ideally at a lower price and for a longer lease, and then sublet it room by room at a higher total rental rate.
Let’s say a unit costs RM2,500 per month to rent. You negotiate with the landlord for a three-year lease and get the rent reduced to RM2,300 or RM2,200 per month. You then sublet each room individually, charging an average of RM800 per room. If there are four rooms, you could collect RM3,200 in rent, but your cost is only RM2,200 or RM2,300, allowing you to earn the difference as passive income.
Benefit of Subletting Rented Property
The upfront cost is lower compared to buying a property, where you’d need to pay a 10% down payment plus legal fees and other costs. For subletting, all you need is the deposit and lease agreement, which would cost you much less—probably under RM10,000. Secondly, since you don’t own the property, you aren’t responsible for most maintenance costs.
If something like a light bulb, fan, or air conditioner breaks, it’s the landlord’s responsibility to fix it.
This method is quite popular, especially in areas with many colleges or educational centres, where students need affordable accommodation and prefer renting a room rather than a whole unit.
3. Investing in Tiny Houses
Investing in tiny houses involves putting your cash in small homes, usually ranging from about 200 to 600 square feet. These homes are modular and custom-built to suit specific needs. Tiny houses became popular in the US as an affordable alternative to traditional homes. An example of a company that offers investment opportunities in tiny houses is Big Tiny, from Singapore.
How it Works
You can buy a whole tiny house or just a fraction of one, starting at SGD 10,000 (or around RM 30,000). You then lease the house back to them, and they deploy it to eco-tourism spots like Australia, New Zealand, or Singapore.
They manage the property as an Airbnb, and you receive a return of up to 10% annually. After a few years, if you wish, you can sell the house back to them at the original purchase price. This way, you generate passive income just like a landlord, but without the hassle of managing the property yourself.
Tiny houses can generate more income than regular rentals, but they can be a hassle to manage. With Big Tiny, however, they handle all the management for you, including maintenance and finding tenants. In Singapore, this type of investment is gaining popularity, and the company is even working with the Singapore government to deploy tiny houses on Lazarus Island as an eco-tourism spot.
Conclusion
These are three ways to reap the benefits of property investment without the hassle of owning a property. Whether you prefer subletting or investing in tiny houses or REITs, there are various options available that can suit different investment styles. Which one do you think is the most suitable for you? Let us know in the comments below!
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