Personally, I would avoid highly geared small REITs. In the event of a property crash, they will be the first to fall. Keep an eye on their financing needs. I like REITs with a decent yield and relatively low gearing. First REIT and the business trust A-iTrust springs to mind. Not vested in any REIT at the moment though keeping a close watch !
If Reits are offering 7.1% on average, with some as high as 10+%, why would anyone want to invest in property for rental yield of 3-4%? Capital appreciation? Tough one, with the government taking action to cool the market. Capital appreciation, at least of a meaningful amount per annum, is certainly not assured.
time for re-look at REITs -- when it's as popular as it is now, some concerns can be overlooked. Karlmax of valuebuddies.com gave this take which I think is very good:
for the longest time, i could not figure out the business model of reits. i've come across the analysis of many reit investors, on this forum and on their personal websites, and it baffles me why reits are so popular.
thankfully, things have gotten clearer after reading all the posts here. there are four things i've learned that i do not like: 1) properties sold to a reit is often at/above valuation, 2) managers tend to gear reits as high as possible, 3) majority of cash-flow is used to service dividends, not debt, 4) cash calls, whether for acquisition or for strengthening balance sheets.
i have been looking at infrastructure trusts and shipping trusts. there appears to be little difference to me between these trusts, except for their type of asset. and my conclusion is that reits turned out to be more popular -- due to their stable/improving unit prices -- mainly because real estate valuations (in singapore) have so far been stable/improving over the last decade. if real estate valuations were to plunge as much as shipping vessels in the last 2 years, wouldn't reits be in the same predicament as rickmers (if rickmers is unable to renew its contracts at the rates it is currently contracted, it is finished)? probably not as bad since real estate tend to have lower depreciation and much longer tenures.
an investment trust business model only works (pays you dividends, overall capital appreciation) when said asset's market is stable/improving. there is little long-term business sense, which therefore exposes long-term investors to higher risk, compared to a plain vanilla property holding company (sph, bonvest?).
my biggest bugbear of reits is their huge debt. i don't like debt on my personal balance sheet and i certainly don't like to leverage my investments. but despite my dislike of reits, i will still go for them at a comfortable price. maybe say, 0.2 - 0.3 p/b?
I have spend a bit of time reading up on REITs during this period of time, and REITs is a very different animal from shares. The common misconception is that REITs is less risky than stocks which is not true. Having said that, REITs does has it's appeal. REITs rollover their debts, they usually only pay when they het the debt ceiling or the banks refuse refinancing. That's the big risk of REITs. But after Lehman there are many REITs that are rated ( allow 60% of gearing) but are only about 30-40% leveraged. Most have also spread out their refinancing such that they won't need to refinace a Hugh chunk of debt in any 1 year. Cash call is part and Patel of REITs investing but that doesn't mean u cannot profit from both capital gain and high dividend yield. It's not true that managers tried to leveraged to the max, neither is it true that all or most REITs have DPU falling, in fact most REITs survived Lehman without significant or any fall in DPU. those who scoop REITs during the 2009 are just 1 yr from getting back their capital and collecting close to 20-30 percent of dividends thereafter every year. Now who can says REITs is bad investment. U just need to do your due homework... As in all stocks, entry level is important, and look for red flags for REITs that might do cash calls that are not yield accretive and avoid them.
It may just be the January effect and it could vapourise, but stocks are moving up as investor sentiment is getting more cheery. So, greenrookie, I think it's time for less risk aversion and it's not so great an idea to be buying REITs now. The 6-8% per annum you may be looking at from REITS yield can be gotten in 1 day or 1 week from capital appreciation of non-REIT stocks which have been bashed down (unjustly) -- such as Sino Grandness, Eratat Lifestyle, World Precision Machinery....What would be your stockpicks?
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Refinancing issues have subsided.... What do you all think abt Reits? 
