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Saturday, 27 February 2010

Passive Income From REIT? - Part 2

Passive Income From REIT?

How can REIT share be evaluated?

REIT share valuation is based on a number of relatively transparent factors:

Net Asset Value Calculation

REITs as well as REIT analysts perform regular (annual, and often quarterly) valuations of their company property holdings.

The value of a REIT’s total assets, minus liabilities, divided by the number of its shares outstanding results in what is called the Net Asset Value (NAV) per share of the company.

Thus, the value of a REIT’s shares is to a significant degree based on the value of its tangible real estate holdings.

Property Portfolio Enhancements

The value of a REIT’s property portfolio can frequently be either maintained or enhanced through consistent capital expenditures. This is significant because strategic property portfolio enhancements help to maintain or
increase NAVs and provide the basis for price appreciation of a REIT’s shares.

Why some REITs have low or zero gearing?

Either they are still in their infancy stage of growth or has slow down their growth or has reduced their debts exposure by disposing assets or raise equities.


Leverages are double-edge sword - can boomz and can also doomz so there is no clear cut right or wrong.

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