How to Invest in Real Estate Through the Stock Market

Due to the high cost of real estate, buying property through loans and mortgages is often the only way most individual investors can participate in the real estate market, but it comes with significant costs and often unanticipated risks. The stock market offers opportunities to invest in real estate, including the possibility of large profits, without the usual hassle and expenses of directly purchasing real estate property.

The most common way to invest in real estate through buying stocks is by buying real estate investment trusts’ or REITs, that are publicly listed as a stock and available to almost any investor. A REIT is a company whose primary business activities involves owning real estate assets. REITs can make money from managing the properties they own, leasing them to third parties, developing new properties, or buying and selling properties.

A publicly listed REIT invests in real estate and then sells shares of ownership in the trust on the stock exchange. When you buy a share of a REIT you are buying partial ownership in a real estate investment. This allows you to buy real estate without having to use loans in the same way a mortgage borrower would. Through REITs you can own a share of stores, commercial properties, residential neighborhoods or other income properties that would otherwise be inaccessible to most individual investors.

While we do not have any REITs, in the strictest legal sense of the word, listed on the Jamaica Stock Exchange, Kingston Properties REIT, Eppley Caribbean Property Fund and Sagicor X-Fund are examples of locally listed REITs.

Alternatively, you can invest in companies which own or manage real estate and perform some of the same activities as REITs, but for one reason or another are not classified as a REIT Examples of stocks on the Jamaica Stock Exchange that have substantial real estate investments are PanJam Investment Trust, Stanley Motta’s, 138 Student Living and First Rock Holdings Limited.

Finally, you can buy stocks in companies that stand to benefit from bouyancy in real estate, but whose primary business is not owning or managing real estate.

REITs and similar publicly traded real estate investment stocks add the advantages of liquidity, low entry prices and transparency to the possibilities of profiting from real estate investing. Additionally, REITs generally do not move in tandem with stocks, which helps to smooth your portfolio’s growth over the long term. However, while REITs can experience share price growth most profits come from dividends that can reach 10 percent or more. This makes them a significant addition to tax sheltered accounts held over the long term.

When compared to the management requirements, financing hurdles, liability and liquidity issues of directly investing in real estate,  REITs offer an attractive alternative. As we have seen, each type of investment has its own benefits and disadvantages. The right way for you to invest in real estate through stocks depends on your investment goals and risk tolerance.

If you need advice in building a diversified stock portfolio, FHC Investments Limited can guide you in achieving your financial goals. Feel free to give us a call today

The following are the current Government of Jamaica bond prices as at July 30, 2021:

*All rates quoted are opening indicative levels in the international capital markets and are subject to change based on market conditions.

The Jamaican dollar appreciated by $0.75 relative to the US dollar week-over-week, moving from a selling rate of $155.34 on Friday, July 23rd to $154.59 on Friday, July 30th. The closing BOJ weighted average selling rates are as follows:

The following are the average Treasury bill rates:

Jamaica Stock Market

Movement of the JSE Indices

This week’s Market activity resulted from trading in 104 stocks, of which 36 advanced, 56 declined and 12 traded firm. Market volume amounted 9,7484,938 units valued at over J$884,824,832.79.

FHCIL’s STOCK PICKS

This information should not be relied upon by the reader as Research or investment advice. If you need advice in building a diversified stock portfolio, FHC Investments Limited can guide you in achieving your financial goals. Feel free to give us a call today.