Even if an investment in the units of REITS has advantages, it is not necessary to place all of his assets. Risk exist.

Although they invest in real estate (offices, walls of shops, hotels,…), an asset deemed as safe, the REIT (real Estate Investment trusts) are not without risk. They are, in fact, the backlash of the markets and the assets that you invest may lose value. To reduce the risks related to this investment, here are the five main criteria which you should consider.

1. Pay attention to the liquidity

The shares of REITS remain largely invested in real estate. Contrary to popular belief, they do not enjoy the same liquidity as securities, negotiable at any time in the financial markets.

If you need to sell your shares of REITS, often you will need to wait between a few weeks and a few months, to recover your funds. Management companies do not guarantee the liquidity of your investment. This means that they do not systematically purchaser of the units that sell their associates. On the other hand, they can help to find a buyer. But if you attempt to assign your units in the midst of a crisis, when there are more sellers than buyers, your assets may be stranded within the company for an indefinite period. Unless you have otherwise consented, a haircut is important to find a buyer quickly.

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know : By choosing a REIT subsidiary of banking groups or insurance, you will have a lower liquidity risk because they collect the savings within their network of clients, many of which are likely to repurchase your units. On another track : to invest via a life insurance contract, in this case the liquidity risk does not exist because the insurer provides the consideration.

Practice >> Learn more about investing in REITS in partnership with Corum

2. Beware of real estate markets

By purchasing shares of REITS, you are investing indirectly in real estate. Your heritage thus – indirectly – the consequences of a downturn in the markets. Concretely, the price of a share of REITS is calculated by dividing the value of the heritage managed by the number of units in circulation. Thus, if the price of the property that your SCPI has won, each share is worth less.

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Attention, this investment is primarily intended to provide a stable return over the long term. Therefore, you should not invest in REITS to expect to reap strong capital gains.

know : To minimise the risk of devaluation of the heritage, invest in REITS that diversify their real estate holdings. Both in terms of geographical areas (Paris, Province, foreign country), that of types of assets (offices, shops, warehouses,…).

3. Consider the erosion of returns

The REITS to distribute it regularly (monthly or quarterly in general), of the income to their unitholders. They correspond to a share of the rents received, after deduction of its expenses. But when a REIT offers highly attractive returns, because it has assets a very cost-effective, it often attracts a large number of new investors. It collects, therefore, a mass savings in a very short time, that it is legally obliged to reinvest in a short period of time.

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Problem : while it is relatively easy to find small buildings in a very cost-effective by adopting an offensive strategy, the technique is more difficult when it is necessary to invest quickly a significant amount of capital. Therefore, it is often complicated to manage a lot of goods in now a high yield.

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Caution you not to let himself be blinded by a history of high returns to invest. Analyse also the real estate holdings and the assets of the REIT.

know : in order To reduce this risk, opt for the REITS that collect in a moderate fashion, by stopping the issuance of new units at certain times. Or the very big, who will have the teams expanded to ensure a perfect.

4. Integrate the weight of taxation

Since the last tax reform, the shares of REITS are taxed as real estate held live, which is more than the financial investment. The income they produce is taxed at your marginal tax rate and subject, in addition to social contributions of 17.2%. In addition, their share of the real estate is included in your taxable base to the IFIS (Tax on the real Estate asset).

If you’re tempted to buy, calculate, in advance, their impact on your taxation overall. This helps to determine their net profitability, after-tax. If you report less than a financial investment, ask yourself if you are on the interest to invest in it.

know : If you are part of the taxpayers heavily taxed, opt for purchases of units in dismemberment, via life insurance, or make your subscription to credit (read à what about “Four ways to invest in REITS “). These three modes of purchase and possession permit, mechanically, to reduce your taxable base.

5. Watch out for the fees and expenses

On average the entrance fees for units of REITS hover around 10%, and are levied only once at the time of purchase. It is thus necessary to invest in these investments for at least eight years, to smooth these expenses over the long term. Failing that they will have a significant impact on your profitability.

in addition, there are annual management fees, which range from 8 to 14% of the amount of the rents received by the REIT you reverse revenues net of these costs. But they are still to monitor.

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know : If you buy shares of REITS to a large amount (more than 100 000€) with a small management company, try to negotiate the entry fee.