Real Estate Investment Trusts (REITs) have become popular among investors because they offer a way to invest in income-generating and capital growth real estate properties without the need for direct property ownership and management.
There are many different types of REITs. The most common REITs in New Zealand own properties in the retail, commercial and industrial sectors. A REIT will use funding from both investors and banks to buy or develop large commercial projects such as office buildings or shopping malls. The fund manager will be responsible for developing, managing and leasing the property, with the lease income paying off debts and paying dividends to investors.
REITs may be listed on the stock exchange or they may be unlisted. Brokerage platforms can offer access to unlisted REITs or an investor may contact the fund manager directly.
However, it’s important to consider the risks associated with certain REITs. Commercial REITs (the most common in New Zealand) have to deal with vacancy rates, business confidence, new building supply. All these factors affect the value of a property and the yield an investor will receive. The underlying asset appreciation doesn’t always occur as projected, which can lead to lower returns. In addition, management and transaction fees associated with the REIT structure, ongoing property management costs, and dealing with other issues can affect returns.
For REIT investors seeking income from the property market, there are attractive alternatives available. Norfolk Mortgage Trust provides a serious option by exclusively focusing on not just one property, but a diversified portfolio of property-backed mortgage investments. Like REITs, Norfolk Mortgage Trust pools investor funds but unlike REITs, Norfolk does not buy, own or manage property. Rather Norfolk Mortgage Trust uses the investment funds to make loans to borrowers that are secured by a first registered mortgage over all types of properties throughout New Zealand. At Norfolk, borrower income can be generated from many different industries and the properties are a mix of residential, rural, commercial and industrial. This diversification helps to minimise the risk. The Norfolk Mortgage Trust structure, rigorous credit assessment and portfolio diversification has resulted in consistent returns over the last 16 years.
Why Invest in REITs?
Investing in REITs offers several benefits to potential investors. Firstly, it allows for portfolio diversification by gaining exposure to real estate without the hassle of owning and managing physical properties. REITs generate steady income through rental payments or mortgage interest payments, providing investors with a stable source of cash flow. Additionally, if it is a property owning REIT, the underlying real estate properties have the potential to appreciate in value over time, offering capital appreciation opportunities.
Risks associated with REITs
Investing in Real Estate Investment Trusts (REITs) carries certain risks that investors should be aware of. Firstly, REITs are subject to market risk, meaning their prices can fluctuate based on factors such as economic conditions, interest rates, and investor sentiment. The value of the underlying real estate properties owned by REITs may also be influenced by factors specific to the real estate market, such as changes in property demand or local regulations. Additionally, REITs are exposed to tenant risk, as their income is derived from rental payments. If there is an economic downturn, tenants can face financial difficulties or vacancies increase, and this can impact the REIT’s ability to generate consistent income. Furthermore, some REITs use leverage or debt to acquire properties, which introduces additional financial risk. Lastly, regulatory and tax changes can affect the operations and profitability of REITs. It is important for investors to carefully assess these risks and diversify their investments accordingly when considering investing in REITs.
The global pandemic of 2020-2021 highlighted some of the risks associated with commercial property REITs. Many experienced price declines as tenants restricted office usage, leading to breaches of contractual agreements and a significant impact on REIT yields. Additionally, some REITs use leverage to acquire properties, which exposes them to the risk of higher interest rates or potential challenges in making interest payments, as some REITs experienced during the pandemic Recently, high inflation has resulted in higher interest rates, and this will also impact REIT returns.
Thoroughly researching the management team’s track record in running the REIT and understanding the fee structure associated with their management services is important. Key statistics, such as management fees, dividend yields, loan-to-asset ratio, and sector and geographic focus, can be found in the investment documents of most REITs. It is important to carefully review these documents before making an investment decision.
What is Norfolk Mortgage Trust?
Norfolk Mortgage Trust invests in property-backed assets and pays out monthly returns to investors. What sets it apart from other REITs is it does not buy and own the properties, rather it exclusively focuses on a diversified portfolio of mortgage investments, which helps minimise risk.
Since 2006 our experienced team has carefully selected investment opportunities to minimise risk and actively manages them to maximise cash flows for our investors. Investing in Norfolk Mortgage Trust’s property fund is an excellent option for those seeking to invest in the property market with minimal effort. As an investment vehicle, it provides exposure to the property market without the risks of property ownership seen in mainstream REITs.
Why Consider Norfolk Mortgage Trust?
REITs offer diversification, income and potential for capital appreciation, but it’s important to consider the associated risks. Market fluctuations, tenant risks, leverage, and regulatory changes can impact REITs.
Norfolk Mortgage Trust stands out with its exclusive focus on a diversified portfolio of mortgage investments, minimising risk. With a history of strong returns and consistent dividends, it provides a serious alternative for investors looking for a diversified investment in the property market with a monthly income.
The experienced management team follows responsible investing practices and takes a conservative approach to mortgage investments. Investing in Norfolk Mortgage Trust is straightforward, allowing investors to buy and redeem units directly. It offers a secure opportunity for investors seeking a monthly income and a conservative diversified exposure in the property market.
Investing in Norfolk Mortgage Trust
Investing in Norfolk Mortgage Trust is a straightforward and accessible process. Potential investors can buy and redeem units directly, making it easy to integrate into a diversified investment portfolio.
With a minimum investment of $5,000 and no entry or exit fees, it’s easy to start your journey with us.
To invest in Norfolk Mortgage Trust, you can:
- Begin by completing the application form on our website and submitting it along with the supporting documents.
- You can also contact us by phone on 09 303 1525 or freephone on 0508 777 707 for assistance and we can help guide you through the process.
FAQs
A REIT is a company that owns or finances income-generating real estate properties, offering investors an opportunity to invest in real estate without direct property ownership and management.
Norfolk Mortgage Trust does not buy, own or develop any properties, instead it invests by making loans to borrowers that are secured by first registered mortgages. Norfolk differentiates itself by focusing solely on property-backed mortgage investments through rigorous credit assessment process.
Investing in Norfolk Mortgage Trust is simple and accessible. Potential investors can directly purchase and redeem units in the trust, making it easy to include in a diversified investment portfolio. There’s a minimum investment of $5,000 and no entry or exit fees.
Norfolk Mortgage Trust offers a history of strong returns and consistent monthly interest payments. Its conservative approach to mortgage investments helps minimise risk for investors. Additionally, the trust’s management team has extensive experience in the real estate industry, ensuring responsible investing practices and prioritising the protection of investor capital.
Investing in REITs provides investors with portfolio diversification and, with Norfolk Mortgage Trust, a monthly interest payment. REITs offer an opportunity to access the real estate market without the complexities of property ownership and management.
Yes, Norfolk Mortgage Trust is a good option for income-focused investors. It delivers steady monthly income through its mortgage investments. While it may not offer the same long-term capital appreciation potential as other REITs, the focus on generating reliable income can be appealing for investors seeking stable cash flow.