What are J-REITs?

J-REIT is a financial instrument with a scheme of investment companies that acquire real estate properties using funds collected from various investors. 

 

① The difference between J-REIT and real estate investment

Generally speaking, investment for actual real estate requires a considerable amount of money in the range of tens of millions to hundreds of millions of yen. Investing in J-REITs, however, needs a significantly smaller amount because it involves purchases of investment units that are offered by dividing the total value of real estate held by the J-REITs into a large number of the small portion. It enables diversified real estate investment. In addition, there is no need to pay property taxes or manage owned properties. Furthermore, you can buy or sell without troublesome negotiations at any time, just like listed stock, so that makes it possible to have a significant advantage in terms of cash exchange.

However, since the unit price fluctuates because it is traded in the market like stocks, there is a risk of falling below the principal.

 

② How to choose J-REITs (an investment company)

The most significant risk of real estate investment is the inability to collect rent due to vacancy, and it is the same with investments for J-REIT.

 

There are differences in investment policies, such as mainly the target area (whether it is central Tokyo or a local region), usage (house, hotel, office, commercial facility, logistics facility) , etc.

 

2-2 Owned property

The properties owned by each investment company are disclosed.

It is not realistic to directly visit the site and see multiple properties, so check with photos and maps.

 

2-3 Yields

J-REIT does not retain earnings that are formed from rents and gains by sales. However it instead puts them all into distribution, so that it will generally bring high yields.

Please look at the expected distribution and the actual distribution so far, and select one that has a stable and high distribution.

 

2-4 Financial policy

In addition to funds collected from investors, investment companies borrow money from banks to acquire real estate, so choose one that has stable and sound financial management.

LTV (Loan to Value), which represents the ratio of interest-bearing debt to total assets, serves as a guideline.

Ideally, 50% or less.

 

2-5 Confirm if the unit price is relatively low

The price level is indicated by NAV (Net Asset Value) multiple.

NAV represents the net asset value of the real estate held based on the market price, and confirms the unit price is relatively low by dividing the market capitalization of investment units by NAV.

NAV multiple is a similar index to PBR in stocks.

 

NAV multiple = market value of total current unit price / investment company’s total assets (mostly real property)

 

The lower the multiple ratio, the cheaper the unit price is.

 

Since J-REIT itself is a risk diversification of real estate investment, I believe that it is not necessary to hold so many J-REITs, Still, I think it would be better to compare the above items and consider some of them in consideration of balance.

     List of all listed J REITs ← Click here

 

③ How to purchase

The purchasing method is precisely the same as a stock investment.

If you have an account at a securities company, you can purchase J-REITs immediately.

Just like stocks, specify a 4-digit stock code to purchase. as limit orders or market orders are accepted

(How to start stock investment)