Thanks a lot Michael for the clarification. :)

Hi Julien, you are right, buy-to-let can boost returns through leverage. Borrowing to invest in REITs is not common. But having said that, REITs themselves use leverage and borrow to invest in properties.

So end investors benefit from their mortgages which is reflected in the dividends and stock price. For example, it is not unusual to see a commercial REIT operating at a 40% loan-to-value. REITs also disclose their LTV so you can see how much leverage they use.

For the record, I should also note that borrowing to invest in a REIT is also possible. I wouldn’t recommend it unless you know what you are doing but it’s still doable. Borrowing this way is riskier than Buy-to-let because your portfolio can get liquidated. Interactive Brokers allows me to borrow at cheap rates against my stock portfolio and invest in REITs or other stocks.

Thanks!

Hey Andrew, nothing to claw back if you hold REITs in an ISA or pension. Your platform provider *should* pay the dividends gross, without withholding any tax. Limited companies have to pay corporation tax on REIT dividends if those dividends are of type PID.

The solution is not to choose REITs that pay no PID dividends. In fact, most property income from REITs is paid out as PID. PID stands for “Property Income Distribution”. REITs don’t pay corporation tax on the PID they distribute so this is beneficial to us, investors, already.

You can find the dividend type REITs pay on their dividend declaration announcements. So for Triple Point Social Housing REIT Plc that you mentioned, I just went to the Investor centre -> Regulatory news where the announcements are made.

Then check out one of the Dividend Declarations. “The dividend will be paid as a Property Income Distribution (“PID”).”

Another way to do it is to look at your broker reports. I know Interactive Brokers mentions it explicitly, for instance.

Also, how to tell if a REIT pays PIDs? Triple Point Social Housing doesn’t mention anything about PIDs in their annual report but on LSE forum I read “1.1655 pence of this dividend will be paid as a Property Income Distribution (“PID”) in respect of the Company’s tax exempt property rental business and 0.1295 pence will be paid as an ordinary UK dividend (“non-PID”)”.

Glad it’s working out well for you, Zed. Thanks for sharing! Do you also own buy to let property?