Singapore’s real estate investment trusts (REITs) offer a compelling opportunity to invest in property without the high upfront costs. Their steady dividend streams make them attractive to investors. That said, not all REITs are created equal — there are four types you want to avoid.

1. Highly leveraged REITs

The Monetary Authority of Singapore (MAS) has set the gearing limit for Singapore REITs at 45%. This ratio, also known as aggregated leverage, indicates the level of total debt a REIT can carry relative to its total assets. While the MAS has set the limit at 45%, REITs that can maintain a minimum interest coverage ratio (ICR) of 2.5 can have their limit raised to 50%. Either way, while this gearing cap serves as a safety net, you may want to consider REITs with a leverage ratio below 40%, or even 35% if you want to be conservative. A lower leverage ratio provides a buffer against unexpected events such as economic downturns....