5 essential characteristics that make real estate investment profitable
From time to time, people who are trying to decide where to put their money ask me if real estate businesses are more or less profitable, compared to other business opportunities.
My answer is always that, in addition to its potential for significant returns, investing in real estate often has long-term benefits.
I discuss five of these advantages below:
1. You can renovate (to increase the value of) real estate
After you buy a stock, you hold it for a period of time and hopefully sell it for a profit. The success of the action depends on the management of the company and its business success, which is beyond its control.
Unlike other conventional investment instruments, such as shares, for example, whose rate of return depends on third parties (for example, the management of the company), real estate investments are directly under your control.
Although you won’t be able to control changes that may occur in demographics and economics, or the impact of changes induced by nature, there are many other things you can control to increase the return on your investment in nature.
Examples include issues related to adding repairs or improvements to the physical property and the tenants you allow to live on it.
If you do it right, the value of your investment will increase, which will translate into greater wealth for you.
2. Real estate investing, when done right, has proven to be profitable even during a recession (like the one we are experiencing right now)
On a number of occasions, it has been used to effect a bailout, from financial setbacks, such as those many have experienced during the economic downturn taking place in Nigeria today.
A considerable number of clients have confided to me that due to the current economic situation, they are unsure of profitable channels to invest their money. Some of them are made with Treasury bonds and bills, but they are in dire need of new investment.
We had extensive discussions and, based on my experience as a real estate consultant, I recommended real estate investment as the most suitable and safe alternative investment channel.
This is because even if all businesses collapse, the land will always appreciate greatly. Then, to drive home my point, I ended by sharing the following apt quote from a former US President:
“Real estate cannot be lost or taken, managed with reasonable care, it is the safest investment in the world” – Franklin Roosevelt.
Unsurprisingly, the client chose to take my advice and signed up – it was the most obvious and common sense!
3. Real estate investments are immune to inflation
In other words, investing your money in viable real estate ownership can protect you from the harsh effects that inflation often has on other conventional investments.
This is because the value of real estate generally tends to increase in a positive correlation with inflationary pressures. This is the reason why property values and rental rates rise with increasing inflation.
Therefore, the nature of real estate gives homeowners the unique advantage of being able to adjust the rates they offer to match inflation.
Monthly rents, for example, can be increased to offset inflation, thus providing a buffer effect against inflation-induced losses suffered by other monetary investments.
4. Real estate is solely because it is universally acceptable as collateral, to secure financing from banks
Today, real estate in the form of buildings or land, with proper titles (i.e. Certificate of Occupancy, also known as “C of O”) is the most widely recognized and accepted form of security in Nigeria, and elsewhere. parts of the world.
It has the unique feature of being able to protect the interests of both the borrower and the bank (which is granting the loan), so that the funds can be released, that is, after due verification, and the terms and conditions are agreed.
This is one of the key advantages that a private C of O has over the global C of O, because the former (i.e., the private C of O) is what the potential borrower will need, in the event of any future financial deals. with the bank. in nigeria.
5. Real estate investment allows the use of other people’s money
In other words, you can do it even if you don’t have enough money. You just have to know how.
This is possible because real estate is physical property or what is called a hard asset. That is an attribute that makes it attractive to financiers, that is, people with money to invest.
This is why real estate products are often bought with debt, unlike conventional investment products such as stocks, which are NOT tangible and therefore perceived as riskier to invest in.
Therefore, real estate investment can be made through cash or mortgage financing. In the latter case, payments can be arranged to allow payment of low initial sums, provided by you or a willing third party.
Those payments will be made on land ownership, the value of which will continue to increase throughout the duration of those payments, and indeed beyond. That inspires even more confidence in the minds of those financing the acquisition that their investment is secure.
It’s no wonder real estate investing has continued to thrive for so long!
[A WORD OF CAUTION] Despite the listed benefits, I still tell potential investors that due diligence is a crucial requirement for success.
Whether you do everything yourself or use industry professionals like me, it’s imperative that you take care and arm yourself with relevant information and education.
This is something I advise my clients to do all the time, so they can make good investment decisions.
The importance of the above cannot be overstated, especially in Lagos, where quite a few people have suffered severe burns to their fingers because they did not take the necessary precautions.
My purpose is to help clients avoid such horrible experiences, bringing my years of experience in this field to serve them.
[You can read about more advantages of real estate investing, in this excellent article I found at: http://realestate4investing.com/articles/real-estate-investments/10-advantages-disadvantages-real-estate-investments ]