5 essential characteristics that make real estate investment profitable
Every now and then, people trying to decide where to put their money ask me if real estate companies are more or less profitable, compared to other business opportunities.
My answer is always that, in addition to its potential to generate significant returns, investing in real estate often confers long-term benefits.
I discuss five of those advantages below:
1. Can restore (to improve the value of) real estate
After buying a stock, you hold it for a period of time and hopefully sell it for a profit. The success of the actions depends on the management of the company and its business success, which is beyond its control.
Unlike other conventional investment instruments, such as stocks, 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.
While you will not be able to control the changes that may occur in demographic and economic aspects, or the impact of changes induced by nature, there are many other aspects that you can control to boost the returns on your investment in it.
Examples include aspects related to the addition of repairs or improvements / improvements to the physical property and the tenants it allows to live in.
If you do it right, the value of your investment will increase, which will translate into greater wealth for you.
2. Investing in real estate, when done correctly, has been shown to pay off even during a recession (like the one we are in now)
On several occasions, it has been used to bail out financial setbacks, such as those many have experienced during the economic downturn in Nigeria today.
A considerable number of clients have confided to me that due to the current economic situation, they are not sure of profitable channels to invest their money. Some of them are made with bonds and treasury bills, but they urgently need a new investment.
We had extensive discussions and, based on my experience as a real estate consultant, I recommended real estate investing as the most suitable and safe alternative investment channel.
This is because even if all businesses collapse, the land will always be highly appreciated. Then, to drive my point home, I ended up sharing the following appropriate quote, from a former American president:
“Real estate cannot be lost or carried away, 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 obvious and common sense!
3. Real estate investments are immune to inflation
In other words, investing your money in viable real estate 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 positive correlation with inflationary pressures. That is why property values and rental rates increase with rising inflation.
The nature of real estate, therefore, 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 compensate for inflation, thus providing a cushion effect against inflation-induced losses suffered by other monetary investments.
4. Real estate is unique in being universally acceptable as collateral, to secure bank financing.
Today, real estate in the form of a building or land, with proper titles (ie Certificate of Occupancy, also known as “C of O”) is the most recognized and accepted form of collateral in Nigeria and elsewhere. of the world.
It has the unique feature of being able to protect the interests of both the borrower and the bank (which is making 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 (that is, the private C of O) is what the future borrower will need, in the case of any future financial deal. with the bank. in Nigeria.
5. Real estate investing 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.
That is why many times real estate products are bought with debt, unlike conventional investment products, such as stocks, which are NOT tangible and therefore are perceived as riskier to invest.
Therefore, real estate investment can be done with cash or mortgage financing. In the latter case, payments can be arranged to allow the payment of low initial sums, provided by you or a willing third party.
Those payments will be made on land that will continue to increase in value for 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 safe.
No wonder real estate investing has continued to thrive for so long!
[A WORD OF CAUTION] Despite the listed benefits, I keep telling prospective investors that due diligence is a crucial requirement to be successful.
Whether you do everything yourself or use industry professionals like me, it is imperative that you take care and arm yourself with relevant information and education.
This is something that I advise my clients to do all the time, so that they can make good investment decisions.
The importance of the above cannot be overstated, especially in Lagos, where large numbers of people have seriously burned 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.
References / related article:
[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 ]