Real Estate

5 essential characteristics that make real estate investment profitable

From time to time, people 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 to generate significant profits, 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 will not be able to control the changes that may occur in demographics and economics, or the impact of changes induced by nature, there are many other aspects that you can control to increase the return on your investment in nature.

Examples include aspects related to adding repairs or improvements to the physical property and the tenants it allows to live in it.

If you do it right, the value of your investment will increase, which translates into greater wealth for you.

2. Investing in real estate, when done right, has proven to be profitable even during a recession (like the one we are experiencing right now)
On several occasions, it has been used to bail out financial setbacks such as many have experienced during the economic downturn that is occurring in Nigeria today.

A considerable number of clients have confided in 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 investment as the most suitable and safest alternative investment channel.

This is because, even if all businesses collapse, the land will always appreciate greatly. Then, to underscore 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.

As expected, the client chose to take my advice and signed up – it was the obvious and common sense thing to do!

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. This is why property values ​​and rental rates rise with rising inflation.

Therefore, the nature of real estate gives owners 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 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 collateral in Nigeria, and elsewhere. parts of the world.

It has the unique characteristic 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 case of any future financing deals. with the bank. in Niger.

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 purchased with debt, as opposed to conventional investment products such as stocks, which are NOT tangible and therefore perceived as riskier to invest in.

Therefore, real estate investment can be done through cash or mortgage financing. In the latter case, payments may be arranged to allow payment of low initial amounts, provided by you or a willing third party.

Those payments will be made on the land ownership, the value of which will continue to rise 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 safe.

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 prospective 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 exercise caution 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 decisions when investing.

The importance of this cannot be overstated, especially in Lagos, where a good number of 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.

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 ]

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