You must have heard people say the real estate is a great investment. But why? And how exactly? What distinguishes real estate investment from all other investment and wealth creation vehicles?
Throughout human history the wealthiest people in all societies have been owners of substantial real estate. For more than 10 years, Catherine S. McBreen and George H. Walper, Jr. studied about 5,000 American millionaires annually to underscore the factors that made and kept them wealthy. Their study resulted in a simple conclusion:
- All truly wealthy men and women own income-producing real estate, and
- They practice continually innovative entrepreneurship
Here are 6 reasons why you should consider investing in real estate:
- Lesser Investment Risk
While investing in stocks, bonds and other fiat investment vehicles are great, the risks involved are high and the markets are very volatile. For a person with low risk tolerance or one with little or no solid financial base to cushion market downturns, real estate should be your safe haven. However, you must study and understand the market dynamics.
At present, Nigeria still operates an annual rental system, and in Abuja, for instance, renting a one-bedroom apartment can cost as much as N500,000 or more per annum depending on the location of the property. So, the more rental properties you own, the higher your income. Remember, like any other quality investment, real estate investment is not a get-rich-quick scheme. It requires time and prudence to grow and feed you.
- More Control
When you invest in the market stocks of a company, you cannot determine who becomes the CEO of the company or how he/she handles the affairs of the organization, unless of course if you are wealthy enough to acquire a significant share ownership of the company. Scarcely does any other investment vehicle afford you the kind of control that real estate does, from choosing which property to own and how to pay, to what maintenance to undertake to increase potential income, which tenant to allow, for how long and when to evict them, as well as how much rent to collect in tandem with prevalent market rates. In real estate, the locus of control is largely in your hand.
- Perpetual Income
For as long as you own the property and you accept tenants into it, you will continually earn from it. Nigeria’s population is estimated to go beyond 221million by 2020, 73million of which are expected to be young people. Also, rural to urban migration has been rising steadily in recent years as the economic base further pushes away from rural communities, and at present it is estimated that about 80million Nigerians live in or close to urban centres. These people need decent apartments and neighborhoods to live in. A smart decision would be to start positioning yourself already to bag some of that rental money flow.
- Capital Appreciation
Your land, home or commercial property will always have value. Fortunately for the smart investor, Nigeria’s real estate market seldom slips, and this assures of continual property value appreciation. It is amazing how easily property values in Nigeria appreciate so quickly; howbeit mostly for lack of stringent market policies and regulations. However, it is an advantage you must not let slip off your hands. History has repeatedly proven that the longer you hold on to your real estate, the more money you will make.
- Financial Leverage
In the investment world, diversification is king, and real estate can be your leverage to raise or acquire capital for other investments. You can use your rental income from one property to acquire another property, to start an innovative enterprise or to invest in other financial vehicles. You can put down your property to secure a loan facility and, if necessary, you can sell at a profit to tackle pressing financial demands. Whatever the situation, you can always count on your real estate portfolio to come to your aid. However, as much as possible, consider selling only as a last resort after all other attempts and efforts have failed, unless you are selling to buy another and maximize profit.
- Generational Wealth
In their research, McBreen and Walper found that a chief component of the legacy that wealthy men and women bequeath to their children is income-producing real estate. Therefore, one of the quickest ways to kiss poverty a permanent goodbye in your lineage and assure your children of a sustained good life is to own as many income-producing real estate as you can and teach them how to manage them before you exit the stage.
The Big Question
So, where should you start from? Start by owning your own home, your primary residence. Getting out of a rental apartment frees up your mind and finances to seize investment opportunities as they arise. Don’t hesitate. Start immediately to build your own real estate asset portfolio. You will become richer, happier and more fulfilled thereby.