Did you know you don’t need to have lots of money before venturing into real estate investment?
At least 10% is enough to get you started. That’s why even as a beginner, you can become a real estate investor.
Although investing in real estate is quite a good idea, knowing how it works before venturing into it would save you from lots of trouble, e.g bankruptcy.
This article would serve as a guide to help you understand what real estate investing for beginners is all about.
Now that we’re on the same page, let’s dive right into it!
What Is Real Estate Investing?
Real Estate Investing is the purchasing, managing, and selling of real estate assets by investors to earn revenue.
Real estate assets include Commercial properties e.g office buildings, Industrial properties— factories, Residential properties— bungalows, Retail Properties— shopping malls, and Land.
Both young and old individuals in Nigeria are into real estate investing and are earning a lot of money from it. The aim is to procure a property to generate income, whether through renting land to tenants or buying land to develop it.
Taking into consideration the amount of return you’ll get over the risk involved would help you make the right investment choice.
5 Things You Need To Know About Real Estate Investing
They are:
- Choose The Best Brand To Work With.
- Find A Professional Real Estate Agent.
- Land Title.
- Location.
- Types Of Real Estate Investment.
1. Choose The Best Brand To Work With
Here are two (2) things you need to consider when deciding on the best brand to work with. Viz:
- Integrity: Do a background check to confirm the brand’s integrity before investing with them.
- Reward: How rewarding are the bonuses and commissions?
The end game is you get a financially rewarding investment.
2. Find A Professional Real Estate Agent
You may not have the time to go around checking properties and making sure everything is in place.
Therefore, finding an experienced and professional real estate agent would help you figure out what should be in place when doing the groundwork. Also, helping you out with payment plans and discount prices.
3. Land Title
You should avoid acquiring land that doesn’t have a genuine title. Different types of land titles exist depending on the type of property you intend to acquire e.g deed of excision and governors’ consent.
They have various uses, therefore they provide different levels of protection for your property.
4. Location
Location is everything in real estate. After knowing your budget and performing in-depth background research on the property you want to acquire, the location is what you should think of next.
This is because location can affect your property’s value, for instance, buying a property close to Government-Commissioned property can contribute to your ROI positively.
5. Types Of Real Estate Investment
As an investor, you must be aware of the various Real Estate Investments that exist— Commercial / Residential Real estate, Estate trading, and Landing Banking, to mention a few.
The type of Real Estate Investment you choose when starting will depend on a lot of factors, e.g. budget, and investment purpose.
Why Invest In Real Estate?
As I said before, you don’t need too much money before you can invest in real estate, so let’s look at other reasons why you should invest in real estate below.
- Capital Appreciation.
- Regular Cash Flow.
- Diversification.
- Protection Against Inflation.
- Tax Benefits.
1. Capital Appreciation
Capital Appreciation is the increase in the value of investments— real estate assets. It is the variation of an investment’s purchase price over its selling price.
By investing in real estate, the value of your investment— real estate assets tend to rise in the long run which can be due to its rising demand.
2. Regular Cash Flow
Cash Flow refers to the net price from real estate investments after opex i.e operational expenses and mortgage expenses are completed. Your cash flow is maintained when your mortgage is gradually paid.
Investors with rental properties earn a steady income from just renting out their properties to eligible tenants.
3. Diversification
The idiom, don’t put all your eggs in one basket best explains diversification. Diversification helps to boost your long-term investment return while lowering the risks.
When you invest in both commercial and residential real estate types or different locations, your investments are diversified, hence balancing high-risk investments over low-risk ones.
4. Protection Against Inflation
When inflation occurs, investors don’t have to worry as the prices of real estate assets generally rise too. This is because the demand for real estate assets rises daily.
So, investors can pass on inflation costs to the tenants who rented commercial or residential properties. But this should be done with due notice.
5. Tax Benefits
A reduction in the value of rental property helps lower the taxable income from your rental properties considering the following:
- Maintenance, modification, and repair of the properties.
- Payment of Insurance.
- Payment of mortgage interest.
Also, be aware of taxes that can’t be deducted from your investment assets, and be sure to note them down.
How To Invest In Real Estate?
Below are five (5) ways you can invest in real estate.
- House Flipping.
- Property Development.
- Real Estate Investment Trusts (Reits).
- Real estate Crowdfunding.
- Rental Properties.
1. House Flipping
You can start by buying a plot of land if you don’t have the capital to buy more, and then sell it after three or four months. This is the hold & sell approach to house flipping.
The second approach is to buy a property whose value you think will rise after renovating it and then sell it at a price greater than your overall investments.
This is called the Repair & update house flipping approach.
Substantial background in real estate and knowledge of the market is needed for anyone who wants to get into it.
2. Property Development
Here, you buy a property and develop it. Both the decoration, design, and everything that has to deal with the construction of the property is done by you— even though you can hire people to help out e.g building engineer, or interior decorator, to mention a few.
You can then sell to a buyer when it’s completely furnished at a high rate and earn your profit.
3. Real Estate Investment Trusts (Reits)
Real Estate Investment Trusts (REITs) have to deal with the owing, purchasing, and managing of income-producing real estate assets.
Also read: Is Real Estate Investment trusts a good career path?
This investment type is best for those who don’t want to directly own properties.
With REITs, you can easily and quickly sell real estate assets as it offers liquidity. Check up on the best REIT companies you can invest in and see your money grow!
4. Real estate Crowdfunding
Real Estate Crowdfunding is the method business organizations use to generate capital from a vast number of people. Providing a marketplace— an online platform — between real estate investors.
These investors then receive equity from development projects or a monthly/ quarterly income.
5. Rental Properties
Rental Properties involve the buying of properties— commercial or residential— and renting them out to tenants.
Here, part of the income you earn from renting it out is used for the maintenance of the property.
Via this, you’ll be able to earn regular income plus the value of the property can appreciate in the long run.
Managing tenants can be tiresome, therefore resilient people can invest in this.
Conclusion
Now that you know what real estate investing is all about, and that all have risks, take your time to figure out the one you want to venture into.
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