INVESTING IN REAL ESTATE: 10 Amazing Benefits
Kick starting my Real Estate journey in 2019, had no idea prior to this year about investing in real estate and its benefit. All I knew was how to purchase a land and build my own home or purchase an already built home and be free from landlord issue. Little did I know anyone can build trans – generational wealth through strategic real estate investment.
I know a lot of you reading this right now are in this position of either no information or little information about real estate investing, its benefits, risk involved and how to navigate for success. So read on as I enlighten you on how you can make so much wealth investing in real estate although not without its risk, because every investment comes with its own risk and real estate isn’t an exception it only takes the investor to gauge the level of risk and press forward.
Benefits of Investing in Real Estate
Here, will be walking you through on how beneficial investing in real estate is to you in building trans-generational wealth. Aside government laws and region outlines which are one of the factors you need put into consideration there are more benefits than drawbacks to investing in real estate.
1. High Return on Investment (ROI)
One of the most appealing aspects of investing in real estate is the potential for high return on investment. In my first year investing in real estate I got a 2 bedroom apartment in a prestigious, high population city for $45721.75, my purpose of purchase was for Airbnb listing which I earn from on a daily basis, fast-forward to 2024 that same unit of apartment is now worth $91443.50 at resell value. At this point you can see my return on investment within 6years which is aside my daily income from my Airbnb
In order to enjoy this benefit always look out for cities with high population because as the population grows, it annually brings about an increase in demand for housing with the expansion of cities and infrastructural improvements, property values tend to appreciate consistently. Equally the need of commercial spaces significantly as living on daily basis is tied to a source of revenue and population will always need a place to carry out social and economical activities. This demand often results in substantial capital appreciation, providing investors with impressive (ROI) return on investment.
2. Diversification of Investment Portfolio
Being sucessful as an investor in the real estate sector you must have to share your finance among various real estate investment opportunities available to build a great investment portfolio and manage risk. One of client back in 2020 during the covid made some strategic moves. He did spread a huge number of his resources across our investment services. He got 3 penthouses, 4 apartments, 2 condos, why? Because people where indoors more and needed safe areas to reside in while the wait was over. He earned and still earning rental income from most of his unit, while some are kept save for future resell.
Real estate generally offers you the opportunity to diversify, so you aren’t putting in all your financial resources in project therefore reducing the overall risk in your investment portfolio. To benefit from this i did advice you invest in different highbrow cities and different projects such as condos, mini apartments, penthouses e.tc. Real estate investment is a tangible asset that can complement other investment types like stocks and bonds, providing stability during economic fluctuations.
3. Rental Income
Owning residential or commercial properties yields a steady stream of annual, monthly or daily rental income. Yes! you heard this right. You need be mindful of situating these properties within growing population and urbanization, where there is a constant need for housing and office spaces,all you need is to step into the position of meeting this need which in return ensures you a consistent flow of rental earnings.
4. Hedge Against Inflation
Investing in real estate serves as a hedge against inflation. You know why? Because as the value of money decreases over time, the value of real estate tends to increase.
For example right now Nigeria is experiencing 29.90% inflation rate as at February 2024.
Homes worth N90m($57,192.35) as at September 2023 now sells at an appreciation rate of N95m ($60,369.71) as at March 2024.
This means that your property’s worth can increase, even in times of rising inflation and economic down turn. Additionally, rental income tends to rise with inflation, allowing you to maintain the purchasing power of your income.
5. Wealth Creation
You want to create wealth? Then owning real estate can be a pathway to wealth creation. Interesting right? Over the years, your property’s value can appreciate significantly, making it a valuable asset that can be sold for a substantial profit when needed providing substantial capital gains. This capital growth can be used to reinvest in more properties or fund other financial goals while securing you a comfortable lifestyle even after retirement.
6. Tax Benefits
Real estate investment offers you the accessibility to various tax incentives by the government, including tax deductions on mortgage interest, property depreciation, and more. These tax advantages can significantly reduce your overall tax liability.
7. Long-Term Security
If indeed you want to build trans-generational wealth, investing in real estate provides a sense of life long financial security, thats why its said to be a means to creating trans-generational wealth. Properties tend to increase in value over time, making them a reliable nest egg for the future and can be passed down from generation to generation.
8. Passive Income
You may be familiar with this saying “LANDLORDS MAKE MONEY IN THEIR SLEEP”. Real estate can generate passive income, allowing you to earn money without actively working for it. Whether through rent or capital gains, your investments continues to pay off without daily involvement.
9. Retirement planning
You can’t retire and have nothing to show for all your years work or depend on your kids for your source of livelyhood. Investing in real estate can be an excellent way to plan for retirement. The steady rental income from real estate properties can provide a consistent source of income during retirement. Additionally, as you pay down mortgage loans on your properties, you build equity that can be tapped into later in life if needed.
10. Economic Growth Prospects
As the demand for housing and commercial spaces constantly remains robust and more investors come into the market it brings about an increase in the economic growth of any country. Due to this demand governmental infrastructres are created providing population with accessibility, credit growth and job creation.
Challenges Of Real Estate Investment
Real estate like any investment, comes with its unique challenges and considerations. While we have numerous benefits to investing in real estate globally, it’s essential to be aware of potential challenges and considerations. Although the potential for profit in real estate is substantial, I will advise you critically look into it’s several challenges and how you can navigate them.
a) Legal and Regulatory Framework
Navigating the legal and regulatory landscape can be complex.As an Investor you must be aware of land tenure systems, property rights, and regulatory requirements. Each country have various governmental agencies and policies , in order to be on the right track always endeavour to make sure you adhere to the government policies in that geographical area.
b) Infrastructure and Development
Infrastructure deficits can affect the value and accessibility of properties. Poor roads, inadequate utilities, and poor drainage systems can be barriers as well to having a successful investment. When all this are not put in place it becomes difficult for investors to achieve their investment goals as those investment become unattractive for clients.
c) Market Volatility
The global real estate market can be volatile due to economic fluctuations and political instability. Investors must be prepared for every market downturn. Here is where property investment diversification becomes very crucial.
Considerations for Successful Investment
To make the most of your real estate investment you need to consider the following factors:
i) Due Diligence
From my experience as a real estate agent have come to see how crucial it is to thoroughly research and carry out due diligence. Verify property titles, conduct background checks, access market trends, area zoning, and generate government plans on every specific location of choice as this leads you on the right direction to adhering to government policies.
ii) Location Matters
If you desire success investing in real estate choosing the right location is essential. Location can never be overemphasied as this guarantees how successful you can be as an investor. Always carry out a vast search on locations with good returns, favourable government policies, tax rate and population density. Urban areas with growing populations tend to offer better investment prospects.
iii) Risk Mitigation
As an Investor you should have a risk mitigation strategy in place, including insurance and legal safeguards as these are very essential to ensure investment safety.
The Potential Rewards
Despite the challenges and considerations, investing in real estate still remains one significant sector with fulfilling rewards.
. Rental Income
Always evaluate the Rental income value on the desired investment location from residential and commercial properties to provide you adequate information on how to price your property and yield consistent cash flow.
. Capital Appreciation
The value of real estate is always upward and forward meaning it tends to appreciate over time, making it a long-term wealth-building option either in an emerging or developed economy with increase in the annual population rate.
How To Invest in Real Estate
The real estate market is dynamic and promising. However, it’s essential to approach this venture with caution and a well-informed strategy to avoid losing it all. I will be guiding you further on how to make investing in real estate a smooth journey for you.
a) Do A Research On the Real Estate Market in Your Geographically Area
Before diving into real estate investment, I encourage you take out time to thoroughly research the market based on your geographical interest. Understand the different property types, trends, and locations. Investigate the demand for rental properties, commercial spaces, and residential homes in various areas. Familiarize yourself with local regulations, property taxes, and zoning laws to make informed decisions.
b) Define Your Investment Goals
As an Investors do not go into the market cluless on your investment goals. You need to clarify your investment objectives, make it clear and smart e.g Are you looking for rental income, capital appreciation, or a combination of both? Determine your risk tolerance and time horizon for your investments because having clear goals will help you choose the right investment strategies and properties that align with your objectives.
c) Build a Solid Financial Plan
Before embarking on building a substainable real estate portfolio you do need a substantial capital. Develop a financial plan that outlines your budget, funding sources, and financing options. I admonish working with a financial advisor or mortgage broker to explore the most suitable financing solutions for your investment goals.
d) Location is Key
In real estate, location is paramount as each zones and region have varying property values. Invest in areas with strong growth potential, such as emerging urban centers, business districts, or areas with infrastructure development projects. Proximity to essential amenities like schools, hospitals, and transportation hubs can significantly impact property values.
e) Conduct Due Diligence
Don’t be mislead. From experience investors tend to put trust on family and friends without carrying out a search or inspect the property they intend to purchase before financial commitment. Don’t do this, I reprimand you always check for structural issues, legal encumbrances, and property title documentation. Engage the services of a reputable surveyor, lawyer and a realtor to ensure your investment is free from potential pitfalls.
f) Leverage Technology
Embrace technology to streamline your real estate investment process. Use online platforms and apps to search for properties, conduct market research, and manage your investments. Technology can save you time and provide valuable insights into the market.
g) Engage a Real Estate Professional
Working with a real estate agent or consultant with local expertise is a valuable asset. They provide you with insights into market trends, help you negotiate deals, and guide you through the buying process. Choose professionals with good reputation and track record of successful transactions.
h) Be Patient and Strategic
In Real estate patience is a virtue you must have to enjoy it’s rewarding benefits. Real estate investment is a long-term endeavor. Be prepared for market fluctuations and economic cycles. Make strategic decisions based on your investment goals rather than emotional reactions to short-term market changes.
i) Stay Informed and Network
You must always keep yourself updated on the latest real estate news and trends. Attend industry events, seminars, and networking sessions to build relationships with other investors, professionals, and experts. Networking can lead to valuable opportunities and insights.
Conclusion
Investing in real estate offers a vast degree of advantages, from high (ROI)return on investment to tax benefits and long-term security. In every economy there is always a demand for housing and commercial spaces. Therefore I advice you diversify your portfolio, carry out your research and secure your financial future investing in real estate.
FAQs (Frequently Asked Questions)
1. Is it safe to invest in Real Estate?
Investing in real estate can be safe and profitable, all you need do is conduct thorough research based on the location you will love to play in, work with reputable agents, and stay informed about the real estate market trends.
2. How can I finance a Real Estate Investment ?
You can finance your real estate investment either through personal savings, mortgage loans, co-operatives or partnerships with real estate developing or investment firms.
3. Are There Any legal requirements for Investors In Real Estate?
Certainly, Real estate investors must adhere to certain legal requirements governing any geo-political zone they desire to play in. For example in Nigeria you will need to register with the Nigerian Investment Promotion Commission (NIPC) and obtaining necessary permits.
4. What are the risks associated with real estate investments?
Risks include market fluctuations, property disputes, and economic instability. Therefore overall do conduct thorough due diligence to mitigate these risks.
