How do I start investing in real estate you mean? Calm down! Your blood is probably hot right now seeing the title of this article and just wanting to dive right in. But to fully understand what you’ll read in this article, you need to be patient and read through this process so you can fully understand how investments and investing work and not end up being scammed of your precious, hard earned money.
You probably hear it all the time, that investing in real estate is an amazing way to make money, that you don’t need to stress, that this and that, yen yen yen yen. After all these talk they end up not telling you nada about real estate, talk more investing in it or how to go about investments. There are various ways to safely invest in real estate and you’ll be showed that soon, let’s walk together. In this article, you’ll be learning about the following things:
- What is Real Estate and Why is it Important?
- Why should you invest in Real Estate?
- Things to do before investing in Real Estate
- Types of Real Estate Investments
What is Real Estate and Why is it Important?
According to www.investopedia.com, real estate is property made up of land and the buildings on it, as well as the natural resources of the land including uncultivated flora and fauna, farmed crops and livestock, water, and any additional mineral deposits. So, as opposed to the general school of thought, real estate isn’t made up of just lands.
Our core focus in this article is land and landed properties, how you can invest in them and make money. You may ask, “Why all the fuss about it, what makes it so important?” Well, for one, it’s about a basic amenity – shelter. It is not a lie that the value of lands increase annually, because according to Federal Mortgage Bank Of Nigeria, the housing deficit is estimated at 17 to 20 million housing units and will be increasing by 900 thousand annually. This is huge and will definitely be worth your investment.
Why should you invest in Real Estate?
This is the part where everybody wants to look away, better look back here. The reason for which you involve yourself in anything must be clear to you, the intent, the WHY. The common reason is money, you know, because of the money involved; some are doing it because their friends or every other person they know is doing it, some do it because properties appreciate, others do it because of the inflation hedge. So, you need to ask yourself “why do I want to invest in real estate?” this is an important question. Another thing to question is your motive behind the investment. That is, what’s causing you to invest in real estate? Debts? The need for a side income? What exactly is causing you to invest? Are you investing for the long term or you want to cash out ASAP?
Things to do before investing in Real Estate
Before taking a deep dive into the deep ocean of real estate investments, you need to be informed on some necessary things that would ensure that you’re in the right hands and not in the deceptive process of being duped. A few things to consider are:
- Confirm if the land/house (investment) is genuine and know the true owner of the property. How can you do this? You vet the property by taking it’s coordinates to the land bureau of that state in order to be in safe hands.
- Know the title document of the property. Title document simply refers to the rights to the property you want to purchase or being rented to you for whatever use. The rights are then passed on from the seller to the buyer after the transaction and it gives the buyer legal rights to the property when they come to an agreement. There are different types of land/property documents and they are: Certificate of Occupancy, Deed of Assignment/Conveyance, Deed of Lease, Deed of Sub-Lease, Land Certificate, Deed of Mortgage and Survey Plan. So check the necessary details and know which you’re going for.
- This is a very important point, let it always be on your mind; make sure your property is free from government’s acquisition. Refer to point 1 in order to be sure of this too. I don’t think you want to have spent millions on properties only to have it demolished or something.
Moving on, there are different types of real estate investment you can invest in, and below are a few:
REITs (Real Estate Investment Trusts)
There are a lot of companies that create a platform where people can bring money to invest with them; they have lots of properties that they manage. So you invest and they, at an agreed time give you return on investments. It is basically investing in the shares of whatever property you find on the platform provided for you, and so the risk involved is quite lesser than that associated with owning a land or property directly.
As the name suggests, residential refers to any place where people live or stay such as houses, apartments, townhouses and vacation houses where an individual or a family pays you to live in any of the properties as available. How long they stay, depends on the agreement between both parties. Investors in residential real estate make their money through collection of rents from the tenants.
This is the leasing or renting out of a land or space to a business, company, a petrol station, a shopping mall, SMEs and any business that needs a building that you can think of. Money can be made from this by collection of rents.
The industrial real estate ranges from car washes to storage units of an industry, warehouses to factories, industrial real estate refers to where goods are made or kept. Money can be made from this by rents, requesting down payments, maintenance fees, etc. This is more advantageous as agreement is usually longer and that means a steady income for the owner of the property being leased out.
Real Estate Agency
This is a person that connects property owners and possible tenants together. Money is made from this by earning commission on every deal you successfully close for a property owner and from the tenant.
Real Estate Whole selling
This is acting as a middle man, by searching for properties that are for sale, then having a sit down with the owner of that property to negotiate with them and then signing a contract. Once this is done, you then bring buyers.
Land flipping is quite common, probably the most popular form of real estate investment in Lagos and other parts of Nigeria. This is buying land for the purpose of reselling it once the land or property has appreciated. Meaning you purchase a property, hold on to it for a few months or years, and then reselling it when the value of such property has appreciated. It involves scouting for properties with cheap offers in places with promising developments, so you can buy and resell within a short period of time.
So, before you hurriedly jump on any one that seems attracting, make sure to be sure of the niche you want, the risks and effort involved and the profit to be made.