Investing in Real Estate

Investing in real estate is not a decision that you wake up in the morning and decide to pursue. It’s a decision that requires careful thought. It can be a stressing task, especially during the times when the economy is struggling. On the other hand, real estate investing is a great way to grow your wealth if you can manage to do so responsibly with conservative financing and also understanding how the whole process works out. I may not be able to exhaust everything on this one article, but my hope is to introduce you to the factors that you need to consider. I know a lot of people may want to get into debates as we have often done with my friends, whether investing in real estate is better than investing in stocks. I won’t get into that debate. However, I do think real estate is easier to understand for many people as compared to buying stocks. As long as the rent arrives on times, as an investor you are happy. An investment property has many benefits and if chosen carefully can provide solid financial returns. If you choose the right property to invest in, it will most likely deliver greater returns in the future. Say if you bought the house for $320,000, you are more likely to see a significant gain on the house when you sell it back. Not only will you gain in the form of original purchase (capital gain), but also from the rental income. In order to maximize investment return when buying a property, here are some key considerations to make: Choose the right time to buy property: Property market values are constantly moving in cycles, sometimes due to strong market growth, at times stays steady or even at times the prices decline due to certain conditions in the whole economy. Thus as an investor, it’s important to know where the market is at before you secure the property, to ensure that you get the property at the right price. Make sure you choose the right Location: This is one of the key decisions you have to make when you decide to invest in property. If the location is chosen correctly, the chance of gaining higher returns from your investment is far greater than if the location is not desirable and suitable. Some of the things that you should consider include proximity to schools, public transport, public facilities such as medical center, library and lifestyle activities such as restraints, shops and malls etc. In future articles, I will discuss on the opportunity that Africa has in property investment, having invested in property there myself. With rising population, and the rise in various industries and people moving to urban centers, the demand for housing has never been higher and it will continue to rise. Property values are skyrocketing and a property purchased today could give you a return of near 30% in a little as two years. A lot of investors believe that Africa’s real estate provides great opportunity now and also for growth into the future. There are many countries that are in nation building such as Rwanda, Liberia and Sudan and this will all see rise in demand for affordable housing. When you choose an investment property, you one that is most likely to be in high demand for tenants, and even future home buyers. Consider the age group living in that area, do some research and discover the demographics and determine what kind of residents live in the neighborhood. Do enough research on the property market and ensure that it’s the right time to invest. Do not buy a property based on your emotions, or because you’re friends or someone you know has done it. If you do that, then you are likely to end up spending more than you bring in from the rental income of the property , and in the end you will be getting a low rate of return well below the market average. Educate yourself on the income tax and the impact it can have on your investment; whatever property you buy, you will be required to pay tax on income (rent and any other money) which you receive from your property. Educate yourself on taxes such as capital gains taxes, property taxes, land tax etc Decide on how you are going to manage the property because you will need to find tenants, chase rental payments and coordinate maintenance, which is all time consuming. Are you going to self manage the property, request a family member to help out or are you going to hire a property caretaker. Weigh up the facts and consider the benefits and the negatives and make a decision based on those facts and not emotions. In the end, when investing in a property requires you to make enough profit or return to be able to cover the risk that you have taken, interest costs, taxes and maintenance costs for having the property, and careful analysis and research is essential component to that success.

Daily habits that we can change to save money

Many of us desire to save money. I think most people would agree that saving money is something “easier said than done”. Personally, I believe it’s a mind-set that needs to be developed by creating good money-saving habits and today I will give you a few tips on the number of things that we can do to cut our costs. In the past articles, I have stated that to succeed in managing your finances, you have to live within your means, spend less than you make. It’s simple as that. Your income doesn’t determine how rich you are; but it's your net worth(what you keep) that ultimately will work to your favour in whatever lifestyle you choose to live as we continue the journey of our lives. Below are areas that I find we can save money on; Buying Lunch at Work; I have always argued that it’s okay to treat yourself once in a while for lunch, but generally I would say make and bring your own lunch to work. For example, if you spend $ 10.00 for lunch each day, five times a week, in a year you will spend $2600.00. Even if you were to reduce that to three times a week, that is still about $1560.00. As you can see, making your own lunch and bringing it to work, will work in your favour as you can have some of that cost invested in other ways that would give you a return. Use the Public Library to get DVD’s, Magazines/Books: The public library has lots of movies that are free. A lot of popular magazines such as the Economist, Business weekly, Consumer report are all available for free. Why should you go rent a movie for about $7.00 a night when you can get the same movie for free at the public library for seven days? Why would you buy a magazine when you can go into the library and read the magazine for free? You can even place a hold online. If you have too much pride to use free stuff at the library, why not try Netflix which only costs you $7.99 a month. Coffee: For those who are coffee lovers like I do. Invest in a coffee mug. It won’t cost you much but it will save you a lot in purchase of coffee. For example if you bought a coffee for $2.95 three times a day that would amount to about $1076 in a year. If you bought your own mug, spent $20.00 for it, and made your own coffee and carried it, or even use the mug to make coffee at work. That would mean a massive savings from the amount spent on daily coffee. Stick to your budget; I know a lot of us plan budgets, but we fail to follow through because of the occasional disruptions here and there. Stay within the boundaries of your budget. If you realize that you overspending in one area of your budget, cut the expense from another area so that you ensure you are living within your means. It is always good to have goals written down so that you can see them every day and don’t lose focus on your ultimate objectives, be it short term or long term. Other things we can do are, cooking more at home. For those that frequent restaurants, you will quickly realize that an evening out easily runs in the $80-120 a meal and drinks. Suppose you ate out twice a week, which easily translates to $8320-12,480 per year, if you reduced that to once a week then its half of that. Now, supposing you chose to cook most of your meals and decided to treat yourself once a month, that would mean you only spend $960.00 per year, meaning the difference can be used for investments purposes to build on your future. If you have read my past articles, I have been a great advocate of paying your full balance on your credit card. If you cannot afford to pay it in full, then I suggest you stack them away and never use them. You are never going to get ahead financially if you are paying 19.99-30% in interest rates. You are basically giving away free money, when you pay interest on those credit cards. Lastly, do not forget to pay yourself, set up an automatic withdrawal of funds from you chequing account into savings. Again, I argue if you do not carry any credit card balance. There is no point putting money in a savings account getting 1.25% at the very highest, while you are paying credit card companies twenty times or more. They are basically borrowing your funds at that rate and lending it back to you twenty times. In the end, saving money requires a lot of your patience and hard work. As long as you stay focused, you will have yourself to thank when you are no longer able to bring in any income as you let your money work for you while you enjoy your life relaxing and reminiscing the years gone by.

Investing your finances-a beginner's guide

Continuing with the article on investments, I get to explore the various instruments/vehicles that one can use to achieve their financial goals, be it short term or long term. It’s important to recognize that the investment industry is constantly changing, and there will always be new products and services, therefore my listing may not be exhaustive. We will get into future articles, where I will talk about the investment methods individually. I will compare investing in a developed country, emerging markets and developing countries, precisely Africa( buts that’s for the future), lets deal with the now. In investing, there is no such thing as the perfect investment. Before you get started in investment you need to consider your risk tolerance. Ask yourself how comfortable would you be if your investment was drop in value. Say for example, if you invested $100 today, and two months down the line your investment is now valued at $60. How would you react? Another thing you need to consider, as I have always said from my earlier articles is your financial goals, are you investing short term or are you investing long term. When you figure out what your goal is, it will then allow you to determine what rate of return would be ideal for you to achieve your goals, say 2%, 5%, 7% etc. Once you have this essentials figured out, then you can begin to choose how and where you begin to invest, and below are some of the investment vehicles that one can use: Bonds/Debentures: A bond is like a loan, the issuer of the bond (could be government/corporation) is the borrower, while the holder of the bond is the lender. The borrower promises to pay the investor regular scheduled interest payments until maturity when the loan is paid in full. Usually bondholders can claim ownership to company assets should they fail to repay the loan. Typically, debt securities issued by the government are not secured by any physical assets, and hence classified as debentures. Mutual Funds: This is one of the most common investment vehicles used by small scale investors, or should I say start ups. A mutual fund allows a group of investors to pool their savings to invest in different/various investment vehicles. For example, if you just have $1000 to invest, it is a tall order to invest in various blue chip shares, but through a mutual fund, say 100 people contributing $1000, it’s possible to buy those stocks and even spread your risk across a variety of investments. More on these in future articles. Stock Market Buying shares in the stock market is another common investment vehicle. Buying a share in a company represents ownership interest in the net assets of the corporation that you have invested in. The good thing about investing in shares, your liability is limited to the amount invested in capital. Say for example, you invest $1000, and the company goes bankrupt, you will only loose the $1000. Should the company prosper and grow, your shares will increase in value, hence dividends and increased value of your portfolio. On the reverse though, should the share’s value decrease, your portfolio will decrease. There are other complicated investments in the stock markets, such as Options. Call option, which gives you the right to buy a stock at a future date and at a given price, and a put option which gives you the right to sell a stock at a future date. These require extensive experience dealing with stocks; otherwise without enough understanding you may lose your money just like that. Commodities: With this type of investment, you are basically dealing with future contracts such a gold, copper, silver etc. The objective is to sell the contract before the delivery date at a price that’s higher than you originally purchased the contract. This is the closet you can get to gambling, and the losses and gains here are massive, and it’s therefore my advice that unless you have an extensive experience with investing, it’s not for beginners. Real Estate: This is when you buy property for capital gains. This could be an apartment, condominium, duplex or even an undeveloped land. There is always limited supply of land, and with our population growing, its value will always be increasing based on the assumption that we will always need a place to live. I have a few friends of mine who have requested I do an article on real estate, based on my minimum experience and I will be doing an article on this particular subject in the near future. I will look into the opportunities that Africa presents. One area that is often ignored by many in terms of investing is reducing your existing debt. For example if you have a credit card that you are paying 19.99%, its always better to pay that card off than investing in lets says a mutual fund where your annual return could be about 5-6%. Remember in my previous article, I have said it before, if you cannot pay the full balance on your credit card when it’s due, it’s time to stack those cards away and stop using them. Before you get into investments, pay down some of the high interest debt first. Your money will compound faster and you will have the magic of compounding interest work for you, instead of against you. Once you develop a fundamental understanding of the various investment vehicles, it is easy to narrow down your focus on those investments that allow you to achieve your financial goals. And that’s why I have always insisted that we need to continue to educate ourselves, if we are to achieve the goals that we aspire for.

Take ownership in managing your finances-(Investing)

So far, we have gone through the particulars of managing your finances on a day to day basis to ensure you have a solid foundation for success in the long term. In this article, my intent is to simply the art of investing to allow us understand how we can make our money work for us. There has been this common misconception that in order for one to become successful financially, you probably have to make a six figure salary, inherit or even win the lottery. The fact is, that’s not true at all. If we lay out a plan and take time to learn a few principles on how money works, we all have the potential to become financially independent no matter our income levels. To begin with, let me define investing; it is the expending of money (putting away) with the expectation of getting profit or to grow for long term financial gain. Put it this way, if you put away $100.00, you expect it to grow to $150.00 by the time you need to make use of it. Investing is different from savings, in the sense that with savings you are putting away a portion of your income in order to achieve as short term goal. For example you save to buy a car, furniture, vacation or even a wedding. On the other hand, investing is based on long term goals, accomplished by having your money make more money for you. There are many reasons why we invest and of course this reasons vary from individual to individual. Mostly we invest to achieve some financial goals, such as funding college education for our children, retirement (it may seem so far away, but it will come someday) or even enjoy the luxury of retiring early, and enjoying the rest of your life travelling and being on the beautiful beaches across the globe. Lastly, we invest to try and beat inflation (rising prices in goods and services). There are very many ways that one can invest, including stocks, mutual funds, bonds and even real estate.(more on this to come in future articles), but before you take that leap, there are some basic essentials that I would like to share with you. Understand the time value of money; the sooner you start the better it is, the younger you are the better. There are only two things that life gives you, opportunity and time. If you are young and have time on your side, you can invest in small amounts and end up with lots using the power of compounding interest (adding interest to principal). For example if I invest $100 at a rate of 10%, at the end of year one my interest will be $10.00, with compounding interest, you take the $10 and add it to the principal, such that in year two, my principal is now $110.00 Secondly, the rule of 72, what this measures is the time it will take you to double your money. In our example of $100, if say I was getting a return of 5%, it will be 72/5, which gives me 14.4, hence in 14.4 years, my $100 dollars will have doubled to $200.00. The rate of return is a critical factor in building financial security, even a few percentage points could be of great significance in the long run. That’s why it’s important we consider the rate of return we get from our investments. Before you get into the world of investing, ensure that you have a plan with goals that you intend to accomplish. (You can never reach a destination which you do not know), and such setting goals will allow you to stay motivated to accomplish them and also a way to measure your progress. One of my biggest advice is ensuring you are out of debt; it is the biggest enemy for our quest for financial freedom. The power of compounding interest works against you. Most of the credit cards charge interest of between 19.99-30%. You are not going to make such returns in any investments in my book, unless it’s those get rich scams. And that’s why I insist that the quicker you realize this, the better. Secondly, as suggested in my earlier article, avoid the credit card trap; use the cards if you know you have the funds in savings account to pay the amount in full at the end of the month. If you ignore this basic rule you will be helping your bank increase their profits for the shareholders, while you struggle to achieve your financial goals. In the end we need to change our priorities on how we manage our money; if you make $1000 a month and spend, $1200, you are a disaster waiting to happen. Discipline is key, to whatever goals we set. Remember it’s not what you make that matters, it is what you keep that will ensure you have financial independence in the long run.

Platform for financial success (Day to Day Finances).

In follow-up to what I promised in the previous article, “Take ownership of your personal finances”, I would like to start off by giving opinion on how to run and manage one’s finances from a day to day perspective. In life’s journey, we pass through various stages, which are all impacted by how we plan ourselves on a day to day basis. Each day, we incur various challenges and also opportunities to be the masters of our own destiny. Once we learn how to manage our finances daily, that knowledge twill set us up to live comfortable standards and take advantage of other opportunities to save and invest, creating financial security and also accumulating and protecting wealth in the long run. There is no magic to being successful financially, it all involves careful and diligent planning as I will illustrate below. Firstly, we should all take time to review our goals in life now and the future. Create a plan on how you intend to get there. This will be the platform for you to manage your cash flow now, tomorrow and into the future. It will allow you to manage your income and how you spend it. Most of us have bank accounts, I would advice that we review the type of accounts we have and make sure we have accounts that suit our banking needs. Select a chequing or saving account by assessing your usage and needs. A lot of people have the wrong bank accounts, and thus are paying a huge amount of fees to banks, which is obviously helping pay people like me (bank employees) and also shareholders. Nothing wrong with that, but as I said earlier, my purpose of the blog is to educate my friends and colleagues and ensure they get ahead financially. Secondly and more importantly, ensure you have a budget of your expenditure. Plan your future use of any income and ensure that as suggested in my earlier article, spend less than you make. If you are those that are already spending more than you earn, then reduce your spending. Without these, you are headed for a financial meltdown should any unexpected events come up. In addition to that, if you have any debt from previous spending habits, pay the debt down because as you by now may know, the interest rates are ridiculously high. And more importantly, avoid consumer debt (buying stuff that will not bring any value/appreciate in value over the long term),-more on of these on another day. Remember we have got to start somewhere in life, and I believe that the first step is always the most difficult step, but once we get ourselves going then anything is achievable. It doesn’t matter what situation you find yourself in, if you can take into account the above mentioned strategies in managing your day to day running of finances, then I believe you will build a solid foundation that will allow you to successfully navigate the various stages of life’s journey all the way to a happy retirement. Invest in educating yourself financially, and trust me the time and cost will pay off in the long run

Take ownership of your Financial Success

I would like this blog from now and going forward to focus on giving personal opinions on how to be a success in managing and improving your financial situation. I have always wanted to have a platform to reach to all my friends and colleagues and help advice on how to get it done financially. I get a lot of questions here and there when holding discussions with colleagues, how did you do this and that etc, and believe through this platform I will help show you what has worked well for me. We all want to be successful in life one way or another, be it in a career, have a peaceful retirement, travel, complete PhD degrees and even being an entrepreneur (Which I highly recommend etc Let’s be honest, finances are big part of that success story. In the next couple of months, and even years I will go from successfully managing your hard earned money day to day, to investing the money overtime in various financial markets. Some of these things have worked well for me and I believe that recognizing this early on in my life was a key part of that story. Other issues that I will handle include whether to invest in the west or to invest in Africa, buying a house or renting, and ultimately investing in real estate, especially the rising need for housing in Africa and the opportunity that it presents to us. In the end, my aim is to ensure that we are informed to make wise decisions to help us be successful in the long run. This article will assume that we are all planning or investing as individuals, for those that intend to plan their finances as a couple, I always say make sure that the significant other person has the same financial values as you do. I advise those that aren't married as yet, as much as we love our partners, ensure that you share the same financial values, because as you go on with life, finances will begin to play a key factor in most of the things you do in your lives. First things first, how do you get ahead financially and even improve your situation? To me, my take on finances is simple and clear; respect your finances just like you respect anything else. Firstly, you need to spend less than you earn. It doesn't matter how much you make, if you spend more than you bring in, you are going to struggle financially. What I believe in is that it’s always easier to spend less that it is to earn more. If you are going to make a big purchase, like a TV, Car, Furniture etc and you don’t make enough to cover that cost, I would say save and plan for the purchase. Secondly, to get ahead financially we need to ensure that we spend our finances as planned, in other words have a budget and stick to it. If you are going to be flexible with your budget, then you must have a savings account from which you draw from. Often, a lot of people budget and then before they know it they have gone to overspend. Another thing that is going to prevent you from getting ahead financially is credit cards debt. People pay ridiculous amount of interest on their credit card balances, anywhere between 19.99%-30% on store cards. My advice is simple and clear, pay of any credit card balances. If you decide to use a credit card, make sure you have the funds in a savings account to pay off the balance when it’s due. There are very good credit cards that give you cash back, reward points for travel, and to build your credit score. But all of these are worthless if you carry a balance and continue to pay lots of interest. Remember if you pay the minimum payments each month on a credit card, very little if any is going towards the principal. You could use some of those funds for investments (that for another day). Learn to cook. Its sounds simplistic but it is very important. If you start making your meals, you will soon realize that a lot of funds are being saved from groceries, eating out etc, again funds that you can use to save toward retirement and invest for future earnings. A lot of us are mistaken to think that life will stay the same forever. There are lots of changes in life, losing a job, disability, retirement, relocation and divorce/separation. It’s wise that you recognize early that being financial in a strong position if any of these storms come your way is as important as anything else you plan in your life. Believe me, how you live in retirement will be a direct result of how you planned, saved and invested today, something we will focus on in the coming months and years. I hope some of the information here has helped recognize the need for planning our finances. In the end we want the money to work for us, and not us working for it. And planning wisely, living below your means will aid in that financial success story. We are on a journey and we need to help educate one another and the success will follow accordingly.

Bringing Optimism to Africa’s Bright Future

Most of us have been accustomed to devastating news about the extreme poverty levels in Africa as shown in the various media channels across the globe. Even though, this may be true, I do think that the whole story is not told as it should be. Africa has in recent times shown great potential for growth and offers many opportunities for emerging business. The private sector, especially the financial sector has been rapidly evolving in the continent which has allowed Africa to be on the verge of takeoff. I believe that the way out of our poverty levels is for the governments to create better business climate/models that support the emerging entrepreneurial culture in the Continent. The businesses in Africa will create the way out of poverty for its people. We can either get a job in an existing business or create your own business. All in all we need to better the business culture in us. It calls for us to take the risks and join the entrepreneur world. We need to take the risks, and support one another in building our continent. We are beginning to own our development and growth as a continent and these are encouraging signs for the future. We have the collective optimism that if we support our emerging businesses the future is bright indeed for Africa. Our private sector/businesses have played a key role in the continents growth and it’s important that our governments realize that creating the right conditions will not only prosper our growth, but all encourage foreign direct investment into our continent, which can only mean one thing, a way out of poverty for our people. Our governments can do better by improving the infrastructure in place and also by encouraging business by giving them tax cuts, and making sure that business rights are well supported. These businesses are the foundation of our future and I believe we should all aspire to contribute to the growth of our continent

Africa Has Potential Too!

After completing studies in a western country, assessing a plan to achieve our career goals and lifetime dreams is next on the list of objectives. For those of us that have a background from developing countries, deciding whether to return home or stay around must surely be our top dilemma. To focus primarily on Africa, a majority of reports from various media sources indicate that Africa’s countries have been growing consistently at a phenomenal rate that surpasses the so called emerging markets. There is lots of opportunity for those with an entrepreneur mindset and not afraid to take risks. Many young people have struggled to decide whether to return to their motherland, or to stay and build a life in their adopted countries. Those that advocate for a stay cite the poor infrastructure such as roads school and the difficulty encountered to register and run a business. They continue to argue that there is constant interruption in services such as electricity, water, health services and education and therefore do not warrant any consideration/ decision to return. While its unquestionable that we have poor standards, it can also be argued that the level of democracy has increased with lots of people migrating to urban centers which in turn has created a consumer oriented market, and thus paving the way for future growth.The past wars civil wars that affected countries, have created opportunity for entrepreneurship, as those countries try to build the infrastructures. Such countries include Rwanda, Sudan and Liberia. This are case examples of countries that represent opportunity. Just food for thought, Ultimately though, I do think that the decision to stay or head back is a personal choice that is entirely dependent on personal circumstances