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.