Abiodun Doherty
It is true that real estate investment is very attractive and is one of the proven pathways to wealth creation.
This has led many people to believe that whatever and wherever they invest, they will make money. Many have also equally discovered that this is not completely true. Real estate investment goes beyond buying a parcel of land and selling or developing it. It is not a one-size-fits-all investment and it is not a mono-product venture. Real estate investment comes in various sizes and shapes, and each has its own advantages and disadvantages.
One of the critical issues to consider before parting with your money is to determine which form of real estate investment suits you best and will give you a better return on your investment. There is a time value of money. The faster you can recoup your capital and make interest on your capital, the better.
This requires your understanding of the options available to you in this regard and the potential benefit or downside of the model that you have chosen to implement.
It is also important that you understand the impact of the environment or the season on the real estate model that you choose to follow.
Some properties perform well in a down market while some properties perform well in a hot market. The return that you get on your investment is dependent on the type of property and its appropriateness to the season that you are in. All properties will not give the same return on investment in all seasons. You must be systematic in your approach to real estate investment.
There are key elements that are common to high growth properties. When you know and recognise these features, it will make your decision-making process faster. Properties that gain good value usually have features that are scarce or limited to their locations.
They are in locations that many people desire to live or invest in and they have qualities like good access roads, proximity to commercial or recreational facilities and unique locational advantages such as waterfront properties. When a thing is scarce it can command greater value.
For example, old properties in good and mature locations perform very well. There are few mature locations that have the rare qualities that we described above.
These properties are usually in areas where land is very expensive and, at the same time, not easy to find. Moreover, because land can only be purchased at a premium, the supply is limited and many people who can afford it are willing to pay a premium to live in an apartment or flat in such areas. Rental properties often perform very well here during boom times.
If you invest in these areas, you are likely to get a good return on your investment, especially if you bought before the price started galloping.
However, during down seasons, these areas also suffer high vacancy because many people will not be able to afford the rent or the price of properties in those areas. In normal seasons, these properties experience steady growth and attract quality tenants who pay good rent. This is definitely an area to consider if you have deep pocket and are ready to pay for quality. Apartments in these areas are properly finished and are often serviced apartments.
New apartments in these mature areas often sell out fast. If you are interested in property development or refurbishment and you want to make quick returns on your investment, this is the area to prioritise.
Many people desire to live in these areas but cannot afford the money to buy land in these areas. They do not mind paying a premium to live in a terrace building or flat in those areas.
These areas usually have good infrastructures and are generally well secured due to the calibre of people living in those areas. Land sizes in old and mature areas are usually large and good for partitioning or development.
Some people have suggested that mass housing or affordable housing is a profitable business, and they are right to an extent. However, the number of properties that you require to acquire scale and break-even are quite much. Building in prime areas, on the other hand, has the possibility of giving you greater return on your investment over a shorter period of time because you are selling to those who have the eagerness and the means to buy and you do not require a large number of people to achieve your financial goal.
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