Real estate investing has proven to be one of the best, safest and most secured forms of investment you can get. The effect of the Covid-19 pandemic both on Nigeria’s economy and on the employment status of most Nigerians cannot be overemphasized.
During these times, many people partook in ponzi schemes and other unsecure means of investing and before long, their investments had gone down the drain. Amidst all these, real estate investments have stood strong and proven to be a very reliable platform for legit investments. While a lot of people have now found a passion or taken interest in real estate investment, it is important to understand the workings of the real estate market before going into it fully. There are pros and cons (do’s and don’ts) of the real estate market and the knowledge of these will help beginners in their journey into the real estate world.
Before delving into the dos and don’ts, here’s a better way to understand the term “real estate investment”: Real estate investing refers to the purchase of property as an investment in order to generate income rather than using it as a primary residence. Some examples of real estate are: houses, office building, agricultural land, commercial plot, etc. It is considered to be a secured form of investment. In other words, real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit.
Now if you’re thinking of investing in real estate, here are a few things to NOT DO (Don’ts):
DON’ T FIX YOUR CONCENTRATION ON JUST ONE ASSET CLASS
Over concentrating in one asset class can be very dangerous. (Meanwhile, an asset class is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulation) The reason why this may be very dangerous is because the real estate market can be volatile and even though you can control how the property is maintained, you do not have the power to control the majority of factors that drive local and national markets. These factors range considerably; for example, changes in interest rates, sharp increase to property taxes, and changes to the public services offered in a community.
As a real estate investment beginner, you shouldn’t stop marketing just because you have finally gotten a deal. Don’t market only when you need a deal. This is one very big mistake that beginners can make. They run around, market, find a great deal, and then stop marketing. If you must keep having deals, you must keep marketing for deals whether you need them or not to avoid emergency situations. It would be devastating to realize you don’t have any other deals in the works even after you just got paid for a deal you closed.
Having analyzed the Cons of real estate investment for beginners, let’s now look at the pros. From the above mentioned points, some “dos” have already been highlighted within the don’ts. Here are other dos that will definitely help you as a beginner in real estate investing.
DON’T STOP MARKETING AFTER YOU HAVE GOTTEN A DEAL
As a real estate investment beginner, you shouldn’t stop marketing just because you have finally gotten a deal. Don’t market only when you need a deal. This is one very big mistake that beginners can make. They run around, market, find a great deal, and then stop marketing. If you must keep having deals, you must keep marketing for deals whether you need them or not to avoid emergency situations. It would be devastating to realize you don’t have any other deals in the works even after you just got paid for a deal you closed.
Having analyzed the Cons of real estate investment for beginners, let’s now look at the pros. From the above-mentioned points, some “dos” have already been highlighted within the don’ts. Here are other dos that will definitely help you as a beginner in real estate investing.
INVEST THROUGH AN INVESTING FIRM
For beginners, this is highly recommended. Investing through an investment firm will reduce your investment risks. This way, someone will manage the paperwork and all the nitty-gritty details. Plus, you can invest a much smaller amount of money and you’ll get a payout each quarter. While you’re busy investing through an investment firm, it is important to note that you must also get busy learning the in and outs of real estate investment so you can stand on your own feet later.
CONDUCT REAL ESTATE MARKET ANALYSIS BEFORE BUYING YOUR FIRST INVESTMENT PROPERTY
To avoid falling into many hazards that no real estate investor wishes for, you have to conduct a real estate market analysis before buying your first investment property. So if you find yourself attracted to an investment property, make sure you perform a real estate market analysis (also called comparative market analysis) before buying to guarantee you are making a smart investment decision. In other words, a real estate market analysis is a study of the current market values of properties comparable to your investment property. This will help you to also determine its market value. Real estate market analysis is important for both professionals and beginners in the real estate investment world because it helps them identify the estimated value of the property before they buy, sell or rent it out. To conduct a real estate market analysis Ranah Ashad of Mahsisor advises the following:
You need to conduct a property analysis of your property in terms of area/neighborhood, construction age, size in square footage, amenities, recent improvements and many other characteristics. Also, you must find recently sold properties in your location that are comparable to yours. The features should be similar to your investment property. These are commonly known as real estate comps. Finally, you must compare the properties based on their prices to determine your property’s market value.
