Why you should invest in real estate Welcome to year 2015. It is no longer news that the Nigerian economy is facing serious challenges due to the drastic fall in the price of oil from which most of our foreign exchange earnings is derived. In addition, late last year our currency was devalued thus putting pressure on it. It is clear that it is only a matter of time before the effects trickle down to various sectors of the economy. As you begin to plan and strategise for the year so many options are definitely going to call for your attention but there are several reasons why you should invest in real estate. In times of uncertainty and risk, real estate investment is one of the best defensive moves you can make. All investments are risky but some are riskier than others. Take for instance, stocks and shares. In times of uncertainty and depression stock values could depreciate significantly overnight and some stocks could even lose their entire value. You don’t see those types of losses or value depreciation with real estate. Real Estate is also very resilient in all kinds of economic conditions including inflation. During periods of inflation the basic effect on the economy is that the prices of things goes up. It means simply that money buys less. Unfortunately, most investments lose their value at exactly such period but real estate investment on the other hand has the inherent ability to absorb rising costs. For instance, during period of inflation rents would likely be increased by property owners not decreased. They are in effect transferring the impact of the inflation to their tenants. The prices of properties may stabilise but it will slowly and surely catch up with the rate of inflation and its value would eventually increase. Real estate investment is unique in this aspect since only very few investments can weather the storm of inflation. Several research and experience has also shown that when viewed long term ,over a period of five to 10 years, the average returns on real estate investment is second only to very few investment vehicles. It has the ability to produce income, ability to produce a profit, and ability to appreciate in value at the same time. Generally, a return of at least 10 to 15 per cent annually and sometimes more could be your benefit. In a country with a fast growing population like Nigeria you could earn some extraordinary returns in some locations. It is also important to note that while real estate is increasing your cash flow it also increases your net worth. Regular income from your investment is something that all investors love since this helps your budgeting and planning. The appreciation in value that your property enjoys actually translates into a better net worth for you as a property investor. If you are a business owner and your business invests in real estate either as a business premises for its sole usage or in partnership with others the value gained by those properties will add to the value of your business. Another benefit of investing in real estate is the ability to leverage your resources or the equity in the property. Leverage is simply an investment strategy of using some of your resources to acquire or purchase a much greater investment. For instance, if you intend to use mortgage to purchase a property you are expected to put down a down payment or deposit of between 20 to 30 per cent. The bank or financial institution provides you with the rest of the funds. However, if the investment goes well, you are entitled to the total benefit as long as you discharge your liability with the bank or financial institution. Real estate also has the added benefit of tax protection for your investment. Because buildings are subjected to natural wear and tear, you are allowed to factor in depreciation. In addition, your property is a form of money bank from which you can access cash when you need them by selling the property. It could be used as a form of collateral in order to access money. However, it is important to note that real estate is not easy to convert to cash. It takes time to market your property and to negotiate with a potential buyer. This only proves a challenge when you need money urgently. However, more often than not, there is always a demand for real estate. The market may go in cycles but ultimately it bounces back and your investments in real estate are more secure than in several other investments. Copyright PUNCH.All rights reserved. This material, and other digital content on this website, may not be reproduced, published, broadcast, rewritten or redistributed in whole or in part without prior express written permission from PUNCH. Contact: editor@punchng ift.tt/1wf8GA5 ift.tt/1oS9uND [[Boost your social presence with NAIRALIKES nairalikes ]] #nigeria x #nairalikes #vanguardng
Posted on: Mon, 05 Jan 2015 23:17:11 +0000
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