Compiled by AbdulGafar O. Asimi (CEO, Asgaf Global Concepts Limited) on a Whatsapp group seminar dated 29th May, 2019
"You don't need an enormous amount of capital to find and execute lucrative deals." RL Adams
Introduction to Real Estate Investment Real estate may have produced more wealth than any other industry, but people still remain skeptical about entering into the fray. Most think that they need to start with some sort of capital, but that's not always the case. The one magic power you do need is to be able to find the money, and we're often not talking much to open up escrow. If you know what you're doing, you can make money in real estate even if you're just starting out. Most people think that it's easier to make money online than it is to make serious coin in real estate. But both are difficult if you don't know what you're doing. When you get the lay of the land and understand the path forward, you can make strides. For many people, real estate is the easiest to understand investment because it is simple, straight-forward and involves a fair exchange between a property owner (the landlord) and the property user (the renter). As long as the hot water keeps flowing and the rent arrives on time, everyone is happy and benefits. Investing in real estate is much more complex than this, though, because there are several different types of real estate investments including residential, commercial, and industrial, The real estate industry has long been perceived as the safest haven to invest any form of business capital. This has majorly been fuelled by a spike in property valuations in countries around the world, especially Nigeria. While some countries have experienced downturns in real estate returns due to certain economic problems, some continue to enjoy greener incentives in the industry. Some investment experts clamour for lesser investments in real estate because, it majorly only ties down potential capital, and piles up property maintenance costs, unlike other investments. The industry is growing faster and getting more valuable, due to uncontrolled vices and open opportunities. As a result, the first course of action most people take when they start to earn some significant income, is to try to own their first property as soon as possible. How then can anyone get into, and profit significantly from real estate investment in Nigeria, and anywhere else in the world? This article is specially geared to fully enlighten you with everything you need to know about real estate investment where ever you are. As a new investor, do you ever wonder which is better: stocks or real estate? Both have certain advantages and drawbacks but the answer may depend just as much on your personality and tastes as it does your portfolio and situation. Find out which investment may be a wiser choice. Stay tuned! First, let’s highlight some various ways you can get involved in, and generate revenues from real estate investment: 1. Developing properties to raise it’s value 2. Owning and renting/leasing properties 3. Acquiring and selling properties Through every one of these real estate investment channels, you’d have to do an in-depth research, determine what you truly want, estimate valuations, explore finance procedures, and determine if the estimated return on investment (ROI) would be worth it on the long run. Let’s dive right in. Deciding how to invest in real estate means analyzing property types, strategies, potential risk, funding sources, average returns, and timelines. We’ll review the most common ways to invest in real estate, including flipping houses, rental properties, buying vacation rental property, and purchasing commercial real estate. In other words, this is real estate investing 101. Ways to involve in Real Estate Investment A. Invest in Real Estate Fix-&-Flips Fix-and-flip investing is best for experienced, short-term wanting to purchase, renovate, and sell a property quickly. Developers look for distressed properties with equity potential that can be flipped in 12 months or less for an average gross profit of 15% to 20% Fix-and-flip real estate investing is best for real estate professionals such as real estate agents, brokers, and contractors. That’s because flips, especially leveraged deals, require careful selection of properties, targeted renovations, and efficient project execution in order for them to be lucrative. Novices risk low profits or potential losses when flipping. Fixing-and-flipping properties is the right real estate investment strategy if you have the following: Experience: Most lenders will require previous experience in flipping properties. If you are new to fix-and-flip investing, hire or partner with a contractor. Time: Three or more months to devote to a fix-and-flip project; you need time to purchase, renovate, meet with contractors, monitor progress, and facilitate the sale. Funds: Enough cash or credit to cover down payment requirements. You’ll need at least 20% of a property’s after repair value (ARV) in most cases. Bargain Properties: Finding distressed properties before other investors and buying them below market value will be a key component of your success. Team of Subcontractors: You will need to build relationships with contractors and subcontractors to ensure you get the best quality for the best price. B. Invest in Rental Properties Investing in rental properties (aka buy-and-hold real estate investing) is best for investors planning to own the real estate long term and plan to manage or outsource management. Rental property investing is best for passive long-term investors looking to purchase residential rental property, and it is a popular strategy for real estate beginners. Long-term rentals offer better financing options and lower equity requirements, making entry into these investments easier. These properties include single-family homes, apartment buildings, and multifamily units. C. Invest in Commercial Real Estate Commercial properties are purchased by investors and leased out to companies, and include office spaces, restaurants, and retail stores. Commercial real estate investors are mostly long-term investors looking for monthly lease income and price appreciation. Commercial investors can use traditional long-term loans or commercial hard money lenders for fix-and-flips. Commercial real estate investing is right for business owners who want to own the property their business is located on and for well-funded experienced investors. Commercial real estate can be more complicated and cash intensive than investing in residential real estate.
Read how to be a successful landlord here Alternative Real Estate Investing Options There are several alternative ways of investing in real estate. These generally include real estate crowdfunding, investing in real estate investment trusts (REITs). Each of these alternative investments have their own risks and rewards and are generally right for different kinds of investors. Real estate crowdfunding companies provide opportunities to invest in loan-backed, single-family homes, apartments, condos, and multi-unit properties. REITs are corporations that own or finance income-producing real estate. They typically own a portfolio of real estate within a specific sector and generally pay out 90% of annual profits to investors. You should almost never, under any condition, own a real estate investment directly in your own name! Most of the time, serious real estate investors own properties through something known as a limited liability company or LLC. These special types of companies can protect your personal assets from lawsuits and other dangers. In fact, most wealthy investors own their home through an LLC as a risk management practice. As a potential new real estate investor, it is imperative that you understand how LLCs work and why you may want to use them to hold your rental properties or other real estate investments. Real estate investing can offer income and equity opportunities, diversification, and tax benefits. The most common investments are rental property, vacation rentals, fix-and-flip projects, and commercial real estate. However, investing in REITs, crowdfunding can also be good options. As with all investments, the right option for you will depend on the size of investment you’re looking to make, the return you expect, and the amount of risk you’re comfortable with. If you’re ready to invest in real estate, we have developed a crowd funding platform where you can save keep your money and enjoy up to 200% ROI.
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