If you’ve some spare capital and you want to invest in real estate but don’t know how to go about it, then this post is for you.
Real estate investing is not something hard or overly complicated. The most important thing is to understand the fundamentals and these are a couple of them:
1. The value of a piece of real estate is the future earning power of that particular piece of property.
The value is determined by the income generated when the property is developed to its full potential(highest and best use).
Although sellers can be sentimental and claim their property is worth so much, however, the true worth in dollars is directly proportional to the future earning power of that property.
As a result, land in the desert or middle of nowhere – let’s say a forest – won’t be worth so much because they have no earning power.
And they cannot be developed to provide accommodation or any particular human need.
Hence, they may continue to be worthless unless it’s fully developed and you expect to earn income from those who use them consistently into the future.
There are some major cities where prices of real estate are falling – that is people are selling less than they bought it. This is because development has come to such cities and has gone.
2. You make your money when you buy real estate and you realize it when you sell.
It is by purchasing at the right price and under the right terms that let you make a profit when you intend to sell.
Don’t be like most people who just buy a property at any price under any terms and think they’ll make a profit whenever they want to sell. This is far from the truth.
In fact, I learn this the hard way. In Nigeria, we are often advised that if you buy a piece of land anywhere and hold onto it, it will definitely appreciate in value. That’s not necessarily true. You can buy land that would never appreciate. So choose wisely who you listen to.
The more carefully you investigate and thoroughly check the offer before investing, the better off you will be. Take your time and don’t be in a hurry.
3. The 3 keys to real estate investing are location, location, and location.
Each real estate is unique just like a Non-Fungble Token(NFT). Your ability to choose a piece of property in an excellent location will have more impact on the future earning power of that property than any other decision you can make.
Real estate values are largely determined by general economic activity in the area and by the number of jobs and level of wages/salary.
Property increase 3x level of population growth and 2x rate of inflation.
By purchasing a property in a good location with a fast-growing population, you tend to get an above-average increase in its value.
4. Business activities are important in the area you choose to buy real estate.
A place with little to no business activities means slow growth and less appreciation in the value of the property, vis a viz.
5. The best place to start is by becoming an owner.
Start investing in a good location and ensure you employ your skills and knowledge.
You’re not a real estate investor until you own a piece of real estate.
I will say this again; that you promote or sell real estate doesn’t make you an investor.
You have to own your own property, use your skills and knowledge to increase its value, and also gain tangible experience.
There’s a great difference between a real estate marketer and a real estate investor.
Don’t just be the former, do and think like the latter.
Thank you for taking the time to read this post.
I hope you found my 5 fundamentals of real estate useful. Please feel free to live your comments below.👇
Thank you and God bless.🙏