An Introduction to Real Estate Investment

Real estate investment is one of the best forms of investment and the right choice of investment anytime any day, but it could be complicated when you don’t have the basic knowledge and when you are not properly guided, especially when you are not familiar with the terrain where you intend to invest. It is better than mutual funds, better than the fixed deposit, it is better than stocks, better than bonds, but it can take away all your life savings if you don’t understand the rudimentary principles that guide this kind of investment.

Definition:

What is Real Estate?

Real estate investment is the purchase, ownership, or acquisition and management of land, properties or anything for profit.

The original motive could be for-profit or prestige. There are four types of real estate investment.

Factors to consider when investing in real estate:

There are two major factors to consider when investing in real estate and once you get them right, your investment will hardly go wrong because they guarantee security and multiplication of your investment.

They are:
1)-Location
2)-Registration

A good location is very important in real estate investment because it determines the value of the property in the end.
For instance, the cost of building the same property in a highbrow area and that of the building in a low-income area is the same but because the value of land is not the same, the prices for selling will differ with a wide margin.

Land registration is an aspect of real estate investment most Nigerians take for granted because of their misconception that land belongs to families. It's a half-truth because it actually belongs to the state and each governor holds it in trust for all.

Therefore no matter what the amount of your investment in real estate might be, except the subject matter that is registered under the extant laws, you are on your own.

This also means that if you are interested in any property anywhere, you are expected to engage the services of a professional e.g. a lawyer to carry out due diligence on the property, that is, searching the land registry of the local government or state where your proposed property is located, to know the status of the property.

 Whether the person selling has the right to sell.

Or even if he/she does, have they registered their interest in the land registry? if not, then don't pay them until they have perfected such transfer, alternatively, if you have his/her assurance that he/she can get the original allottee to sign for you directly, you can go ahead.

And if it's a family or community land, it's the same process. You are supposed to sign an agreement with them through their authorized signatories and register the same in the relevant land office in your state or local government. This registration is very critical in real estate, in fact, no matter what the value of your property is today and the document that was given to you, if you have not registered your own interest in the land registry, that property is not truly safe.

Whenever an investor considers these two major factors mentioned above while investing in real estate, he/she would hardly make an error.

Types of Real Estate Investment

1. LAND; Land investment is the sale or purchase of vacant or underdeveloped land for either farm or ranch for subdivision for site and service assembly for land brokerage and all other land transactions to make a profit.

The land is not moveable from one location to another but it has the potential to grow in value over time. It is the easiest form of real estate investment and it is better to start with land especially if your investment capital is small.
Land can be gotten from the outskirts of any developed town and it will grow as development begins to overwhelm the neighboring town.

2. RESIDENTIAL REAL ESTATE INVESTMENT; This includes the buying of property or constructional property for home use, personal use, for residential purposes or for prestige. It can also be residential estate but it can equally be for the purpose of selling. Residential real estate can be for real investment or personal use which means you are building the property and at the end of the day, you plan to live in the property and even when you live in the property, it’s also an investment because the cost of paying your rent has been transferred to that property so you make profit annually after a duration of about ten (10) years. If you look at how much it cost you to build the house when you sum it together and subtract your annual rent for 10 years, you will understand the value of such investment; 

This form of real estate investment is capital intensive and can tie down your money if you are not a smart business-minded person because it requires a lot of marketing to sell, and if the location is not in high demand, that could cause you to reduce your already projected or fixed price. It, however, has a higher profit margin that can transform your financial fortunes, if the location and market is right, building to sell will multiply your money in time.

3. COMMERCIAL REAL ESTATE INVESTMENT; This includes all classes of malls, shopping centers, medical centers like hospitals, clinics, and educational centers like private schools, nursery schools, private secondary schools, private universities, hotels, all categories of hotels and office complexes. It also includes all categories of commercial farming, industries, and so many other related businesses. Commercial real estate is a very big type of estate investment because it is capital intensive, you need a lot of money to go into it but in most cases, you access facilities from the bank to bankroll the project.