The reasons to invest in real estate are priceless. Real estate involves improvements and developments of land, buildings, and other structures for residential, commercial, and industrial purposes. Landed properties pose one of the safest financial investments. Unlike other investments affected by external factors like political stability, economic stability, and the market, they aren’t.
In the words of past U.S. President, Theodore Roosevelt, “Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent; because real estate, is the basis of wealth.”
Misconceptions About Real Estate Investment
Like every other topic, there are misconceptions, especially when the right information is not easily obtainable. A common misconception is a risk involved in real estate investment, while others reckon that it is not as profitable. Other common misconceptions include:
- People think that there is a perfect time to invest.
- Remodelling old buildings are a quick way to get rich.
- Profit is uncertain.
- It requires massive wealth to invest.
- It is difficult, overwhelming, and time-consuming to become a landlord.
- One must be a homeowner first and even invest in properties closer to home.
Reasons To Invest In Real Estate
However, in the words of Thomas Jefferson “with great risk, comes great reward”. Gaining financial freedom, emergency funds, retirement funds, leaving something for your children, and more income are reasons to invest in real estate.
The four reasons below, will debunk the wrong perceptions and answer the question of reasons to invest in real estate.
- Retirement Funds
Having a retirement plan is crucial to achieving financial security after years of hard work. It guarantees comfort, and the right investment plan ensures that household and personal needs are met.
Returns from real estate investment are a great replacement for regular income. You can earn from real estate while working by leasing or renting out the property. That way, you will be paid by occupants of the property until the expiration of the lease or rental agreement. If you have full ownership of the property, you will be paid for the rest of your life and your children will also enjoy the benefits.
It also serves as an avenue for compound earnings, an effect that would normally not ensue from the regular savings account.
- Education Trust Fund
When setting up trust funds, assets, property, and money are most commonly transferred to family members; in most cases, children from parents.
Usually, the grantor specifies an educational trust fund to be used for the child’s education and when the trust will mature. It can be set up to mature when the child is of legal age, or upon their death with the help of a trustee.
Investing in real estate is a great way for parents to secure the educational future of their children. By accruing the rental income from the property pending when the child is old enough for enrolment or the time is suitable for the funds to become operational.
Either way, this investment option is very flexible. The monies can cater to the child, especially if parents can no longer be available. It can also guarantee a continuous influx of finances for whatever educational height the child proceeds to attain.
- Gifts for Loved Ones
In a previous blog, we shared how one of our clients used real estate as a gift, noting that it shows a meaningful way to express appreciation and love for loved ones in our lives
A real estate property as a gift passes a powerful message like “I appreciate you”, “You deserve more than things that will fade away”, “I’m looking out for your financial future”, and “Here is a financial cushion that will make your money work for you”.
The property can serve as accommodation or a means of income.
The investment can either be gifted directly by making the deed out to the recipient or by including it in one’s will. Hence, it can be passed down through generations without experiencing a price or value depreciation.
Corporate and private organizations can also invest in real estate to serve as housing options, incentives, and bonuses for their employees.
- Passive Income
Investing in real estate is one of the wisest moves by young people and salary earners in today’s world. Real estate offers the average investor the best way to build wealth as a stable and passive source of income.
Generating passive income from real estate can be achieved by crowd-funding, building construction, house flipping, and the rents of properties. The tendency of properties to appreciate and yield great returns by using income and profit from their resale over time exists. This keeps the income flow steady and affords the investor time to focus on other business ventures.
Furthermore, using properties for short-lets and Air BnB for tourists is another strategy that can create more income than traditional rentals.
The Most Profitable Real Estate
Commercial and residential real estate are considered the most profitable forms of real estate in Nigeria. Examples include medical centres, residential buildings, hospitality facilities, estates, stores, working spaces, apartment buildings, parking lots, and shopping malls.
Determining the best type of real estate investment depends on you, your goals, and your reasons for investing. The returns on a real estate property depend on the location of the property, as well as other factors.
On a final note, research has shown that 90% of people who become millionaires have been known to invest in real estate. Although serving as an industrial investment venture itself, real estate has been found to yield more money than all other industrial investments combined.