The Punch Newspaper
July 31, 2012 by Abiodun Doherty
One of the most frequent questions I am often asked is: Can I still make money in real estate in a slow economy or an economy in recession? The answer to this question reveals the dynamism of real estate investment and its use as a wealth creation vehicle for those who understand it.
As we seek to answer this question, we shall be looking at real estate in a broader context to include all forms of wealth creation vehicles that deal with land and whatever is in or is erected on it.
In every economy, real estate is one of the most stable and resilient investments and this is due to a number of reasons that are mostly unique to this area of wealth creation. Firstly, real estate is essential. No matter how tough the investment climate may be, some primary human needs must be met such as food and housing. People need places to live, land for farming and industrial activities, shops and offices for their businesses. Moreover, real estate is to a large extent limited in supply; you can’t significantly make more lands although you can maximise and increase its value significantly. And whatever is limited in quantity and is essential to human existence or meets a need has the capacity to increase in value.
For instance, there was a time in Nigeria when the salaries of civil servants were significantly increased. Many of the beneficiaries spent the increase on higher standards of living that took more money out of their pockets than it brought in. Some bought the latest cars, some married more wives, while a few invested the increment.
In a particular area of Lagos State at that time, you could get a parcel of land for N50,000.00 and be allowed to pay instalments. Today, the same parcel of land, without any development on it, is worth over N10m and still increasing in value.
Interestingly, though limited in supply, yet real estate is available to everyone no matter your level of education and time constraint. Although real estate investment has its process, they are simple and uncomplicated. You don’t need different kinds of analytical charts and software programmes. You don’t need to check fluctuating prices every day. You don’t need significant capital to start .You don’t need a certification examination to start. And you don’t need a lot of technical information. Often times, its those with too much information and lack of strategic action who miss out on the opportunity. I have known individuals who were waiting for the big bucks before starting while one of my barbers started small and now has a roof over his head. His asset is already worth millions. This is so because of the income generating and wealth creation potential of real estate investments.
Real estate investments have many ‘ables’. It is appreciable, liveable, rentable, improveable, saleable and leveragable. It grows in value every day and has the ability to outpace inflation. You can build and live in the house. You can build and rent. You can buy a property and improve it for your personal use or to let or to sell. You can leverage your property with banks and other financial institutions to raise money for business or other investments. In brief, real estate has the ability to make you rich!
In addition to the above, real estate is very stable in most economies compared to other forms of investments. It is often slow to rise but also slow to fall. And often when it is said to ‘fall’, it is often as a result of the pressure on it by those who have lost all in other investments. This is the reason why astute investors all over the world diversify a significant portion of their resources into real estate as a form of extra security against unstable investment climates or downward trends. More so, when you consider the level of control a real estate investor has over his investment compared to other forms of investments such as stocks, mutual funds and others, a real estate investor has greater personal control over his investment. He or she can determine the level of value to give to the investment such as improving it or leveraging it. In some other investments, the value and safety of your investments are in the hands of analysts whose competence or carefulness you have no ability or right to determine.
I trust by now you should have guessed my answer to the question we started with. In a downward economy or a recession, if you’re looking for something sure and safe ,go for real estate. Think like an investor. Experienced investors do not hope to make money but actually make money when going into an investment. They buy their investment at a discount. When others are selling things of value cheaply, they buy a lot. And thus make money entering in. This is your time. This is your opportunity. And as we embark on this journey of wealth creation, get ready to be equipped with the knowledge and skills that are time tested and will work as you work them.
