I have had people asking me, “I want to make money in real estate, how do I do this? Must I be a professional to make money from real estate?” I always tell them, you do not have to be a professional to invest in real estate. What you need is to know the basic, non – complicated ways on how to make money from real estate.
You see, you do not have to be a professional but you may actually need a professional to put you through some ideas on operational modalities, and I am going to be dishing out some tips to you.
Note this, before investing in real estate, you must decide whether it is going to be a short term or long – term investment. What I mean is, you must be intentional – know what you are going in for. Are you going in for a short – term investment or a long – term investment? In a short – term investment, you need your capital or your returns as early as possible, but in a long – term investment, you will have to wait for a little while, maybe 10 years or 15 years to get your returns. So, you must know what you want to do with your capital. That is very important.
Four basic ways to invest in real estate without being a professional:
1. Rental Income: This is the first basic way to invest in real estate. For instance, you buy a property, rent it out, and obtain some good income from your tenants. Another way you could obtain income from real estate, without even building a property yourself, is to rent a property. This is called “Rent to Service Apartment.” To do this, look up a property in a very good location and rent it from the original owner. Alternatively, you can even ask the owner to lease it to you for 3 or 5 years, then give the property a face lift and put it up for short let. You must however let the original owner know what you intend to do with the property so that he would have no issues with you. If the owner agrees, you can rent and shop let the property.
You will be required to service the apartment for anyone who wants to make use of it, whether they come around for holidays and do not want to stay for long – a day or two, or a week – and make sure it is available for them. To service the apartment, means you are to ensure provision of adequate security in the apartment, good electricity supply and good water supply, so customers have their needs met without any complaints. You also ensure customers pay the adequate requisite fees for all of these services rendered.
You will eventually come to realize that the income made from the short let is very high, and it will reflect in your profit even after you have given the owner of the property his annual rent. This is one good way of making rental income for yourself in real estate. I hope someone learns this secret on how to make money from rental income.
Remember, you do not have to own a property to do this. Just rent a property from the original owner and put it up for short let.
2. Off Taking – A second way of making money in real estate is through off taking. Off taking is simply investing in property before it is built; that is, you invest in a building project that is not yet visible.
Before property developers start building projects, while the companies are yet planning projects, they raise funds from people, groups, investors. This is the stage where you should invest. Anyone who invests at this stage, is given a certain percentage, or when the project is completed, each investor is given property (e.g. a 2 – bedroom flat, or 4 – bedroom flat) according to the volume of his investments, as stipulated by the contract agreements he has with the company.
Before you get involved in this however, research about the real estate development company thoroughly and ensure the estate developers are reliable. An MOU must be drafted, that is, an agreement that shows you have invested into their off taking project, what you are going to be getting as returns and other terms of agreement. For instance, would your returns be visible apartments or in form of percentages? Ask a lot of questions, pertaining to the duration of the project.
When developers are starting a project, most times, they always need money. This is the best time to invest in order to obtain some income.
3. Land Banking – This involves accumulating land and saving it in the same way you save your money in the bank. This oftentimes is a long – term investment. This is how land banking works: you obtain land at a very low price, and wait for it to appreciate. Go to a developing environment, you do what we call, a Growth Poll. This means you watch out for viable environments that are going to come to limelight, environments that will soon be expensive based on growth polls. For instance, if there is a major government project that is coming to that environment, go there and buy lands. Buy in hectares. If you can buy 15 hectares, go ahead. Can you buy 100 hectares? Then, do so. Buy the land, build a fence around it to secure and hold it. This is called, “buy and hold.”
Do not be worried about the fact that you may not actually be making money while you are holding the land, you are just waiting for the right time to start selling. And you know, real estate is one of the best ways to invest your money. Real estate investments, do not depreciate. No matter the challenges, no matter the economic downturn, if the property doesn’t appreciate, its price will remain constant, but it will not depreciate.
Land banking is one of the best ways to make money in real estate. A lot of people have become billionaires through land banking. It is so sweet. You buy low and sell high. One of the best times to get into this business is during times of economic recessions. You can capitalize on investing during such opportunities.
4. Real Estate Investment Trust (REIT) – Many Real Estate Investment Companies own and operate other real estate income generating products, where they buy, sell, and manage real estate investments. These companies pool investors together towards handling some projects, and later give dividends to each investor. Before you invest funds into these companies, you have to do your research to ascertain if the company is reliable. Some companies share dividends monthly; others weekly, or annually.
You do not need to have a physical real estate in order to enjoy the benefits from these companies. Neither do you need to be a professional in the real estate sector. The companies will handle the investment on your behalf. You can even ask for the companies’ portfolios, that is, the real estate they manage. The companies’ portfolios reveal their customers, properties they handle, property type – is it a hospital, commercial properties or residential properties? The companies handle the investments, you get your dividends. Some REIT companies are on the stock market.
REIT is one of the best ways to actually make money in real estate. You don’t need to get involved in any physical labour, your money does the work. The most important thing to do is to ensure proper research on the company. Make sure the company is not defunct. Ask questions from their clients. Ensure they are not defaulters of the law.
Employing any of the above strategies will guarantee you good returns on investment. Hopefully, I have been able to alleviate your fears on real estate investment. I look forward to your grand testimonies. Do keep a date with me on the next episode. Thank you.