Real estate investment involves the purchase, ownership, management, rental and/or sale of real estate for profit.
Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development.
According to Wikipedia, real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive (although capital may be gained through mortgage leverage) and it’s highly cash flow dependent.
If these factors are not well understood and managed by the investor, real estate becomes a risky investment. The primary cause of investment failure for real estate is that the investor goes into negative cash flow for a period of time that is not sustainable, often forcing them to resell the property at a loss or go into insolvency.
When Nigeria’s housing deficit is discussed, focus is usually put solely on the number of people that cannot find a place to rest their heads while they think of their next course of action.
Statistics show that about 17 to 20 million housing units are needed to curb housing deficit in the country. This is a major reason why investment in the real estate sector ought to be encouraged.
According to research, the Nigerian government spent a huge amount in developing what today stands as Festac Town in the run-up to the 1977 Festival of Arts and Culture.
As a residential estate, the festival village (as it was called at a time) was designed for over 45,000 participants of the black arts and culture event, which the government hosted and had about 5,000 housing units, with major avenues and amenities that made the town stand out.
There was access to things like efficient transport, supermarkets, public restrooms and a grid network that made navigation easy. It was clear to see that comfort for the town’s occupants was the goal.
Not many people who think about Nigeria’s current housing deficit think about the comfort a home should bring. For a large number, minimal existence of real luxury apartments in Nigeria is not a challenge and one can say they understand.
When someone is faced with such high numbers, they forget anything about luxury, but that is only because luxury is thought to rhyme with huge cost.
The people who would later occupy those houses after 1977 moved for same reason of comfort.
Benefits of investing in real estate
- Steady income
The majority of people invest in real estate for the steady flow of cash they earn in the form of rental income. This passive income is a huge incentive to get you started and buy your first rental property.
Depending on the location, you could be earning significant income to cover your expenses and make you extra money on the side. Urban cities or towns with colleges and universities tend to reap higher income because the demand is always high in those areas.
- Long-term financial security
The benefits of investing in real estate provide investors with long-term financial security. When you have a steady flow of cash in succession, the rewards of this investment bring on financial rewards for a long time. Owning a rental property can afford investors a sense of security because of the property’s appreciation in value over time. This means that your property’s value is most likely going to increase because land and buildings are appreciating assets.
- Tax benefits
One of the benefits of investing in real estate is the tax exemptions investors get from owning a rental property. This is a major reason why many choose to invest in real estate. For example, rental income is not subject to self-employment tax. In addition, the government offers tax breaks for property depreciation, insurance, maintenance repairs, travel expenses, legal fees, and property taxes. Real estate investors are also entitled to lower tax rates for their long term investments.
- Mortgage payments are covered
The benefits of investing in real estate include your tenants as well. Simply put, the rental income you receive each month is more than enough to cover your expenses, including your mortgage payments. Essentially, your tenant is actually the one paying your mortgage. That is why it is important to keep your tenants happy and avoid or mitigate the negative repercussions of vacancy at all cost.
- Real estate appreciation
If you already are in real estate investment or are just starting out, you do understand that real estate is not a short term investment plan. On the contrary, the benefits of investing in real estate include the appreciation of capital assets (aka land) over time. In other words, your property’s value will be worth way more 30 years from now, hence why investors are in it for the long run.
Source: Feyisayo Popoola