How to Invest In Real Estate in 5 Easy Steps!

How to Invest In Real Estate in 5 Easy Steps!
To us, it is not just enough to tell you about the juicy opportunities
that exist in Africa’s real estate market. Knowledge alone is not
enough. Because we believe the key to entrepreneurial success
lies in action, we shall share with you some very important tips
about investing in African real estate. Here they are…
1. First, Set Your Investment Goals…
Like we mentioned before, there are two main ways to make
money from any real estate you buy: sell at a higher price or rent
(or lease ) it to earn steady flowing monthly/yearly income. Which
of these will be your goal? What’s your plan? Are you planning for
retirement and need a source of income to sustain you when you
are no longer working? Do you plan to quit your job one day to
pursue your real passions but need a regular source of income
other than a job?
Maybe you really don’t need a steady income. It could be that you
are looking for low risk and long-term investment opportunities
that appreciate in value over time and give a better return. You
want something with investment returns that are better than a
savings account and more predictable than stocks. Whether your
plan is to buy, keep and sell later or to earn steady rent income, it
is very important that you have a plan and stick to it. This is the
first and most important thing to do before investing in real estate.
2. Who to Buy From And How to Find Them
There are usually two groups who sell most of the
real estate you want to buy – let’s call them public
and private . The main player in the public group is the
government. Governments often sell real estate to
ordinary people and companies for residential or
industrial development. When governments sell real
estate, it usually sells at a lower price compared to
the prevailing market prices. Government housing
estates are a good example of a real estate
opportunity where ordinary people can buy and own
housing units (single homes, duplexes etc) at below
market prices.
The private group is primarily made up of individuals
and corporate organisations. If you look in the
classifieds section of your local newspaper, you are
likely to find adverts for real estate properties on sale.
People are always on the market to sell property for
all sorts of reasons. Maybe it’s land that they inherited which they
want to sell or it could be that they have an urgent need for cash.
Other times, sellers could just be investors like you who want to
realize their profit/investment.
There are always a wide variety of properties on the market for
sale – bare land, partially-completed buildings, old properties that
need to be renovated and brand-new (finished) houses. Depending
on their condition and location (developed or undeveloped parts of
town), the prices will vary significantly.
How can I know of these opportunities you ask? Well, there are a
couple of tips we would share with you in this regard. And they are:
Be observant and pay more attention to your environment. Look
out for all those ‘For Sale’ banners that often hang on properties
that you have been blind to all along. For all you know, there may
be a juicy real estate deal on your street that you haven’t noticed.
Follow real estate ‘For Sale’ listings and adverts in newspapers and
magazines. This is the traditional way for sellers of real estate to
find buyers. In some cities, there are newspapers and magazines
that carry only real estate news and listings. Most of these listings
describe the properties, the seller’s asking price and a phone
number you can call. Easy and convenient!
Ask around. Let people know you are in the market looking for
properties to buy. Your neighbours, office colleagues and friends
can be rich sources of real estate information. All you have to do is
ask!
Enlist the services of a real estate agent. These agents are
professionals who help ordinary people like you find the kind of
properties they want. Whether you want a property to live in or as
an investment, it’s their job to find it for you, and of course, earn a
commission for their services. It’s a win-win for both you and the
agent. We did a previous article dedicated to the real estate agency
business . You can read it here .
3. Before You Buy, Do Your Research Very Well!
I’m sure you do not want to get involved in a property
that is the subject of a fight or legal battle. There is a
lot of real estate fraud going on and you need to be
sure that you are buying from the right owner of a
piece of property. You must be sure of the correct
condition of any piece of real estate you are interested
in.
Depending on your location, there is often a way to
verify the ownership title of every property. Most
cities have a Land Registry with records that contain
up-to-date information about every kind of real estate
in the area. Your lawyer would definitely know about
this. Pay him/her to obtain a report from the relevant
government department. This is one of the most
important but often overlooked things inexperienced
real estate investors never do.
Most times, there are important pieces of information that you
may be unable to get from formal or government sources. Ask
around the area for any things you may be missing. There may be
softer issues about the property that may reduce (or improve) the
value of your investment. For example, if there are frequent
security threats in the neighbourhood (like robberies, kidnapping
etc), it may discourage tenants from your property and likely
reduce its value should you plan to sell it in the future.
4. What If You Don’t Have The Money?
Many people think they need to have a truck load of money before
they can invest in real estate. In fact, we often wrongly believe that
the property market is reserved for rich people and large
companies who have deep pockets. This is so not true. Like every
other business or investment that exists, there is room for
everybody in real estate, no matter the size of your capital.
As we always advise, start small. Start with your savings. Set a
target for yourself every year to set some money aside for real
estate investment. It may take you months or a couple of years to
save enough money to buy a piece of property. Start with what
you can afford. Start with empty land on the outskirts of a
developing and expanding city. These are usually cheaper than
properties in developing areas but the potential for high returns is
huge.
Apart from using your savings as a source of capital, there are a
couple of other interesting ways to raise the money you need to
start investing in real estate. In a previous article, we explored 10
Guaranteed Ways to Raise the Capital You Need to Start Up and
Grow Your Small Business . You should read it and try out all the
other options.
5. Make Sure You Get the Necessary Titles and Government
Approvals
Due to poor regulations and inadequate controls, real estate scams
are rampant in many of the cities with hot property markets in
Africa. There are incidences of fraud where the same piece of
property is sold to several people. This is just one example of the
different kinds of fraud and scams you could become a victim of if
you are not careful.
After you have paid for any piece of real estate, you should ensure
that you register your ownership (or ‘title’ as it is legally known)
with the appropriate government office or department. Your lawyer
can advise you on the relevant registrations and approvals to
obtain. After successfully purchasing property or real estate, many
people ignore this very important step. By the time they wake up to
the realities of the situation, it may have become too late. By
registering your title and getting the necessary approvals, the
government recognizes your ownership of the property and
protects you from any fights or disputes that often show up in this
part of the world.
Getting your title registered may cost you some money and effort
but it is usually worth it in the long run. Investing in good real
estate is not enough. You have to do what it takes (legally) to
protect your investment.