There are many ways to make money in real estate. Despite the challenging economic times, real estate investment remains one of the most reliable means of making money and preserving wealth in the country.
Real estate investment is very resilient especially during inflation. It rarely diminishes in value unlike many other forms of investments.
During economic uncertainty, investing in real estate may be one of the best defensive economic moves that you can make. While it secures your money, in the long run, it will also create capital appreciation which will compensate you in the form of high returns on your investment when the economy stabilises.
The best starting point is to understand the market dynamics that impact on real estate investment and determine what and when you should invest in real estate. Property values are affected by several economic and social factors.
One of the factors that influence the value of properties is supply and demand.
Supply and demand are generally determined by population growth and economic opportunities. As the population of an area increases and demand for residential or commercial real estate increases without corresponding increase in construction of such properties, the value will increase.
People are attracted to areas of growth and opportunities. When government policies or improved infrastructure stimulates economic activities, people gravitate to such areas in search of jobs and others with the intention of providing services to the people.
The employees of those companies usually love to live close to their places of employment. The companies and businesses that are set up to provide one service or the other need facilities from where they can operate. The gradual pressure that this shift creates often leads to increase in rent and appreciation in the prices of real estate. Once you notice this trend, you can be sure that there are real estate opportunities that you can access in those areas.
If you are new to real estate investment, you should familiarise yourself with the basic opportunities that are open to you. Your knowledge, your personality and the resources available to you will be the determining factors of the real estate investment model that you choose to engage.
Experienced real estate investors often combine several investment models to make money in the sector. However, for someone that is relatively fresh in this area, it is more strategic to choose a single model, master it and gradually diversify or grow it. This will also guarantee that you focus your investment money carefully and avoid dissipating your energy everywhere.
The basic models that you can adopt depends on your investment goals and available resources. Some investors simply buy and hold.
They buy vacant land or property with the intention of holding these properties long term. Their aim is often capital appreciation. Once the property appreciates, they decide whether to cash in on that or to continue to hold for some more time.
In certain instances if the property is a rental property, the investor could also gain rental income while enjoying capital appreciation.
If the investor is uncomfortable with owning rental properties, he or she could focus on vacant land, which is easier to sell without the hassle of thinking of how to eject troublesome tenants or what to do when the property is vacant.
Another model often used by real estate investors to make good money is buying and renovating properties. There are many properties in good locations that are dilapidated or in need of serious repairs. It is easy to track the historical trend of properties in an area.
This will reveal to you what is possible once the property has been renovated. Some investors simply sell the property and move on to the next project.
Some investors carry out cosmetic repairs and then sell the property. The main advantage of flipping is that it provides quick cash that can then be ploughed back into the next investment. In all this, location, location and location is often the determining factor of the success of this model.
A real estate investor could also consider property development as a means of making money. Property development could be residential, commercial or mixed development. A property developer could simply acquire vacant land for the development or enter into a joint venture with someone who has vacant land and is looking for a property developer. Good property development projects often attract early off-takers who can make deposits and secure part of the project even before the actual commencement of the project. These early investors often enjoy huge returns on their investment if the property development appreciates on completion.
