Whether you like it or not, real estate has been and will remain a big player in the investment market owing to the fact that we all need where to rest our heads at night - houses.
For the sake of clarity, real estate has to do with landed properties - Homes, Schools, Hotels, Warehouses etc. and in as much as I will love to talk about how important real estate is or why you should build your homes, this article is going to be focused on going into the real estate business.
Okay, who am I kidding? Real Estate is, in fact, one of the most profitable ventures to go into due to low-risk curves and this is because the prices are always going up! Except of course in our war-torn countries like Syria, Irag. Trust me, no one wants to buy a land there! Literally.
Why is real estate so important in the business world? The value of most companies (including big companies with lots of assets like MacDonalds) is determined by the number and size of their landed properties.
Even if the company folds up, it can still make a lot of money through selling its landed properties. If you doubt the importance of real estate, why do you think banks only take your loan request seriously when you present your home as a collateral?
Getting to the point, do not hesitate to buy any 'good' property you can lay your hands on! Of course, there are some properties you shouldn't buy. You don't want to buy a property at a bad location where there are always crimes like robbery, kidnapping.
If you do, it will be a waste of money since you won't be able to live there or resale the property easily but then again, no one will be silly enough to pay a huge amount of money (they are hardly cheap) for a property without doing proper research. You should follow my financial education series.
- If you need to invest in something local for a recurring income, build properties for rent.
- If you love working for the big buck, consider developing properties and selling them afterwards.
- If you want to make a long-term investment, buy properties, lease them and resale them years later.
- If you love playing the fast business transaction game, buy and flip properties.
- If you want to be self-employed with no serious commitment, be a real estate agent!
You really do not have a reliable asset until you buy landed properties. I do laugh when people think their 6-figure car is an asset. Hell! Your car might actually be more expensive than some real estate properties but at the end of the day, your car is a liability. In a few years, your car's value would be drastically reduced while the real estate value would have appreciated in multiples. Also, your car takes money from your pocket while a real estate property is likely going to fetch you more money.
Real estate is an asset you can hardly loose due to the fact that the land will always be there even if the house burns down. This is why real estate will always be a better investment than stocks and the likes.
However, real estate can be quite capital intensive and this is One thing that scares people out of the real estate game and for being an agent (which doesn't require any investment), finding buyers becomes a challenge.
As stated earlier, there are several ways you can tap into this endless pool of profits in the real estate industry. No matter your budget, there is a spot for you in the real estate community but then again, there are certain skills that you will need in order to very successful at it.
Skills such as being a great salesperson or being a good investigator but then again, if you have the cash, you could hire people to do these for you. However, it's always best to know them yourself. Being able to investigate doesn't exactly mean you would be working harder than the FBI.
In fact, it might just need you to be able to do simple research about certain areas before buying or developing a property there. Follow my journey on every step I take in launching a new entertainment company.
Then for a salesperson skill, you might not need it as a property developer since people can do that for you but as a real estate agent, your job is really to get buyers for properties. So, how would you do it without being able to completely sell the property to potential buyers?
Real Estate Developer
Property developers are usually the big guys with the cash or so you might think. Most property developers are usually companies but some few businessmen don't hesitate to beat these guys at their own game.
These are the guys who buy a good portion of land, build homes or commercial properties on it and then, resale them at a higher rate.
In as much as these guys are usually known for building estates and apartment buildings, sometimes, they can be found building office blocks in a business-oriented environment.
To get started here, you will need to, first of all, get a good land. And by good, I mean a land at a location that is in high demand.
For instance, as of 2014 (till now), the Lekki community in Lagos, Nigeria became so high in demand that almost any house built there was bought or rented faster than you say 'Jack!'.
Now, if you are a developer and you happen to build houses around there, can you imagine how fast you will start profiting from your investment? You may also want to see my 7 effective methods on how to grow a business.
Things to consider
Before going into the real estate industry, you should take note of certain things about the property. Things like the value of the property, demand and supply of properties within that location.
This is to say, you need to ensure that properties in that location are in high demand. The number of properties there should be fewer compared to the number of people looking to own a property there.
How do you spot areas where properties are in high demand?
Doing this isn't really a rocket science. Most times, these areas hide in plain sight. Now, take a look at your vicinity and pray tell, do you notice new people moving in? Do you usually spot tourist?
How about the availability of new jobs? Is there a university nearby? Or perhaps, your location is next to a hot zone (place in high demand). Well, now you know.
You have a higher shot at renting out all your small apartments in a university neighbourhood or renting/selling off all your family homes in a location where there is a new company offering employment.
Certain locations require certain kind of properties. Developing a five-star 6-bedroom apartment building in a community where the average person earns a $1,000 monthly, will be a really bad idea.
Simply put. They can't afford it! The house will remain empty. No one will buy or rent a single apartment there! And guess what? Those who can afford it probably would move there either.
Except of course a new company moves there and start paying their staffs over $50,000 monthly. Also, do note that the demand for a property is usually due to the value of that property
What makes a landed property valuable?
Why would people want to own or rent a property in a certain location? Well, from the above, you must have deduced that properties become more valuable as their demand increases, but do find below, the major reasons why there is an increase in demand for certain properties.
Infrastructures - Is the property easily accessible (Is there a major road)? Is there a mall, park, restaurant (etc.) nearby? How about the environment? Is it neat?
Basic amenities - This has to do with the availability of water, electricity, gas or even internet. Yes! These things are always taken into consideration by most property buyers.
Availability of jobs - There are only two major reasons why people change homes. First reason, is to start afresh and the second? In search of greener pastures (Jobs) or when their current employer posts them to a new location!
This doesn't include temporary contractors or students who are only in that location for a few months or years (These categories only rent apartments).
Trade - When there is a high level of booming merchants within a location, there will be a need for warehouses, commercial properties like stores, offices as well as hotels. Owning these kinds of properties at such a location will certainly make you money.
Roadside - Have you found a property located on a major road? Especially a busy road? That will be a good location to build a gas station, restaurant, shopping centres, offices, banks etc.
By this, I'm not saying you must build and run the business. In fact, you could build and rent it out or just buy the land and lease/resale at a profit.
Security - No matter how polished a house is, or how equipped its facilities, if the house is in an unsafe neighbourhood, renting or selling it will be a huge challenge.
Is the house on a gated estate? Are there security teams nearby? Does it have a low crime rate? Are thugs non-existent there? If your answer is yes, then, it's a good property.
In summary, build your property where people need it. Anything otherwise, it becomes a long-term investment since you will need to wait a few years for that location to get high in demand.
People do this, but why tie down funds that should have been generating a recurring revenue for you just by building the same property in a different location?
Things to Note
- Commercial properties are more expensive to buy (Could be cheaper to build) compared to residential properties
- Properties located on (or close to) major roads are as expensive as they come but will generate more revenue when invested on.
- Building properties could be a lot cheaper compared to buying one (especially a newly developed property).
How to raise funds for your real estate projects.
Well, as you know, the real estate business isn't cheap. As a matter of fact, it is almost equivalent to launching a small company in terms of capital. So, what do you do? Here are over 12 ways you can raise capital for your business.
Savings - This is the part where you might freak out. Well, don't panic since this is completely attainable. And in fact, it's the most reliable option.
However, most savings account are dried out and most people don't even have enough to spend, so then, where do you save from?
When we hear 'savings', we keep thinking, oh, it must be some big chunk of money stacked somewhere.
News flash, most times, it could be just you depriving yourself of some launch money! Imagine you keep a $20 bill every day, in 5years, you would have saved up $36,000.
Now, if that isn't enough to raise up any property in your vicinity, head to a good African country and get yourself a good property.
Or you could just start with that, and use it to gain investors or a loan to finish up the project.
Raise Funds - Most people are in the rat race where they live paycheck to paycheck and can hardly leave anything out for the winter season.
If you are in this category, you need to understand that if you do not make an effort, you probably may never be able to change your situation.
Perhaps, you could create a profitable membership website like Ghavoch or any other side project which could be a means of raising funds for your big real estate project. There are so many other things you could do to gain some passive income! One of them will be to start freelancing online.
Investors - Just like in every other business, there are people who are interested in funding real estate businesses (for a share in the profits, of course).
These guys are usually very busy or might just not want to be fully involved in the business but will expect some good returns on their money.
Depending on your agreement with them, they give you money, you handle your project and give them a share of the profit.
Though these guys might seem impossible to find, most times, once you are able to get hold of a good piece of land and get your intentions out there, you are most likely going to be approached by an investor.
Especially if you are developing several buildings at a go. Anyway, to find these guys, you need to go where they can be found, like business clubs or you could simply use every opportunity to network with every well-to-do person crossing your path.
For instance, if you want to fly, fly first class and ensure you make yourself known to your seatmates. If possible, sale yourself.
Give them reasons why they should be a part of your business (not in an obvious way, of course). They need to know that they will benefit a lot from you.
Exchange business cards and they just might link you with an investor they know, assuming they don't want to invest themselves.
Loan from Banks - We all know no bank will give you a loan (Huge sum for that matter) without a wealthy guarantor, collateral or a high paying job.
And trust me, if you had any of that, you wouldn't need a loan in the first place. However, we cannot completely exempt them from our list of sourcing for funds since it's still very much possible to get a loan here.
For instance, you could use your home as a collateral or you could buy a small property somewhere, use it to get a loan, finance (improve) the property with a little percentage of the loan, sell it at a higher price (since it's now a better property) and boom! Now, you have the capital for your major project.
Family and Friends - The importance of a family and some good friends can never be overemphasized. These are the first set of people that are more likely going to give out money for your projects before any other stranger.
This is mostly because they know you and probably have more trust in you than the average investor. If you have some good friends or family with some cash laying around, why not bring them in or at least request a loan from them for your project?
They won't bite, or would they? However, do not hesitate to state terms and document all transactions here since doing business with family can be very tricky.
Partnerships - Another way you can get the needed funds for your real estate business is through partnerships with the rich guys who have the funds for it.
What you do here, is to put up a good business plan or a proposal and approach rich individuals who might be interested in this business, other real estate developers or simply form a team of real estate business enthusiasts like you and add your funds together for a big project.
Let's say, if I don't have enough funds but I have a land, I could partner with another developer to build on my land and we share the profits.
Or if I don't even have a land, I could partner with other developers with limited funds like me, add up our funds to make it sufficient for a good project, develop a property and share the profits according to the agreed percentage. In fact, we could even form a real estate corporation afterwards.
Grants - Yes! There are places where the government wouldn't hesitate to offer you a grant once you are willing to develop properties.
Most times, all you have to do, is to approach the local government (at least) and make your intention known.
Even when the government can't get you a grant, they are likely going to allocate a good portion of land for you (perhaps as a loan or you pay for it in instalment over the years) especially if you start developing the land within the said time-frame.
Apart from governments, we cannot ignore the fact that there are now several non-governmental organizations out there that will be very happy to fund your real estate project.
Most of them might only require you to participate in their business funding programs by filling an application, writing a good business plan and presenting yourself to their panel of judges.
Once you can give them enough reasons why your business is worth funding, you get a grant!
Other ways could be through crowdfunding where the public will opening contribute to the project especially if it's something they would benefit from.
Real Estate Investor
These are the big guys with lots of cash. Probably from other investments, businesses or they simply get paid a lot more salary than the average individual!
These guys, due to the need to diversify, would just find and invest a property developing company in order to create another stream of income.
If you have the funds but don't want to get your hands dirty or perhaps, you are too busy to be too involved in another business, you should consider investing in a good property developer.
This must not be a company, in fact, it could as well be just an individual who knows what he's doing.
In this case, you should just get your legal team ready to finalize all necessary documents and agreement, then you release your funds and let him do the work and give you feedback on the important milestones as well as your share of the profits once the investment is due for harvest.
But to ensure your money is being well spent, you need to make sure you invest in someone who can get the job done.
And you should, once a while, get a real estate consultant to look into your investment if you have no idea about it yourself.
Real Estate Flipper
Have you ever witnessed an abandoned apartment or an old house being renovated and sold to new owners within your vicinity?
Well, that is usually the job of a real estate flipper. These guys do get some cash stacked up, find and buy a bad building, refurbish it (and probably adds up some new features) or expands the building and takes it back into the market.
Now, since the building was in a bad shape, he's probably going to buy it very cheap, then since he now has a property, he is likely going to get a loan to renovate it (assuming he doesn't have the needed funds).
Then, he renovates it, tidying up the environment, adds all necessary facility, maybe adds up more rooms. At the end of the day, the building becomes a fresh new house with modern design and this alone would double the worth of the property.
Now, since the flippers are never in the habit of renting out their properties, he will simply resale it at a much higher price! In fact, he could make more than double of his initial investment. Turning $100k to $250k. See also, my 8 profound tips to help you generate more sales.
Real Estate Agent
In case you are still unable to raise enough funds for your real estate project, you should consider being a real estate agent since this doesn't require much other than your marketing skills.
These guys simply get good properties (that are for sale or rent), find buyers and gain a percentage (5-15% average) on each successful sale or a broker's fee for a rented property. To make things easier, you should actually focus on getting interested buyers.
And once found, you can easily locate a good property that fits the buyer's description. This is because it's a lot more tedious getting a buyer for certain properties compared to getting a property for a potential buyer.
Real estate agents are freelancers. I have a first-hand experience with my Dad who is a real estate agent to date. In case, you have a property for sale, you could send it to him on MenletProperties.com or you could as well request for a property.
These guys don't go to your every day 9-5 jobs. In fact, they work when they like and most times, their main job is to network with rich people.
Most of them end up having more contacts with wealthy people than the wealthy people themselves. Besides, who else is going to buy a $2m dollar property?
The middle class can't afford that! Being a real estate agent will accord you enough time for yourself to carry out your other activities. You could practically be a full-time employee and still run a successful real estate agency.
If your interest falls here, then you chose right. This is not to say you shouldn't consider being a real estate developer but being an agent doesn't require much.
However, it can be very unpredictable. In fact, you might spend months finding buyers without success or you could make over $120k in two days from a successful sale of two $600k property.
Sometimes, you could even sell over 10 of such properties in a month or sell a bigger property of over $2m which will fetch you a 10% share of $200k at a stretch. Overall, you will just have to be good at finding qualified buyers!
How to find buyers for real estates.
Finding buyers for real estate properties can be really challenging if you don't know what to do. Sometimes, you might not have a clue on where to start from but you need to know that something as simple as putting up a "For Sale, Call ***********" signboard in front of the property or in strategic locations, could as well get you that buyer.
Online - The internet is now where virtually the world's population go to, in search of information such as available properties to buy in certain locations.
Now pray tell, if your property isn't listed online, how will they find it? Start by posting your property here. In fact, you should get a quality website and do some digital marketing to bring your properties closer to your desired buyers. If you already have an email list of prospects, you should also utilize email marketing. Use convertkit for your quality email campaigns.
Business Clubs - As the name suggests, the members of such clubs are well-to-do people who could easily afford certain real estate properties. Why not be a part of this group of people?
The good news? Even those that aren't interested in getting a new home, will likely need a warehouse or an office space for their businesses. Be the one to sell them!
Companies - Yes! Sometimes, if the buyer doesn't come to you, you have to go to the buyer. By this, I mean you should probably consider visiting some companies and inform them of your new available warehouses, office blocks or even a land at a good location and you just might be surprised that they actually needed these.
Even if they haven't thought of buying any more property, a good salesman could literally make them think they need it and they will buy it. You just have to let them know how much they will benefit from it.
For instance, if I had a good land along the major road, I would walk up to the management of a good restaurant, gas station, bank etc. and let them know how much they will gain if they open up another branch there, as well as how much they will lose if their competitor buys it instead.
In fact, by the time I'm done, they will all be bidding for it. And then? I will sell to the highest bidder!
Agency - Not everyone is interested in getting their hands dirty. In case, you are one of these sets of people, you could easily outsource the marketing side of your property to the foot soldiers.
Simply put. You could just get real estate agents to market your property for you (even real estate agents do this.
They get a property and give to other agents to market for a share of their profit) but the catch is that you will have to give some percentage of your profit to the agents.
Word of the mouth - This traditional way of sharing information still works. Rumour, as they say, spreads like wildfire.
Most times, you only have to tell a few persons that you have a property for sale (or letting people in the neighbourhood know that your property is for sale - Assuming they know the property) and watch how the news could just travel till it gets to a buyer's ear.
Local Adverts -Finally, placing one or two adverts of that property on your local newspaper, real estate magazine, television or billboard, will certainly not be a bad idea.
This is because, in as much as we may like to deny it, there are people who solely depend on these for their information or at least targeting these mediums would increase your chances of getting a buyer since most wealthy people mostly read newspapers, magazines or watch the television at their spare time.
Well, now you know the real estate business Whys, Hows and Wheres but whether you found this helpful or not, do not hesitate to share your thoughts through the comment box below...