Can You Go Wrong Investing In Real Estate?
“You can’t go wrong investing in real estate” – Unknown
It’s not out of place to say that real estate investing is extremely popular nowadays. In the last decade, loads of seminars, books, and other training materials have been developed. In fact, real estate has created more millionaires and billionaires than any other business idea, according to its most ardent supporters.
Andrew Carnegie, one of the richest men of the 20th century, is reputed to have said that, “90% of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”
Erin Carlyle, Forbes staff writer on Real Estate, writes that in 2016 a whopping 184 people made the Forbes 400 list based on their Real Estate investments. The Asia Pacific region had 99 billionaires, the U.S 44, and Europe 31. The Middle East and Africa contributed 8 billionaires to the list. The wealthiest real estate tycoon in the world, with a net worth of $28.7 billion, is China’s Wang Jianlin, who places 18th overall on the Forbes Billionaires List.
While real estate continues to prove a goldmine of opportunity all over the world, it remains hardly foolproof like every other investment. You could literally make it big investing in real estate. But, on the other hand, you could also lose big. Here are several ways you could go wrong investing in real estate:
Failing to commission the services of an expert to undertake due diligence
Sometimes, in the excitement of wanting to acquire property, due diligence is often relegated to the background. Real estate, however, is by no means a small investment.
Make sure to engage the services of a lawyer to visit the Ministry/Department of Lands to check the property’s title. This will help to ensure the current ownership. The services of a surveyor might also be required to confirm that the said property is free from government acquisition. Whether virgin land or already developed property, all sorts of checks must be undertaken.
Lack of effective planning on the funding requirements for your real estate investment
The African skyline is littered with lots of real estate projects that were started and abandoned midway in development. This is the end result of investors not counting the cost before plunging into real estate investing. Those in this situation might be forced to sell out to others, thus losing a major part of the gains of investing in real estate.
It’s important to work with a budget and effectively channel a portion of your income on a monthly basis into the investment. You can also channel a financial windfall or a loan facility into this investment. Keep aside whatever you can, no matter how small and invest.
Failure to get involved in directly supervising your real estate development
Now to those who are unable to visit sites, please note you will lose the benefits of not being in control of your investment. Our societies are full of many unscrupulous people who want to reap where they haven’t sown. You must be aware that the prices of everything the project requires could be inflated by your construction crew.
I seriously advocate buying all the required materials yourself where possible. Do your best to shop around and get the best prices. Embarking on this task will definitely save you some money!
Neglecting to secure your building site
There must be security in and around the premises of your building site. This serves to deter unscrupulous elements who might want to make off with expensive building materials. Ensure to use the services of a security man who can be on the premises especially at night to deter thieves.
Equip your security with the required hardware and also light up your site. You could fence it around to further enhance security.
Buying vs Developing your real estate investment
While there are advantages and disadvantages when it comes to either buying a completed structure against developing one, I tend to prefer the latter. This is because property developers charge a huge premium if you intend to invest in real estate by buying an already finished property.
Already finished properties are devoid of challenges with builders/developers, but the property might not be to one’s exact taste. Developing it from scratch makes for challenges, but the costs are more economical. You will definitely save money embarking on the latter.
Committing your project into the hands of quack professionals
These days we hear of buildings collapsing. Many building professionals cut corners in the execution of building projects. It is imperative that one carefully chooses top construction professionals to execute your real estate investment. A failed and collapsed structure is usually the result of using poor materials or other unscrupulous practices.
The onus is on the investor to use professionals. Work with referred and recommended people. No one wants their investment to collapse down the line, causing terrible losses and legal issues.
Not completing the process to acquire proper title to your real estate investment
The process of acquiring proper title documents for real estate investments is usually slow and tedious. This is perhaps one of the reasons many don’t take the time to perfect them. Many people claim ownership of property without the appropriate documents. This course of action is fraught with so much risk.
No one knows tomorrow. It is essential to complete the process and perfect all the required documents. This minimizes risk.
Not bothering to value real estate before you buy
I have discovered that sellers place exceptionally high premium/value on their property. They quote exceptionally high prices, without considering the actual valuation. This causes many property investors to end up paying outrageous sums far above the real value.
This development can cause investors to receive slower returns as they seek to recoup their investments. Investors could even lose money. Please make sure to request valuation information from the seller where possible. Or alternatively commission an Estate Surveyor acceptable to both parties to value the property. Furthermore, you can also research on property prices in the area before investing.
Getting lousy financing
Many mortgage/home financing products sold by Nigerian banks make me cringe. The interest rate and the terms for taking these loans seem designed to impoverish and enslave borrowers. The borrower ends up paying back far more at the end of tenor.
Be careful of taking such huge loans to buy real estate. It’s unlikely you can pay them back from the real estate investment in the short term. Avoid lousy financing schemes at all cost.
Signing contracts without a thorough vetting of the fine print
“Thoroughly read all your contracts. I really mean thoroughly.” – Bret Michaels
Buyers and sellers of real estate usually sign contracts. Legal documents exchange hands. It’s best to entrust the responsibility of vetting to legal professionals. I’m sure you wouldn’t want to sign some of your rights and benefits away just because you didn’t take the time to vet the document.
Don’t rush to sign those property papers.
Bottom Line
Real Estate investing is fraught with a lot of opportunity and risk. Take these ten pitfalls to heart, and do your best to ensure you avoid them. Real estate is, without doubt, one of the most popular avenues to wealth.
Note: This article originally appeared at MoneyTalkNG.
Category: Real Estate
