Last week, I was having a lunch meeting with a friend of mine who is a management consultant with one of the top 5 consulting firms. The topic eventually turned out being about investing in real estate I was excited because I am passionate about real estate and I thought it would open up new opportunities for him.
This client, on the other hand, was a little less enthusiastic than I was.
“I don’t know – I don’t see what the big deal is” he said to me. “I wanted to experiment to supplement my other investing methods like stocks, and T- bills which I am familiar with … but I got ZERO interest, because I feel I am being sold to.”
Naturally, this concerned me, so I pressed him for more information. “I hooked up with this local company and we spent a lot of time analyzing different fliers; different properties and I’m telling you, I’ve got next to nothing to show for it”.
As our conversation about how to begin to invest in real estate went on, I realized pretty quickly what the problem was. This client was absolutely entering the real estate market for the right reason, as he correctly recognized a trend that isn’t going away anytime soon and he wanted to secure a better future for himself , his family and ultimately for his future.
The issue was that he’d started in the wrong place.
Yes, he has been talking to a salesperson who works in a local property firm – all a salesperson wants to do is SELL. The reason why he saw no real return on investment to speak of was because that firm was trying to cram him into a “one size fits all” approach by urging him to buy from the properties in their portfolio alone.
Breaking free from that idea is officially step one.
If You Don’t Have an Investment Goal, You Don’t Have to Invest in Anything At All
One of the first things I tell my clients is, when it comes to investing strategies, you need to start with the words. In this case, I mean the unique reason WHY? What is your money goal? Why do you want to invest in real estate? Always remember, investing is a plan and not a product.
Real Estate investing is simply the act of purchasing, owning, renting or selling of land or structures for the ultimate purpose of earning money in return. Today, there are many opportunities in the Nigerian real estate market. You can choose to focus on residential, commercial, agricultural or even industrial properties. The opportunities are there, so you have to choose the area you are comfortable in and want to participate in.
The concept of real estate investing is a simple process; the goal is to put money in what you understand, and allowing it to increase, so in the future you have more money available. While all investments require a degree of risk, the potential profits must cover the amount of risk involved. For example, when you play the game of Monopoly, in order to win, one must purchase properties, avoid bankruptcy and collect rent to help them afford more properties, generate passive income annually and also build sustainable wealth if done properly.
Here are the 4 major components of real estate investments:
- Positive cash flow
- Minimal risk
- Low maintenance
- Long term investment
When you are ready to start investing in real estate, it is very important for you to narrow down the type of real estate investment you want to get involved in, the one that best suits your needs and goals. You must understand that real estate is a long term investment; and by ensuring a positive cash flow, minimizing your risk and maximizing the length of your returns, you will make good money when it comes to real estate with minimal effort for years.
The real estate industry can be a tricky one to enter but, understanding the different options available can help beginning investors get a grasp of how to make money. And how, exactly, can you expect that to happen if you don’t know where to begin?
Start from Wherever You Are
Mojisola Afolayan is a highly accomplished and seasoned professional with 10 years of experience in Banking and Real Estate. Until recently, she was the Lagos branch and western regional manager of Ayeye & co, a firm of Estate Surveying and valuation. She is the Principal Partner Mojisola Afolayan Estates, a real estate solutions company promoting sustainability of Property and Wealth through Advocacy, Education and Consulting. She is an associate of the Nigerian Institution of Estate Surveyors and Valuers NIESV and Women in Management, Business and public service (WIMBIZ).