Real Estate Investing Advice (Getting started with real estate)

Real estate investment has become increasingly popular over the last two decades, especially with traditional non-real estate investment firms and individual investors due to inflation fears and market uncertainty affecting other asset classes. 

Although the real estate market has plenty of opportunities, investing in real estate is a lot more complicated than investing in stocks and bonds.

Investing in real estate requires a good amount of cash investment which makes it critical to take extra measures to ensure return on your investment or at least save yourself from huge losses.

There are several options for investing into property which can be Residential Apartments & Houses, Commercial Office & Retail, Industrial, Warehousing, Tourism, Specialized Properties, etc and they differ in terms of potential return, investment requirements and complexities of investment and management

It is important first to decide on what type of properties you want to invest in and that is also dependent on your vision, goals, budget and expected return.

Even if you are ready to invest up to a million dollars in your first investment property, it is always a good idea to go for properties that lie in the lower- to mid-range price brackets.

Since it is your first investment property, keeping your investment as low as possible will help you stay in the safe zone. 

Market analysis is important when making decisions and avoid reliance on intuition and complacency due to past successes.

There is a mistaken notion that supply of new developments creates their own demand.

In everyday language, some market players believe if they “build it, they (buyers/renters) will come”.

This attitude to real estate investment and developments can lead to costly failures such as empty shopping centers or office buildings. 

It’s important to do a systematic search for evidence that there is demand for an apartment complex, office building or shopping center before resources are mobilized to develop it and as well it is important to take note of the following notes:

Research Your Location & Opportunities

Depending on the clients you are targeting, you need to do proper research before buying investment property.

Make sure that the property is situated in a location that will attract the type of clients you hope to sell or rent to, that it will reach the returns you are expecting and that it will appeal to the market.

You should consider the strength of the location, the rental yields that are achievable, the level of demand and the potential for capital value growth.

It’s also important to look into areas that have positive expectations for price growth and a proven record of investment success. 

For example, currently, we have places like Pomona, Marlborough, Greendale, etc offering many opportunities due to their strategic transport links through Harare Drive and potential price growth through regeneration.

Places like Bindura, Chinhoyi and Bulawayo with opportunities for Student Housing and Hwange, Kariba, Nyanga, Victoria Falls, etc being good locations for Tourism Investments.

Know your Expenses and Return on Investment

It’s essential to sum up the money that you already have and what you can borrow before proceeding to buying your first investment property.

Also consider how much it would cost to renovate the property on top of the purchase price. 

Keep in mind the operating costs. Finally, estimate the price you are going to sell your property for or the revenue you are going to generate from rentals and cut out the expenses to get a rough estimate of the return on investment you stand to make. 

Be Aware of the Applicable Taxes

As an investor you need to be aware of the taxes to be paid for your property on a monthly, quarterly, yearly basis or at entry and exit level.  

Local Authorities, Rural District Councils and other Local Government establishments also charge rates and levies which you need to be aware of. 

There are many good reasons to invest in real estate with the current market uncertainties and they include:

Potential Excellent Returns

Diversified long-term real estate investments provide excellent returns within the same range or exceeding traditional asset classes.

Short-term real estate investments, like investments made into residential development projects (stands, apartments and cluster developments), can provide even higher returns. 

Good protection against inflation

Money supply growth has been fueling the rapidly increasing inflation, which is eating out the purchasing power of your savings. Inflation is often considered to be a form of hidden taxation, hidden because we do not see the outflow going from our pockets.

Real estate prices are very good in following the increase in money supply, inflation rate and wage growth over longer periods of time, and therefore real estate is a perfect asset class to protect yourself against inflation. 

Low volatility

While the long-term equity returns are attractive, stock markets are quite volatile.

Real estate is a significantly more stable asset class, being able to earn rental income even during the recession.

The reason behind real estate’s lower volatility arises from the fact that real estate transactions require significantly more time and money than buying and selling shares, so the number of transactions is significantly lower and the deals are more prudent.

Regular cash flow

When investing in rental properties, your investment will produce regular returns via rental revenue.

Reinvesting your regular investment income will improve your investments’ return rate even further.

Security

Real estate is a safe investment. By investing in real estate, you become a direct owner of the property which gives you a sense of security on a tangible asset.