Why Now is the Best a Time to Invest.
(A practical guide on how to create real estate wealth in a slow market.)
Recently an old client shared a story about how he had bought a property at the height of the real estate downturn. Less than a year later when the market started regaining momentum, he had a property that was essentially worth three times what he had paid, and even received numerous offers. He refused to sell, subsequently building his dream home on the more than two acre property in a choice part of Ikoyi. In future, this investor will extract more layers of value from the same property by developing a multi unit luxury apartment block. Even in today’s sluggish real estate market, you’d be hard placed to find that same sort of value in a similar location. His story is not unique. Investors understand that money is made during tough market times. We have definitely seen an increase in investors specifically looking for “Discounted Properties” and where better to find these than the prime residential market in Ikoyi and Victoria Island where many sellers are getting more realistic.
BENEFITS OF BUYING DISCOUNTED PRIME PROPERTIES NOW.
1. FEAR FACTOR : Every investor in what ever asset class knows that the real gains are to be made when the market is sluggish, when the ‘average, sensible and mostly fearful investor’ is holding back investment decisions. Most serious investors know this is the best time to pick up bargains in all real estate categories, especially prime residential real estate in Ikoyi and Victoria Island and indeed in several other locations. However, if you can afford it, it makes sense to go for the top of the cherry sticking to prime locations or as close to it as possible at this time because that’s where the deals are to be had mainly.
2. CAPITAL GROWTH. SOLID ASSET . Appreciation tends to happen faster and at a higher margin in prime real estate especially when you buy at a discount. Buying at this time in the economy essentially guarantees you immediate capital growth if done right. You could buy it to use as an owner occupier, therefore having a great asset and collateral if needed in future. Alternatively, you could invest as a buy to let investor. Many multinational corporates and top executives who make up the bulk of tenants in this space continue to require good quality rental properties but their budgets have largely been adjusted downwards, so by buying at a discount, you can attract them with a good value market related rental unlike those investors who over capitalised and have a tough time adjusting to reality. Always do the math to see that the numbers stack up and there’s a real discount and upside.
3. MOTIVATED SELLERS/INVESTORS : To supersize your returns, look for motivated sellers in the current market who want to move their property stock because of high interest rates and slow sales. There are also opportunities for buying off investors who bought at the early stage of an off plan project and who may no longer be in a position to complete due to change in financial circumstances. Where the transaction was denominated in dollars, it may also be possible to negotiate a further discount with both the seller and the buyer for cash investors and end up with an exciting investment property with high rental yields and immediate capital appreciation. These type of opportunities present a gold mine for the investor with a keen eye and ear to the ground. Even if you already invested in a project, which is still under construction, if you have holding power and perhaps an ability to buy more, this might be the time to ask your broker for more opportunities. You never know. (We have a couple of these types of opportunities on Fine and Country’s books currently and it’s interesting to see how keen investors are to find great deals.)
4. SAFE HEDGE AND STORE OF VALUE AGAINST INFLATION : For those with mid to long term funds, investing in real estate is a great bet and a good protection against inflation and low deposit rates. With the equities and bond market going through its own upheavals, and rising inflation, it’s clear that this is not the best time to leave cash in the bank, unless it’s emergency funds, or short term funds as real estate is fairly illiquid. That said, it’s probably best to invest in a discounted property opportunity with a large upside and take a short term loan in an emergency situation rather than erode the value of your money daily by leaving it in a low yield investment that gives you a negative return against inflation.
5. FOREIGN CURRENCY ADVANTAGE : And a word for those with foreign currency….wow, do you really need convincing? Now is definitely the time with your currency (USD and GBP at an all time high, why not look for Naira denominated transactions and get real value especially if you have long term ties/plans to Nigeria and can either use the property or lease it.).
Possibly the biggest reason to invest now is that when everyone is playing it safe, the big boys and girls come out to play, picking up the best deals, creating massive wealth, the proverbial rich get richer while the safe stay well, safe and jumping back on the band wagon when everyone else is, and usually paying too much when the market rebounds.
NO MONEY? NO WORRY! BE CREATIVE WITH FINANCING.
Here are 3 quick tips if you are thinking of looking at discounted property opportunities but don’t have enough immediate cash.
- FLEXIBLE PAYMENT TERMS . Remember that real estate investment is really about terms. Are you able to close quickly or do you want to put a deposit and negotiate a longer time to pay, and in some cases without incurring interest whether for off plan or already completed properties. Don’t be afraid to ask questions. Get the best payment terms possible.
- CASH IS KING : Remember that cash is king. Your ability to conclude with full payment upfront could make a massive difference to the discount you get.
- PARTNER/LEVERAGE : Remember that you may not have all the cash, but you could partner with another/other investors to take advantage of discounted properties, if the opportunity is really great. You might even consider a bank loan if your future cash flow supports it and the opportunity is really great.
GET REAL. PERSPECTIVE MATTERS.
Finally, everything depends on how you view things. Your perspective makes all the difference. You can see the sluggish real estate market as a reason to stall, stay safe and miss opportunities or you could seize this market opportunity to grow your real estate wealth. As two great biblical investors I know (Joshua and Caleb) said,” Let us go up at once and occupy, for we are well able to overcome the land. It is a very good land”. The question is which land, which real estate will you take over this season.
KEEP CALM AND BUY REAL ESTATE.
Ps. Are you interested in exploring some discounted opportunities? Check out this great top grade investment buy or contact us with your specific requirements.