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The global Real Estate market has in recent times experienced innovative combination of old traditional ways and a modernized approach in real estate investment. The traditional method involves buying of lands with huge capital outlay and developing such lands with equally outrageous cash flows into residential and commercial properties, either for outright sale or rental income. The modern innovative approach to real estate investment is an investment pattern where the investor does not necessarily require a huge capital savings, mortgage loan or bank collateral to own a property. In today’s real estate market, the investor may just decide to own a small percentage of the total cost of the property or may decide to buy the full property according to his financial capacity. These properties are classified into single buildings, block of flats, commercial properties, hotels, schools etc. The investor has the choice to either be a tenant in his invested property, to rent out part of his property to make residual rental income while living in the remaining part or sell his entire property after construction at an agreed percentage return on investment (ROI) with the developer before exiting the investment cycle.
This innovative approach in real estate investment is seen by industry analyst as less cumbersome, enhances investment capacity of different classes of investors, reduces documentations and banks demands for mortgage securitization, reduce contract timing and closure. This innovation in real estate investment is fully in operation in developed countries but same can not be said of the African real estate market. MGF Realtors is on a mission to expose this transformative model to African markets and serve as a link for cross-continental real estate investment.
If you want to immediately invest in real estate market but are constrained with low capital, then this is the right model. This would also afford you the opportunity of spreading your risk factors across many investors. This form of investment’s is managed by reputable property developers who raise funds by issuing and selling shares or bonds through the securities market and use the proceeds to purchase lands, build and lease out such real estate assets like shopping malls, office buildings, apartments, buildings, hotels, warehouses etc. REITs managers are obligated to pay out almost their after-tax profits to their investors as dividends. This form of real estate investment frees the investors from the challenges of owning and managing a real estate asset. The developers are saddled with managing both the investor’s funds and real estate assets while the investor only reaps dividends from his investment which is usually higher than dividends from conventional stock market.
REITs model can serve as a retirement investment for low-income earners and investment port-folio for the upper class. Investors who don’t have immediate need of their dividends can opt to re-invest those funds to grow their investments. REITs shares are highly liquid as it is traded like any other shares in the stock exchange and as such can provide urgent funds to investors. Not all REITs investments are publicly traded through the stock brokers. Some REITs investments are equally issued and efficiently managed by registered real estate companies and associations. However, REITs issued through the securities market are more risk protected.
A real estate investor who wants to play more participatory role towards his investment should consider crowd funding real estate platforms. This model enables would be investors to choose what specific property they want to invest in, what location, quantity of investment stock and at what amount of funds to invest. Real estate crowdfunding model usually source for investment funds from multiple investors outside the stock market to fund real estate projects. It is generally required of investors to commit to real estate investments for longer duration of time, ranging from three, five years or more in many cases. There are possibilities for an investor under crowdfunding to access part of his invested funds before maturity period, but it would be at the discretion of the general investors to approve that which might also come with a penalty.
The managers of these crowdfunding platforms usually charge subscription and service fees for managing the investment assets on behalf of investors. Not all interested investors may be qualified to invest in real estates financed through crowdfunding as there are minimum investment threshold. Some platforms may require you to be a publicly accredited investor by owning certain amount of money in assets or earn a certain income level per year.
Traditional real estate investors still prefer to invest in rental properties. Traditional investors play a major role towards the property development sector. Funding is usually sourced through personal savings, family heritage or mortgage loans. The hassles of obtaining a mortgage loan with all the conditions attached are very daunting. The challenge of high interest rates on mortgage loans, especially for African markets ranging from 20 to 25% and issues of bank securitization are quite discouraging. Low earning capacity and attendant problems associated with rental payments as at when due are a cause for concern. Additionally, incessant tenant/landlord problems, high maintenance cost, low ROI and many years of recouping investment on rental properties makes this model unattractive to most real estate investors. The problems associated with rental property can be minimized by the investor through engaging a property management company who will handle all issues arising thereof including rental collection and legal matters.
However, investment in rental properties can serve as a source of steady cash inflow. An investor can also build or buy properties and put it up for short rentals like Airbnb, single family homes or holiday rentals. These rental systems can attract higher and faster ROI, minimize frequent confrontations and maintenance cost incurred on conventional rentals.
Investment in home Flipping is one of the recent investment strategies in real estate business. This model requires buying old, abandoned or dilapidated properties and then remodel reconstruct or renovate such buildings to a more modern structure. However, this model may not necessarily be cost effective because some properties may cost more money to bring it to acceptable taste. Again in some jurisdictions, the investor may require a reconstruction permit. In addition, some properties flipping may need to be outsourced to different contractors to get the desired result which increases the cost of such properties. However, with proper planning with regards to home flipping, the investor should be very resourceful and conservative in identifying homes that would not require much financial cost to either reconstruct or renovate, again investment in home flipping should be in locations with attractive property values to enable for fast sale or rental of such properties in order to recover invested funds and guarantee for profit margin.
Investment brief description
Investment description here.
Investment brief description.