As a 20 something-year-old in Nigeria, the prospect of investing in real estate seems like a pipe dream. With the rise in inflation and unemployment, many Nigerian millennials seek seemingly stable paths like career development and are fore-going investing altogether.
It may seem like an unachievable feat, but it is possible. Our very own CEO at Catalyst Business Consult is a testament to this fact. Investing in real estate in your youth can fast-track your journey to financial independence.
In real estate. the advantage of time is not to be underestimated. Investing early affords you the ability to take on increased risk without significant consequence and to maximize the power of compounding interest.
We will be going over some tips that will inform you on things you need to know about investing in your 20s
But first,
BENEFITS OF INVESTING IN REAL ESTATE
The question most will have is, “Why exactly should I invest in real estate?” Well, here’s why
TIME ADVANTAGE
The nature of real estate is that its value is directly proportional to time. Real estate, when done properly, is a venture that only yields more increases as time passes. The value of land and property is constantly on the rise. Therefore, investing as a young person gives your investment sufficient time to accrue significant value.
INVESTING PROVIDES ANOTHER SOURCE OF CASH FLOW
Investing in commercial real estate can provide an additional source of cash flow. Opportunities exist in housing, subleasing, or Air BnB spaces which can provide a steady cash flow stream without compromising your original investment.
SECURITY
Job security is one of the biggest concerns in today’s economy. The recent upset in global economics caused by the COVID-19 pandemic showed how volatile traditional employee positions could be. Real estate investment can serve as a source of extra income. It can also be something to fall back on after retirement. The cyclic nature of rental income means that you can also earn from your investment even if you don’t have a job. And with the advantage of time, your investment can grow to replace your primary source of income.
So how do you actually earn money from real estate?
- Value Appreciation
This is the traditional way to earn from real estate. Naturally, the value of property appreciates every year by an average of 5% in Nigeria. This value is dependent on the location as well as other factors and will vary.
- Cash Flow Income
The next kind of income real estate properties can generate is rental income. Properties such as homes, apartment buildings, hotels, warehouses, office buildings, and other kinds of physical residential spaces can generate a set amount of rental income each month. This kind of cash flow is great as you get a steady stream of cash income regardless if you have a job or not. In fact, many people can live off just cash flow from rental income alone.
TIPS ON INVESTING IN REAL ESTATE IN YOUR 20S
1) Get your personal finances in order
The first step before considering an investment of any kind is to make sure you have a firm grasp on your personal finances. This is good advice, even if you don’t plan on investing. Have a review of your last six months of income and expenditure, so you know precisely how your cash moves in and out. This practice will help you develop strategies to cut expenses and increase savings. Set up a budget for yourself and stick to it. Settle loans and other outstanding credit you may have before venturing into any investment. The bottom line is to be disciplined and responsible with your finances.
2) Educate yourself on real estate and finance
The second step is to acquire knowledge on the area you wish to invest in. Read books, articles, blogs, news segments, etc., to keep abreast with the latest on-goings in real estate. Get your feet wet by listening to podcasts, shows, etc. Find means to consume information and media that pertains to real estate. Information is power. More information will put you in a better position when you decide to invest.
3) Pick a good real estate market
You need to answer the question of what market to invest in. This will involve you researching the different markets available to you—for example, a decision to invest in Yaba or Surulere. To answer the various questions that will arise in your research, you’ll have to speak to market veterans, consultants, and other professionals in the industry to get a sense of areas to invest in. We recommend Catalyst Real Estate as a consultant choice for intending investors. Some metrics you can use to narrow down your options when it comes to market choice are
- Population Density
- Population Growth
- Attractions/ Lifestyle ammentiies
- Local Regulations
- Proximity to Financial or Educational Districts.
4) Decide on a strategy for financing your investment
A few ways to finance your investment are as follows
Buying it on your own:
This involves having direct contact with the seller of the land or property space you wish to acquire. This can be a rewarding strategy, but you will have to do a lot of legwork. The hassle of finding the right seller, the right location, etc., will have to be handled by you. This means it will cost you less money, but it will take more time and effort.
Invest through a Platform like P.B 3.0, REITs or REIGs
You have the option to invest through third- parties or investment trusts. These third parties do the legwork and connect investors to real estate opportunities. REITs are real estate investment trusts. These are companies that own or finance income-producing real estate across a range of property sectors. Another third-party option is REIGs. These are real estate investment groups that offer investment opportunities and handle the day-to-day maintenance of property for their clients. We recommend platforms like Project Balogun 3.0 for intending investors. To find out more about third-party investment and commercial real estate, click here.
There are many other options to choose from when deciding to finance your investment. Do your research and choose wisely.
5) Set Short-term and Long term goals
So after you have consulted with the experts and have a path you wish to follow, set goals for yourself and your investment. If you need capital to finance your intending investment, you will have to set short and long-term goals to make it happen. If you have already secured your property or space, set goals for short-term and long-term development, renovation, income, etc. The point is to plan. To make plans and set goals. Be proactive about your investment.
6) Network
This is extremely crucial no matter what field or discipline you find yourself in. It’s all the more crucial in real estate. Forge connections with important people in your local market. Landowners, realtors agents, contractors, property managers, etc. These people have their pulse in the industry and will know things you don’t. You may even find a mentor to guide you as you progress. Making these connections will help you learn more about the business from credible sources in the industry.
7) Be Patient.
A lot of young people expect to dive into an industry and start earning millions in a second. The advantage of investing early is time. Be patient. This is a marathon, not a sprint. The effect of careful planning and decision-making will snowball into success. This is a journey of years. The decisions you make today will profoundly impact the results you see down the line, so don’t rush it.
To learn more about real estate and investment, contact Catalyst Business Consult at
+234 816 272 6997
