• Friday, December 01, 2023
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3 reasons now is time to push patient capital into real estate

Nigeria attracts $8.9bn investment third quarter 2021

For people with patient or idle capital, the time to invest in real estate is now when inflation is eroding values across board and the Covid-19 pandemic has upgraded the work-fromhome (WFH) life.

There are lots of speculations on why real estate is not a profitable business. While this line of thought carries some weight, Purple Capital, a real estate investment firm, says there are good reasons real estate is actually a profitable venture and, therefore, worth investing in.

Real estate hedges inflation as it appreciates in value

Value appreciation in real estate refers to the increase in the value of property over time. In economics, appreciation of real estate comes as a result of inflation, an increase in job opportunities, and a major development in a city, town or country such as road infrastructure, industry or school.

Nigeria is currently experiencing a hyper-inflation. Its March inflation figure peaked at 18.17 percent as recorded by the National Bureau of Statistics (NBS) in its recent GDP report. This, therefore, is the time to move patient capital into real estate in expectation of increase in value.

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With the world changing, especially with the pandemic that has led to an appreciation of homes and an urge to upgrade the work-from-home life, demand for real estate is high now, particularly at the mid-income residential market segment.

“Real estate values tend to increase over time, and with good investment, profit can be gotten when it’s time to sell. Imagine the profit of someone who invested in real estate before now,” Laide Agboola, the Purple CEO noted

Real estate can be leveraged

Leverage in real estate means the use of borrowed capital to increase the potential return of an investment. The idea behind this is for an investor to be able to increase his profit by using other people’s money at first, and not having to put as much of his own capital into buying a property.

The benefit of this is that it allows the investor to buy property that costs more than the amount of money he has at the time. It also allows the investor to spread his money across multiple properties.

“Leverage can increase your returns. This happens when the interest you’re paying on the loan is less than the rate of return on the investment. For example, if the rate of the return on an investment property is 10 percent and you’re paying 4 percent interest on the loan, you’re earning the 6 percent difference from the lender’s money,” Agboola explained.

Real estate has high tangible asset value

Unlike other investment assets, real estate is described as a tangible asset because it is a physical thing such as computer and equipment that are worth money. Real estate always has some monetary value.

When compared to investing in stocks, the difference will show because if the stock market crashes, it is possible that a stock an investor paid N500 to buy could suddenly be worth N0. “But with real estate, like land and real property, the investment will always be worth something,” the Purple CEO assured.

For skeptics hwo hold the view strong that there’s no money in real estate, Agboola reminds that “good things take time; investing in real estate doesn’t make you a millionaire overnight. Think of it as compound interest. It’s the small drops that make an ocean.”

He advised that an investor looking to diversify his investment portfolio should see real estate as a great option. But, “it is important to note that if you’re not an expert in navigating the real estate investment field, you’ll need help from a licensed source to make you succeed,” he advised further.