Now that we have looked at reasons behind the huge demand and boom in the African real estate market, let’s now look at a couple of reasons why you should be very interested to invest in real estate.
#1 – Real Estate Provides a Steady Source of Cash Flow
When you buy or build a piece of property (single or multiple room apartments, bungalows etc.), and rent it out to tenants, that property starts to earn you rental income (monthly or yearly depending on the contract with your tenants).
With the high demand for accommodation and growing inflation, rent prices are always on the rise. Higher rent prices mean more income for you, the landlord.
Compared to other investment options, the income from real estate is the most steady.
Take stocks for example, the amount of dividends paid by many companies often fluctuate and may not be paid every year. Bank savings (another form of investment) usually attract interest payments that may be steady but are often very small compared to the returns you can get from investing in real estate.
Because the income from real estate investments is steady and predictable, you can plan better.
The rent you get from your property can be used for specific projects such as paying your kids’ school fees, travelling abroad or buying a new car. Rental income is also great for people who are planning for retirement.
#2 – Real Estate Can Be Used As Collateral for a Loan
In Africa, collateral is one of the biggest obstacles faced by entrepreneurs in obtaining a bank loan to start a new business or acquire property (such as a factory, machinery or equipment).
When banks ask for collateral, they want you to provide something that is equal to or greater in value than the loan amount you are asking for. Under this definition, your car and furniture should qualify as collateral, but the banks won’t accept them.
Banks usually prefer real estate as collateral because it is known to continually appreciate in value. Unlike your car which loses value every day, the value of real estate properties are more likely to grow.
Compared to stocks (which some banks accept), the value of a property cannot vanish overnight (like stocks). As a result, an investment in real estate means that you can use the properties you buy as leverage to get money (loan) from a bank and other lenders. Only very few other investments can give you the kind of leverage that real estate can.
#3 – Real Estate Offers One of the Highest Returns on Your Investment
Like we just mentioned, real estate always grows in value. Especially in developing regions like Africa where the property market is not as matured like in North America or Europe, the prices of real estate are often on a steady rise.
Nairobi (Kenya), Lagos (Nigeria) and Luanda (Angola) are some of the African cities that are currently rated as hot property markets. Due to the huge demand for shelter in many African cities, the returns on real estate investment are one of the highest in the world.
Although buying and selling of real estate should not be your main investment goal, it is your insurance that should you need to sell your property sometime in the future (for whatever reason), you will still make a handsome return.
You can earn rent income for many years like we mentioned earlier or you could sell the property. Either way, you make money and earn a profit on your real estate investment!
Nigeria is one of the many countries in Africa that is experiencing a huge boom in its real estate market. The short 2-minute video you are about to watch is just another account of the huge returns that are possible with real estate investment. In two of its major cities, Lagos and Abuja, returns as high as 35 percent are being achieved. Watch and get inspired…
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