Benefits of Investing in Real Estate in the Case of Ghana
Did you know that, investing in Ghana's real estate is one of the best ways of building real wealth over time? With real estate, you can enjoy a good rate of returns and at the same time, leverage your property to capitalize on many revenue streams while at the same time, enjoying capital appreciation better than stocks and shares. Here are the top ten reasons for investing in Ghana's real estate.
Entrepreneurs in Ghana are allocating more of their spending and investments on real estates. Many are investing in rental property which is not for a year or decade but the long haul. Others are investing in the construction of properties for sale but this requires huge capital outlay. We tried to find out why many people, most of them already rich, are going into rental properties and their responses have been provided as follows.
There is a high demand for housing: One interesting thing about real estate in Ghana is the fact that, there is a shortage of housing. Hence, there is huge demand over supply for housing. This is caused by many factors including the growing population, migration and the rural urban drift. Unfortunately, the supply of housing is inelastic and this provides a sound justification why the property market in Ghana is less likely to crash compared to other markets on the continent such as in South Africa. There are certain classes of properties that are in excess supply over demand such as the prime residential buildings. It is therefore, important to study the market carefully before choosing the kind of rental property you want to invest in.
Real estate offers a positive cash flow: To the layman, cash flow is "money left after bills and outgoings have been settled". According to real estate investors, there is a positive cash flow from investing in rental property. This implies guaranteed regular monthly payments, while allowing you time to do other things such as growing your core businesses. They indicated that, the cash flow from investing in real estate in Ghana is not only positive but stable and more predictable compared to income from the other forms of trades and businesses such as operating a taxi or “trotro” business which are more risky. Remember, the taxi or "trotro" depreciates with time which is the direct opposite of property.
Tenants repay your loan: According to real estate investors in Ghana, when you buy a property with a loan or mortgage from the bank and you rent the property required by the bank to open a savings account. Direct all the rental payments into out, it is your tenants who actually repay the loan, not you. Normally, you will be that account and you will soon realize that, your debt to the bank will be reducing month after month, year after year until the debt is cleared. You will realize twenty or twenty five years after, that the loan is repaid and you own a property in a prime location which you can keep or sell at a fortune.
Property appreciates with time: One interesting thing about investing in real estate is that while the bank loan is going down as a result of your repayment, the tangible value of the property will be appreciating so that in 20 years from the day bought the property, you will realize that, your property is worth 50 times the price at which you bought it. Although recessions do occur, property in the long multiply in value. Owning a rental property in Ghana like other places offers you long term financial security for the mere fact that, the property increases in value with time.
A hedge against inflation: To the layman, inflation is period/process of continuous rise in the price of goods and services because the value of the cedi may be decreasing. For example, if in 2010, a bag of cement was about GH¢10.00, today, that bag of cement will cost about GH¢30.00. The increase in the price is as a result of inflation. If you invest in real estate, you don't have to worry about inflation because while the price of cement and other goods and services are increasing, rents for your property will also be increasing. On the other hand, salaries and the return on other investments won't increase immediately to correspond with the
inflation. The fact that, there is a corresponding increase in rents in times of inflation means that, it is a hedge against inflation. In addition, the value of your property will be increasing.
Better returns without much volatility: By investing in real estate, you build equity. What does this mean? Your risks of losing value are minimized as long as you hold on to the property over a longer period of time. In a recession for instance, when prices of property plummet, you don't have to worry much because the value of your property will automatically recover as the economy recovers which is not the case for some other investments. In the stock market, the risks don't change as there are many elements beyond your control which can adversely affect your assets. History has shown that, property markets always recover from bubbles if they occur. As long as you continue to hold on to it, the value will recover.
A good way to diversify your portfolio: Remember the adage "don't put all your eggs in one basket"? This is because if that basket falls, you may lose all your eggs. Valuers and financial advisers always talk about diversification and recommend that, we diversify our investment portfolio so that,when one basket falls, we have other eggs to fall on. Diversification means that,you spread risks associated with investments. The thing is that, real estate provides a means of diversifying your risks as it provides a safe vehicle. Many people are amassing wealth through real estate. What are you waiting for?
Not so hard to get started: Starting a real estate business, particularly rental require some formal education. We found that, majority of real estate tycoons in study and research into real estates than trading in forex, stocks and shares which into that field by chance. They bought a property and when they realized the Ghana have little or no formal education. Many real estate businessmen entered amount of returns they were making in a few years, they took it seriously.
Price of property is flexible: The price at which you can buy a property in Ghana largely depends on your negotiation skills. Any one conversant with the negotiation tactics for buying land and buildings in Ghana can acquire property at a good price below market price. If you are fortunate, you can secure an undervalued property such as those offered for sale as a result of a divorce or forced sale. This is unlike the price of stocks and shares which are non-negotiable. The price of GCB shares and Standard Chartered Bank shares, for instance, are traded at a fixed stock market price.
Financial support is now available: Once you are in the business, it is easy to obtain financial support because money lenders like to provide support for the purchase of property. The fact of the matter is that, many Ghanaian banks now prefer to lend money on real estate than other assets and will lend between 0 to 70% of the property's value. This provides some added advantage for investing in real estate in Ghana.
Good inheritance for your children: Just as any other asset, real estate can be bequeathed to your children. The interesting thing is that, real estate guarantees stable and tangible value and you can be sure that, your children will still get tangible value from the property 50 years after you are gone. This is not so with many other assets such as stocks and shares, a savings account or a new car. Simply ask yourself this question, how many of the top listed companies from the 60's and 70's still hold their top slot? There may be one or two but you will find that, not many companies have been able to maintain their positions in the top for a long time. Real estate guarantees you value over the long haul.
Conclusion: Investing in real estate is rewarding but building wealth through real estate does not come simply by owning rental property. How much income you make from real estate depends on a number of factors, particularly, your location. You can rake in super normal profit with a good location. You should not only target big towns and cities but strategic areas such as near universities as demand for property tend to be high in these areas.
Source : Land, property and Estate management in Ghana by Gad Asorwoe Akwensivie