Dr. Stephen Akintayo, one of Africa’s most influential investment coaches, Lead Consultant/Founder, Stephen Akintayo Consulting.
How close are we to experiencing a global recession? This is a tough question even for economists; in the midst of war, the spike in oil prices, massive layoffs and a stifled supply chain, the best recent news is the year-over-year U.S. inflation rate shrinking to 7.7% in October 2022 from 8.2% in September. It may still be too early to celebrate, however, as other major economies as well as developing ones like Nigeria are recording low or even negative GDP growth in 2022.
It’s not news that real estate assets tend not to diminish in value, especially when compared with other financial investment vehicles like stocks, bonds and cryptocurrencies. During the Covid-19 recession period in 2020, I was able to build wealth in the real estate sector and expand my business across different states in Nigeria as well as internationally. In this piece, I will share practical nuggets to guide your entry into the real estate investment scene. I can promise that if you implement these steps, you’ll have a strong chance of success regardless of location or the economic climate.
1. Don’t buy small; buy more, even if it means collaborating.
If you buy only one plot in a virgin area, you have set yourself up for inevitable regrets when the land appreciates. Like I always say, buy for the future, not the present. Remove sentiments and emotional underpinnings when investing in land banking.
Success tip: Detach from your personal taste and preferences when it comes to making real estate investments. Your focus should be your customer demographics, tastes, needs, etc., and this should guide your investment.
2. Keep the land for at least five years.
Land appreciates with time, so don’t be in a hurry to sell. You might be facing financial constraints, but be patient; only sell when there is an appreciable bump in the real estate valuation. The primary goal when investing is to get returns on your investment, and this stated time frame creates room for such appreciation, especially if other development projects begin around your acquired real estate.
Success tip: Invest residual funds in real estate and consider using assets as loan collateral for unforeseen circumstances that require immediate liquidity. This crystallizes the importance of proper land documentation and pre-purchase checks.
3. Sell a portion of the land and reinvest in a new acquisition.
After keeping the land for at least five years, you can sell a portion of the land and immediately reinvest. Ideally you should be reinvesting in real estate in another good location. At this point, you can even start developing the primary land to ensure you achieve maximum valuation at selling time.
Success tip: Collaboration is key! However, even more important is strategic prioritization of available funds in developing your primary land.
4. Use other people’s money.
After fully applying the first three principles, the next step is taking advantage of a key element of scalability in real estate investment: using other people’s money (OPM).
This is only possible when you capitalize on the evidence of the land you’ve bought to convince other people to buy into the new location you just acquired. If you leverage your growing brand and testimonials, the perception of this new property will naturally elevate and the prospect of other people investing becomes very appealing, even without having to wait half a decade to raise the land’s valuation.
Another side of this coin is raising equity and building trust by brokering multiple real estate transactions. You might say you don’t have the money to start buying properties, but OPM presents a good opportunity to raise funds to buy your own land and build a strong brand equity.
Success tip: You must walk the walk by matching actions with your words. The most valuable element for success in using OPM is your brand equity and how much you can be trusted.
5. Get a mentor to guide you.
Find someone who has achieved results in the real estate business to mentor you. This person should be able to give you valuable insights on the best time to invest in real estate. Building wealth, especially in the current economic climate, is not a matter of luck. It’s a matter of taking risks, working hard and working smart. I always say, the higher the risk, the higher the reward. If you don’t take risks, you can’t build wealth.
Success tip: There are practical lessons you can learn from experienced mentors that aren’t written down. These may come from mistakes you watch them make or their reaction to these mistakes. The prime goal for a mentorship is charting your investment journey with minimal friction by being guided appropriately.
Conclusion
I believe the times when people are most skeptical about investing can be the perfect times to embrace it. Personally, I am about to acquire two more estates in Nigeria. The ideal mental shift reading this piece should initiate is moving away from feeling like a victim of inflation and positioning yourself to earn by taking proactive steps. Inflation or even recession become less of a concern to your finances when you take the right steps at the right time.
