WHY SHOULD I INVEST IN RENTAL REAL ESTATE ?
By T. O. Nuga
September 24, 2014.
As investors, we are consistently searching for new solutions to make financial success and to improve our earnings. Some have encountered the answers to this quest, some have gotten their hands burnt in the process, though it is a lesson learnt by experience, which makes them better, while some still remain in that search realm. One way or the other, each and everyone of us belong to at least one of these categories.
There are certain economic sectors of good benefits when planning for ourselves short, mid and long term earnings which is research proven to generate far stable and secured earnings in compare with some other sectors. Most successful entrepreneurs that we hear of today engage in rental real estate as an important component of their investment portfolio.

I realize many business owners shrug off this ideology as a result of the high capital intense required, but the truth is, you really do not have to put in up to tens of millions of naira or start up in Banana Island - Ikoyi, before you join the league, these days rental properties have become as busy as stocks in the market today in terms of the frequent number of transactions that occur within a very short period. Besides, a few reasons that are definitely worth considering are as follows:
1. Gain more leverage. Real estate is one of the few investment vehicles where using the bank's money couldn't be easier. The ability to develop a good and well organized business plan, leverage the facilitation and security of your capital, and of course increase of your overall return on investment is incredible over time.
2. Grow, tax-free. Buying rental property based on speculation of its value is a dangerous tactic since cash flow is the key. However, appreciation over the long-run is certainly realistic and at the least, you should be considering a tax-deferred strategy. Over time, you may even consider diversifying into property development and sales.
3. Burden Freedom. You don't really have to be in the location of your rental property nor go through all the managerial process and burden, you can just go to bed or be resident anywhere, even in Diaspora, and your rental property would still be run smoothly, even better than when you are around. Only when you appoint the real estate professionals (Estate surveyors & valuers) to undertake the responsibility, and the only job you would have to do is receiving bank alerts, i guess that's one job every Tom, Dick and Harry would apply for, if there were a vacancy of such somewhere.
4. Tax free cash flow. It's no secret that because of depreciation and mortgage interest deductions (if you leverage your capital growth), your cash flow should be tax-free. That's right!, that is feasible when the far majority of your earnings are re-invested, it would leverage you to never pay taxes on cash flow.
5. Tax write-offs against your other income. Depending on your classification as an Active Investor or Real Estate Professional and your income level, there is a good chance your rental property will not only give you tax-free cash flow, but an overage of tax deductions you can use against your other income. Having said this, there arises the need to discuss with a practicing real estate professional before investing so your expectations are realistic.
6. Rental real estate is a sure retirement plan. Nigerians are terrible savers. We lack the self-discipline to maintain a monthly deposit culture. However, buying a rental property is a significant commitment that you are required to do and maintain. You will always be grateful in the long-run when you don't give up on it and build future cash flow and wealth.
I meet with a lot of successful businessmen, and almost every one of them has taken profits from their individual / corporate businesses over the years to invest in rental properties. Based on this fact and the list above, I have consistently urged clients to buy / develop one rental property a year, and the most encouraging outcome of it are the testimonies of clients' earnings which they never imagined they'd have.
The far majority of people wouldn't just storm across wealth on the roadside. It takes most importantly the grace of GOD, with one's individual input of smart investing and a diverse portfolio to build true wealth, amongst which rental real estate cannot be overemphasized.

Comments & Opinions are very welcome..

tioenconsults: Comments & Opinions are very welcome..

How do we buy and develop one rental property a year if we cannot even afford the price of land? If such opportunity is available, what is the entry level?

Its difficult and could be easy information matters most. Sometimes, u could be spending more for less or spending on areas which do not not ad value to the investment

I agree to all. Plus I even think the real estate sector of the country is still largely undeveloped. Apartment buildings, office complexes and formal retail shops are aspects that will drive the economy in the coming years and investors can tap into this right now I think.

carpenter:

How do we buy and develop one rental property a year if we cannot even afford the price of land? If such opportunity is available, what is the entry level?

Rome wasn't built in one day.. u can start with a plot in mowe, Simawa, ikorodu or epe.. a plot is going for less than 300k in these places.. then you built on it over time.
for instance I was involved in a land transaction @ ofada, ogun state about 2 years ago.. now simply because a new road was commissioned to be developed in a place not even really close to the site, that same plot is selling for almost twice the purchase price now..

baroun04: Its difficult and could be easy information matters most. Sometimes, u could be spending more for less or spending on areas which do not not ad value to the investment

yes .. information is key.. u just do not pour out your hard earned capital on just any land.. that's why you are strongly advised to seek advice from professionals before embarking on any move.

destante: I agree to all. Plus I even think the real estate sector of the country is still largely undeveloped. Apartment buildings, office complexes and formal retail shops are aspects that will drive the economy in the coming years and investors can tap into this right now I think.

you are very much on point

tioenconsults:

you are very much on point

compliments of the season ..

happy boxing day

Still want to invest in real estate, try REITs

Real Estate Investment Trusts

Some are listed on the Stock Exchange and they pay pretty well.

carpenter:
Still want to invest in real estate, try REITs

Real Estate Investment Trusts

Some are listed on the Stock Exchange and they pay pretty well.

Very good, kindly share more light on this for Nairalanders that would love to know.