The question “Is now a good time to buy real estate?” is one of the most common questions asked when it comes to real estate investing.
This is so because real estate investors have over time realised that it is not enough to judiciously follow the modern rules of investing; you also need to be sensitive to the right time to buy if you want to be successful.
In the same vein, real estate investors have realized that knowledge about the key determinants of real estate investment is no big help if you can’t tell when it is favourable to buy.
So, then, how does one tell if a certain time is favourable?
The truth is, there is no predetermined method to tell when it is appropriate to buy an investment property. However, there are a number of factors that may help you decide if a certain time is advantageous for you.
Primarily, these three factors can help you decide if a certain time is advantageous for you.
- Your perspective on real estate investing
- Your area of investment, and
- Your risk tolerance.
These are basically the first things to examine before you can make a decision about whether or not you should buy at a particular time.
So let’s get into it.
Is now a good time to buy real estate?
Let’s examine these factors, and you will have your answer.
- Your perspective on real estate investing
Every real estate investor must be aware that the answer to the question “Is now a good time to buy real estate?” is neither yes nor no, nor does it require a general answer. The answer is always a personal one.
This is because a certain time might be favourable to other investors but not to you in particular. So, to find out if a certain time is personally favourable for you, you need to understand first what your perspective is on real estate investing.
Do you consider real estate a long-term investment, or is it a short-term endeavour for you?
If you answered, “short-term endeavour” and your method of investing is by flipping properties, this is your answer: now might not be a good time to invest. Why? Because at the time of this writing, the prices of properties in Nigeria are steadily on the rise, it may be tough to earn the handsome profit you might be expecting.
In fact, it is safe to say that any time the housing market is spiralling out of control like it is right now and property prices are rising, it is most definitely not a good time to invest as a short-term real estate investor. Because it is obvious that when property prices are high, it is usually difficult to acquire income properties or find cheap homes that can be refurbished and flipped for a profit.
However, long-term investors may experience no problems and can brave this season. If you have the patience to wait and the capital to purchase, investing in real estate in these times should not faze you. What you should know is that long-term real estate investing brings the reward of asset value appreciation. It also generates a sizable or consistent income in the long run.
Though buying now may not look like a good call, it would become a prudent decision in a few years. The sole reason a long-term real estate investor should purchase an investment property despite the bad economy is to build equity. This equity is what will in turn yield value appreciation in the future.
To join the ranks of long-term investors building equity, you can begin by purchasing a property that will provide you with monthly cash flow. But you must ensure that your purchased property has the potential for long-term profit. The secret to success as a long-term investor is always to consider the big picture.
Once you have defined your perspective, it’s time to decide if you want to proceed with the purchase or not. If you do decide to buy, the next aspect to consider is your area of investment—what real estate do you want to invest in?
2. Your area of investment
Real estate investing is a multifaceted endeavour, and there are different types of real estate to invest in –from residential to commercial, industrial, retail, or mixed-use real estate, even real estate wholesaling and turnkey rental property.
With so many options available, you may be at a loss for what to do. Because truly, how do you know which ones will perform well enough to provide consistent income, if not high returns?
The easiest way to know is to investigate the different types of real estate and discover which best suits your preferences and financial goals. While you’re at it, you might want to think about the population growth in the area where you want to buy.
The economic development potential of the area is another thing to consider. Property values and trends, as well as a variety of other relevant factors, should be considered also to help you determine if your purchase would be a worthwhile investment.
So, in a nutshell, when examining your area of investment, you should keep an open mind, evaluate available options, and do your due diligence where necessary.
Typically, most real estate investors prefer to invest in residential properties. This is most likely due to the fact that residential real estate is known to be a reliable source of consistent income with enormous profit potential. But this doesn’t in any way imply that residential real estate investing is without risk.
This brings us to the next aspect you should consider: the risk associated with your chosen investment. There is always a possibility of losing it all if associated risks are not managed properly. This is unavoidable because every investment involves risk.
3. Your risk tolerance
Risk tolerance simply refers to your readiness to bear risks that may arise during your period of investment. Your risk level plays a huge part in your decision-making process. This is why it is very important to gauge your appetite for risk, assess your area of investment, and ascertain the inherent risks involved.
Risks are not the only pitfalls that should be avoided. They also include opportunities that should be managed well. Any of these two may arise as a result of the volatility in the value of your investment or the economy. So you must be prepared to handle them as they come.
When you examine these three basic factors, the answer to the question, “Is now a good time to buy real estate?” becomes either a yes or a no.
Irrespective of whether your answer is yes at this time or no, it doesn’t change the fact that real estate is a great investment. Whether the economy is bad or not, it is still an excellent way to build wealth.
Business Day Nigeria even affirms this in one of their articles, stating that “experts note that savvy investors participate in the real estate sector because it can provide passive income.”
So, whatever the state of the economy, savvy investors invest in real estate. This is because they know the magnitude of passive income it can provide and that they will always find a way to profit in every season.
To savvy investors, “down” markets may be seen as the richest in terms of opportunity. This means that real estate investing in every season is for you if you can think creatively.
Are you ready to get started?
James Cubitt Developments (JCD) has a mix of projects that are ideal investment properties with high investment return potential. Check out our property portfolio today.
For more information, contact us.
Phone numbers: +234 715 9995, +234 715 9996