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What to consider when investing in the real estate sector

There are several lucrative benefits from investing in the real estate sector, but there are also challenges that come with these benefits.

Investing in real estate may present some challenges and the fact that the returns are long-term in this sector; this might greatly affect some investors in challenging economies. This week I share with you a number of basics to consider when investing in a challenging economy.

LIQUIDITY IS IMPORTANT

When you are investing in real estate, you are taking money out of your liquid financial assets and investing it into real estate. Before investing in real estate, make sure you are earning at cash-on-cash rate of return, ratio of annual income to total investment, on your real estate investment.

This is important as it will help you maintain the earning rate of return on your financial assets.

PLAN FOR THE RISKS

Real estate investments are extremely risky. Development of real estate, getting land, etc., all have much higher risk profiles than just simply buying a nice established cash flow investment property. In most cases those investments will never produce profits because there are many things that can go wrong.

So, if you want to invest in real estate, you must do proper due diligence, analyze and review sector reports to minimize risk on your real estate investment decision.

TIME MANAGEMENT

Most real estate investments require a lot of time to be profitable. Examples include rentals and land.  It is important to know that you will need to spend a lot of time on these projects in order to get profitable returns on them.

A BUSINESS INVESTMENT

Real estate is like any other business; so, make sure that you take it as serious as you would any other investment. It is important to keep it organized, planned and efficient. The reason is that if you do not take it seriously, small problems might slip through the cracks, leaving you with some serious challenges.

The writer is the country manager of Lamudi Uganda, an online real estate marketplace.

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