THE REAL ESTATE VALUE THAT SILENTLY AFFECTS MONETARY RETURNSOluwakemi Adeyemo
There are 24 reasons why we invest in real estate and they are not peculiar to any tribe or race. As long as you are a human being making real estate decisions, your reason will be found on this list.
It is a widely favoured belief that monetary reward is the only pay-off of real estate investment. But there is another kind of return, rarely talked about, which accounts for more than half of the reasons why you would consider investing in real estate.
This other kind of return often makes up for the down-times that characterize periods of negative or no financial returns even though it could sometimes be considered a hindrance to the effective delivery of monetary returns on your investment.
I refer to this other kind of return as Sentimental Value.
Sentimental value is defined as the value of an object deriving from personal or emotional associations rather than material worth. Hence, in real estate investment, you are either getting sentimental or monetary value; or both.
Sentimental value is also your inflated opinion of your piece of real estate’s value. The value of your real estate, in your opinion, can be related to a number of things peculiar to you as an individual. These could range from the sacrifice and discipline it cost you to acquire a piece of the earth or to set up a real estate business which is often known and considered by you alone.
This type of value tends to be subjective therefore, it finds its way around assets through the lifetime of the asset even as the asset moves from one buyer to the next buyer.
The creation story both from the religious or scientific perspective shows that there has to be a planet to sustain human life. It must have required some great effort to have the first house or bridge or wall. The earliest real estate objects have become artefacts in Museums or monuments around the world. These edifices have nostalgic stories behind them.
The labour invested in the acquisition of real estate often invokes an incredibly nostalgic feeling in the owner. It becomes a priceless asset, largely because of the underlying purpose of the purchase, efforts and energy invested as well as the investment journey.
Most real estate investments come at higher financial costs than they should. The extra cost is usually overlooked because of the sentimental value attached to the real estate.
Conducting an objective evaluation of how much a real estate investment is truly worth at the prevailing rate may be impossible when the investment is induced by deep-rooted emotional motivations that are often denied or, in many cases, unknown. This is considering the variations in the market value of properties within a location.
“Sentimental value tends to be subjective therefore, it finds its way around assets through the lifetime of the asset as the asset moves from one buyer to the next buyer”.
A skewed perception of real estate value makes it difficult to focus on a bigger picture or make accurate judgments about its monetary value given a current economic reality and real estate cycle which are always subject to external factors.
Of the 24 reasons for real estate investments, it is important that you identify which have influenced or can influence your real estate investment decisions as well as which of them may no longer be sentimentally or financially profitable.
Your reason may no longer guarantee any higher monetary compensation you may desire at a current or future sale. An attachment to the subtle sentimental value of a piece of real estate is partly responsible for many abandoned properties.
The initial listing of an asset for liquidation at a rate way higher than the perceived market value only to change it later may suggest the existence of a defect to potential investors who are often smart enough to delay their investment decision in anticipation of a further drop in price. You definitely don’t want to deal at a loss.
It is best for every investor to put in perspective the kind of values an investment is expected to deliver and for how long that value will be profitable.
To access the 24 reasons, and tips on how to manage them in the investment process, send “24 reasons” to 07061351530.
Article first published in Businessday Newspaper. Link below