Real Estate: How To Prevent Losing Money: The Definitive Guide

Real Estate: How To Prevent Losing Money: The Definitive Guide

There are seven options for an individual to get on the real estate investment ladder. These options are;

  1. Inheritance
  2. Gift
  3. Buy options: outright buy with cash, buying through mortgage loans, joint ownership, co-ownership, joint tenancy, and exchange through barter.
  4. Transfer through Marriage
  5. Rent/Lease
  6. Takeover (acquiescence, Government acquisition, adverse possession, squatting, and laches)
  7. Taking over a place where accretion, reliction or alluvium has occurred.

This article will focus on the most popular and common option for real estate entry which is the buy option. The buy option is the option with the least resistance. It is also the option available to the majority of the populace in a particular geographic location. Real estate entry by purchase option then becomes one that exposes many to loss – loss of money, time, and energy. Sometimes, lives are lost.

Only a few people inherit profitable real estate, get real estate as a gift, or receive a piece of real estate through marriage. Those who can give real estate as a gift, inheritance, or in marriage most likely first obtained it by buying it.

As a first-time, repeat, or serial investor in real estate, the chances of exposure to a loss per investment is high. Some folks may argue that it is okay to have such experiences to learn or toughen up. This argument may be valid because of how emotional we get about real estate. When handled well, such experiences can help balance real estate investing with the required logic.

While it may be okay to have such experiences, there should be a limit. Experiencing loss while entering real estate by buy option can be prevented. You do not have to be held in the jaw of a lion to know or believe that it devours.

So how exactly do you prevent losing money and other resources when investing in real estate? Below are seven tips to always keep in mind in other to prevent losses in real estate investment.

  • Check your real estate investing knowledge.

Ask yourself this question: What do I know about investing in real estate in the location that I wish to invest in? This is a very important question to ask if you want to prevent losing money in real estate.

That you were born in a place or a family involved in the real estate business does not mean that real estate investing skills come by default. Preventing loss and succeeding at real estate investing requires intentional learning. If what you know does not suffice, learn more.

  • The sales pitch should at best get your attention and not your cash immediately.

The real estate market throws hundreds of sales pitches. A sales pitch is not bad in itself but it can be a potential trap. What is bad is for you to get wrapped in how good a pitch or product is so much that you forget to check critical things. For instance, you must check how exactly and when these benefits apply to you.

Having a clear picture of your investment goals backed up by a plan and sitting down to count the cost of investing before starting helps a great deal. Even when you want to bite more than you can chew, let it be with understanding and a solid plan. Hope is not a strategy.

  • Watch out for too good to be true deals

Real estate can offer low to very high returns – sometimes over a 100% ROI per annum. The ROI is different from the appreciation value. Some factors must be in place for return on investment to be possible at a certain level and frequency. A few of those factors are strategic location, the type of investment, and the structure of the investment.

When an offer looks too good yet, it interests you, take some time to think about the offer. Ask questions about the offer and get answers. The quality of your questions depends on what you know about real estate investing. This is why investment literacy is as important. Don’t be in a rush and don’t also delay.

  • A payment plan can sometimes be a trap.

Due to the high entry capital required for real estate in Nigeria for instance, structured payment creates some ease for the buyer. Think through a structured payment real estate offer before accepting one. Even when it appears cheap, it may not be the right plan for you at the time.

  • How much are you prepared to lose?

Think about what you stand to lose when you cannot meet up with a structured payment plan. Putting in perspective the other terms associated with investing in a piece of real estate. Can you stomach the risk? Are you prepared to invest what you can afford to lose? What will be the effect of the loss on your wealth goals or wellbeing? What recovery options are available?

It is okay to set up recovery plans before investing. Recovering part of your investment is much better than losing it all.

  • Understand the terms

Most real estate products come with an attached guide or document. Read the terms and conditions as much as you can till you understand. Ask for interpretation where necessary. If you find anything that is not clear, highlight and email the company or the representative giving you an offer. Send emails so that you can have records to visit in the future. Investing in real estate with minimal loss relies on understanding the rules and law.

  • Company Status

Check on the status of the company giving you an offer from time to time. This is to ensure that your investment is existent and protected as you fulfil all financial obligations. Companies may exist today and fold up the next minute. The earlier you can make your purchase stand-alone to the extent to which it can be, the better. This may mean getting your allocation done or taking possession as soon as possible. Get appropriate documents and register them.

Most people buying real estate in Nigeria will do so through a development company. There are hundreds of companies with a thousand offers. Choosing the best-fit offer can be a tall order. Yet, it is wise to know how to sift through these offerings if you are a smart investor. This way, you eliminate confusion and reduce the chance of losses.

Conducting thorough due diligence before investing in any real estate offering is a way to sift offers. However, in a situation where there are many mouth-watering offers, a cost-efficient and effective system will be ideal. A system that gives you confidence in the offer you chose to buy. A system that allows you some level of control and one that you can use, rinse and repeat.

We have created an easy to use real estate offer analysis system. A detailed guide on how to analyze real estate offers before you part with money. It is smarter to know what real estate product to buy than to try to recover money after paying for an offer. 

Click the link below to access a real estate purchase analysis system (REPAS) guide series.

Credit: Photo by Anna Tarazevich from Pexels

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