WHEN YOU SAY INVESTING IN REAL ESTATE, WHAT DO YOU MEAN BY THAT?
Investing is something like postponing consumption of an asset to reserve for future use and possibly make some income in doing so. Investing in real estate is simply shifting from one asset form like cash assets to assets that are related to real estate like an apartment building or rental properties or even simply a vacant land depending on the investment objectives.
TALKING OF INVESTMENT OBJECTIVES, WHAT ARE THE OTHER POSSIBLE OBJECTIVES OTHER THAN MAKING PROFIT?
It is true that majority of investors are after maximum return or profit from their investment. However there could be other different reasons that investors would shift their non-real estate assets to real estate assets. For example, why someone would invest in land and developed it to a mango plantation when it is a fact that this particular investment would generate cash inflows only after several years of continued cash outflows? If we investigate, we will find out that the primary objective of the investors in this particular situation is not maximum current return but more of making future income in preparation for his retirement. Another example is those buying vacant lands. As we can see, vacant land does not produce any income for the investor but instead it causes additional expenses such as property taxes, maintenance and security. Here, the objective is to protect the value of the asset from inflation, because if the asset is in the form of cash, its value is being eroded by the effects of inflation while if the asset is in the form of land, its value is at least maintained because it is one of the advantage of real estate assets, it can ride out inflation by appreciating in terms of currency. Another reason could be the safety of the investment.
WHEN IS THE GOOD TIME TO INVEST IN REAL ESTATE?
It depends on the objective of the investor, the type of his capital and the condition of his heart. If the objective is maximum current income, his capital is more of equity capital rather than borrowed money and his heart condition can take all the risks involved, then the answer is anytime provided he does not have any other better investment alternative.
HOW ABOUT THOSE WHO WANTS TO GO INTO REAL ESTATE INVESTMENTS BUT ARE HESITANT DUE TO LACK OF THE KNOWLEDGE MENTIONED OR DO NOT HAVE ENOUGH CAPITAL, DO YOU HAVE ANY SUGGESTION?
I would suggest that they should start first as real estate brokers and get involve in selling or marketing real estate. In this way, for a smaller capital, the investor will be able to acquire more knowledge and experience. This technique would also give him the opportunity to associate and learn from veteran realty practitioners that can serve as the stepping stone towards the bigger business fields of real estate such as property management, leasing, financing, build-and-sell and development. At the same time that it provides experience, real estate brokerage can be a very much financially-rewarding profession that could build up more capital.