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Land speculation is another strategy that is relatively attractive for group investments. It involves buying vacant land in undeveloped areas and holding it for a long period anticipating increase in value in future. Selling such real estate when the area has eventually developed can easily multiply or triple your investment. It is important to understand how land speculation work in order to minimize the risks and maximize the gains that comes with it. While real estate is generally considered to be less risky, there is no investment that is without a risk. Among the real estate investments options explained, land speculation is one that has high risk potential. What makes land speculation attractive Land speculation has a benefit of low capital entry since vacant land in undeveloped areas is the cheapest of all real estate investments. Land investment has a potential of huge returns on investment when development projects start hitting the area. The investment does not require active management. What you should pay attention to You cannot accurately predict whether and when those developments will show up. Its actually possible that the area will remain undeveloped for ever. That’s why it has a speculation aspect. Its prone to fraud interns of false ownership identity, double allocations, hyped pricing etc. The amount of research and due diligence you conduct before commitment can go along way to minimize the risks. It requires patience . Since land speculation not an immediate income generating investment, you can only hope to recoup your investment and make profits after a certain significant amount of time. For investment groups/ Chama its a bad idea to take a bank loan to finance land speculation if the loan is to be serviced by member contributions. In most cases some members give up along the way, other times group disintegrate and the burden is left on a few committed members. The bottom line Land speculation should not be the primary real estate investment strategy. It should be part of your real estate investments portfolio after all the necessary due diligence to minimize the risk.
Welcome to our second part of Investment groups/chama money growth strategies series! You can as well use the navigation below to navigate through the series to be at par Real estate flipping involve buying properties that are in need of either minor cosmetic repairs or in need of serious renovations, doing the work, and selling them for a much greater price. This brings in a significant amount of profit in a rather small amount of time There are three ways that you can flip a house:- Retailing This is where you buy a house in bad shape, do the repairs to fix it up, then turn around and sell it.There are a variety of houses in need of repairs out there, and several ways that you can quickly flip a house to net profit. All you need to know are the techniques that will get you the most money in the least amount of time. Wholesaling Wholesaling is where you act as a third party middleman between buyer and seller. You will find the property, put it under contract with the seller, and then you will find a buyer to buy the property, making a profit in the middle. There are several you can do that. One option is assigning the contract itself from the seller to the ultimate buyer. The other option is by doing a dual closing. In a dual closing, as the real estate wholesaler you will buy the property and immediately sell it to the buyer on the same day.To do this, you’ll need to know the real estate investors in your area, the types of homes that flip the best, and how to fund your property so you can flip it to them. Assigning the purchase This is where you commit to buy the house but instead of closing the deal yourself, you assign it to a real estate investor for a small fee. The investor will take the contract over and close the purchase themselves. An assignment of purchase and sale agreement is a real estate transaction contract that defines the parties and terms of a real estate purchase. This agreement allows the original purchaser of a property to transfer or assign their rights in the deal to a third party. You don’t need to have your contract worded any special way to be legal, although you will need to determine the assignment fee.
If you have been following this series, you are already aware that we are exploring various profitable alternative investment opportunities in real estate that are ideal for Investment Groups/Chamas. If not you can navigate to the beginning or previous part of this series to be at par below Well, another strategy that an investment group can employ to grow their money is by investing in real estate investment trusts(REITs) A REIT is a form of real estates investment where investors pool their funds together in a trust with an aim of earning income from real estate as beneficiaries of the trust. These trusts either acquire or build real estates assets which they lease or sell out to generate income distributable at the end of the financial year. Basically, there are two major categories of REITS:- Development Real Estate Investment Trusts Investors pool their capital together for purposes of acquiring real estate with a purpose of undertaking development or construction projects. Income Real Estate Investment Trusts The investors pool their capital for purposes of acquiring ownership rights in long term income generating real estate. Islamic Real Estate Investment Trusts This is a special type of REIT that carry out Shariah compliant real estate Investments which can either be D-REIT or IREIT and other related activities Major characteristics & benefits or REITS Short to long term investments– As compared to property ownership, investors in REITs can invest in short to longer term in REITS Consistent annual dividend payoutsLegally in Kenya, REITs are required to distribute at least 80% of their net after tax profits to their unit holders as annual dividends. This can provide a stable and consistent form of income annually since real estate assets are less volatile. Tax Benefits– REITs are exempt from stamp duty, value added tax and income tax except for payment of withholding tax on interest income and dividends Liquidity-As compared to real estate ownership, REITs investors can easily buy and sell units giving them an opportunity to liquidate their assets more easily Conclusion There are two ways you can earn income while investing in REITs; Through annual dividend which can range between 5-7% p.a and through capital gains by increase in the market value of the securities. Its worth noting that the annual interest income that you earn will also be determined by the size of the rental income. So the vacancy rate of the properties under REIT is a factor to REIT returns in form of annual interests payout. Currently In Kenya, there are three firms that are issuing REITs units in Nairobi Securities Exchange. i.e ILAM- Issuing I-REITs, Acorn Holdings Limited -issuing I-REITs & Acorn Holdings Limited issuing D-REITs As an investment group, if you don’t have sufficient money to buy your own properties, you can choose to acquire real estate ownerships rights through existing REITS and and enjoy such annual income stream.
Welcome to the investment groups/chama money growth strategies series! You are on the first part of the series. You can navigate through the next part of the series at the bottom of this article. In developing economies, its common to find people come together for the purpose of pooling their resources together for a common goal. When people first form an investment group or a Chama, the ambitions are high. In addition, the members’ commitment to the group is also high. However, keeping the fire burning requires a constant motivation to commitment. This is so since these members have private commitments and ambitions which might drown the commitment to the group. This is why most investment groups eventually die without accomplishing the purpose for which they were formed as the members disintegrate. The highly needed commitment motivation for chama growth is essentially pegged on the projects that the group is involved in. There are various types of chamas such as welfare groups, merry go round & investment groups etc. Our focus is on investment groups. These are the chamas formed with investment projects in mind and the most critical for members’ financial growth. In this series, we explore various projects that an investment group can implement to keep the members’ commitment afloat and achieve the group’s wealth growth goals through alternative real estate investments. Jump to the first strategy in this series by clicking the button below Subscribe to our mailing list This is a premium free mailing list where we share real estate wealth- growth opportunities. Including implementation strategies, rewards and challenges involved in each.
Real estate investment is considered to be one of the most attractive investments. It can be an excellent way to add diversification to your portfolio due to its stability and low risk. On the flipside, real estate is usually associated with huge capital outlay.However, real estate crowdfinancing is an attractive alternative to a real estate investment trust (REIT) or direct ownership. With real estate crowd financing, you essentially have two options for investing: debt or equity investmentWhen you invest in debt, you’re investing in a mortgage note secured by a rental property. As the loan is paid back, you receive a share of the interest. This type of investment is considered lower risk than equity, but the returns will depend on the interest rate being charged on the mortgage. On the other hand, it’s preferable to direct ownership because you’re not responsible for managing the property.Investing in equity means you receive an ownership stake in the property. In this scenario, returns are realized as a percentage of the rental income the property generates. If the property is sold, you would also receive a portion of any gains from the sale.Real estate crowdfinancing offers to non-accredited investors an attractive low entry point in terms of capital investment as compared to the amounts required to gain access to private real estate deals.