Alternative Investments-The Real Estate Market By Mark Darko

Advertisement

By Mark Darko ( Ghana)

“If you don’t own a home, buy one. If you own a home, buy another one. If you own two homes buy a third. And lend your relatives the money to buy a home”-John Paulson, American billionaire hedge fund manager.

I am sure most of us are very familiar with this quote by John Paulson.

Undeniably, buying and owning real estate has proven to be a lucrative choice of investment. It provides the opportunity to diversify your investment portfolio and provides an additional revenue stream. The global real estate sector has seen a huge development in the last decade. This is influenced by the growth in demand for both residential and industrial property.

The demand for residential property is the largest segment in the real estate industry, while the commercial property market is the second-largest segment in the industry. Knowing where and how to invest in the real estate market though, is a major concern to most potential investors. Indeed, knowing the options available to invest in can be equally tasking.

Let us get started by making the task easy for all, I.e by providing a better understanding of the global real estate market.

What is Real Estate Investing?

Advertisement

Real estate investing refers to acquiring property as an investment to earn money rather than utilizing it as a primary residence or commercial property.

Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development. Real estate is an asset form with limited liquidity relative to other investments (such as stocks or bonds that openly trade on financial markets). It is also capital intensive (although capital may be gained through mortgage leverage) and is highly cash flow dependent. If these factors are not well understood and managed by the investor, real estate becomes a risky investment.

Real estate markets in most countries are not as organized or efficient as markets for other, more liquid investment instruments. Individual properties are unique to themselves and not directly interchangeable, which presents a major challenge to an investor seeking to evaluate prices and investment opportunities. For this reason, locating properties in which to invest can involve substantial work, and competition among investors to purchase individual properties may be highly variable depending on the knowledge of availability. Information asymmetries are commonplace in real estate markets. This increases transactional risk, but also provides many opportunities for investors to obtain properties at bargain prices. Real estate entrepreneurs typically use a variety of appraisal techniques to determine the value of properties prior to purchase.

Real Estate Investment Options and how to invest in a real estate property

Buy REITs (Real Estate Investment Trusts)

REITs allow you to invest in real estate without the physical real estate. This saves you from the time and cost commitment of buying your real estate property but provides you with exposure to global real estate market. With this option, you are entitled to receive dividends as an investor. To invest in a REIT, you make payment to a trust or corporation that purchases a real estate property and the investor receives dividends as the property appreciates. The returns on this type of investment are usually higher than many other stock-based investments. This investment choice eliminates the fuss of owning a physical real estate property since it is eliminated, It also gives you the flexibility to invest in bits, particularly when you cannot raise the full amount to buy a property outright.

Investing in rental properties

The rental housing property is a great way to create an additional income source.

You make money from the rent charged. You also get to earn some significant profit when your property’s market value appreciates and you decide to sell it off. Investing in real estate via rental properties offers a great profit potential; however, it also requires a great deal of effort on the investor. You may need to find the right and ideal tenants, take care of ongoing maintenance and other issues that may arise. To avoid dealing with the complexity of all the challenges that come with renting a real estate property, you can also hire the services of a property manager to handle the issues that come with renting out your properties.

Online / Crowdfunding Real Estate Platforms

Real estate investing platforms require capital investment; however, the amount to be financed is less than what is required to purchase a real estate property outright. Real estate investing platforms allow investors to join others in investing in a bigger residential or commercial property. It also provides real estate developers with the opportunity to connect to investors interested in financing projects. The investment mainly takes effect via online real estate platforms.

Most often, investors commit to real estate investments for at least five years. Most of these online platforms are governed by rules, and these rules differ from one platform to the other. In some instances, you may be able to access some of your money before the end of the investment period but this will be up to the platform’s discretion and this may also attract some penalties in some instances.

Buying your own property as an investment

Opting to invest in your own real estate property is another way to start the journey of your investment in the real estate industry. The most common way in which most people invest in real estate is through their Primary residence. Often these steps precede investing in other types of real estate. In most cases, individuals look to mortgage financing to support their homes’ acquisition and make a monthly payment to settle the mortgage. Acquiring a home, this way is a long-term investment and it can provide you with some protection against the volatility of the real estate market, particularly in times when prices are going up. Investing in your own home can help you build wealth over the long term because average annual returns are not as high as you might expect. Real estate has had its difficulties but it generally appreciates in the long-term. This is one sure way of boosting your net worth.

Short-term and vacation rentals

Another innovative way of generating income from your real estate is to look at the option of listing available rooms or part of your property online for short-term or vacation rentals. The amount you earn would be based largely on the property’s location, the season or time of the year. Living in an area with high tourism traffic can turn a profit. This option does not require huge initial capital; just the extra space can be all you need, and you will start seeing a cash flow quickly compared to investment in stocks. You can look at this as a side hustle or a part-time gig.

You will be responsible for furnishing and maintaining the property and bringing it up to code, as well as communicating with renters.

Benefits of Investing in Real Estate

It is understood that there are numerous advantages of investing in real estate. The benefit of which could result in the investor earning a consistent income which may lead to financial independence. The benefits include:

Steady Income

This is a no-brainer! Most individuals invest in real estate for the steady flow of income they earn on rent. Depending on the property’s location, you could be earning a meaningful income that can cover your expenses and make additional cash as an afterthought. Properties located in cities or towns with good social amenities generally reap higher income because the demand for properties in such localities are always higher

Whenever this is done rightly, you can get a steady income flow for quite a while and even put something aside for retirement. This can help supplement Social Security funds and any other funds you might already have in place. Where you have a full-time job, this can mean extra money to use toward get-away and pleasant to-haves.

Long Term Financial Security

The reward of investing in real estate offers investors long-term financial security as you have a steady flow of income. For instance, owning a rental property provides real estate investors with a sense of security because the property increases in value over time. Though there is no assurance of property’s value increasing indefinitely, properties are most likely to increase because land and buildings are appreciating assets. That is the reason why it is constantly advised to altogether explore the location before finalizing the decision to acquire a property at a particular location.

Hedging Against Inflation

In many instances, most investors dread inflation, this is however different for real estate investors. Investing in properties is a very good way to hedge against inflation. As inflation increases, so does the income received from rents and your property value increases significantly. This implies that real estate investors are effectively insured against both the current and the long-term effect of inflation. Real estate investors embrace inflation wholeheartedly because as the cost of living goes up, so does their income.

Tax Benefits

One of the importance of investing in real estate is the tax exemptions most real estate investors receive from owning a rental property. This is a significant motivation behind why many decide to invest in real estate. For instance, income received from rent is not subject to self-employment tax. Also, real estate investors generally enjoy lower tax rates for their long-term investments.

Market Highlights

✴INTERBANK FOREX RATES 💴💰

US$GH¢ Buy 5.8532 Sell 5.8590

GB£GH¢ Buy 8.1049 Sell 8.1136

CHFGH¢ Buy 6.3788 Sell 6.3851

AUD$GH¢ Buy 4.3126 Sell 4.3180

CAD$GH¢ Buy 4.6316 Sell 4.6363

JP¥GH¢ Buy 0.0533 Sell 0.0533

NZDGH¢ Buy 4.1732 Sell 4.1785

ZARGH¢ Buy 0.4136 Sell 0.4138

EU€GH¢ Buy 6.9237 Sell 6.9305

CHN¥GH¢ Buy 0.9090 Sell 0.9094

GH¢CFA Buy 94.6479 Sell 94.7408

GH¢NG₦ Buy 70.1832 Sell 70.2686

   

CRYPTOCURRENCY MARKET      

Bitcoin $44,896.38 🔻1.01%

Ethereum $3,286.35 🔻1.16%

Binance Coin $400.39 🔻1.53%

Cardano $2.45 🔻4.57%

Ripple $1.07 🔻0.82%

Dogecoin $0.2414 🔻0.56%

Polkadot $35.86 🔻12.84%

Uniswap $23.41 🔻13.85%

Solana $162.22  🔻8.39%

LUNA $37.40 🔻11.93%

Chainlink $22.68 🔻1.85%

Bitcoin Cash $625.59 🔻1.11%

Litecoin $177.36 🔻0.96%

MATIC $1.28 🔻4.38%

Internet Computer $56.68 🔻3.15%

Avalanche $54.88  🔻10.61%

Algorand $2.19 🔻7.77%

Ethereum Classic $56.01 🔻1.95%

Stellar $0.3219 🔻0.50%

THETA $6.28 🔻2.47%

Vechain $0.108 🔻7.94%

Filecoin $81.28 🔻0.91%

TRON $0.1141 🔻0.78%

PancakeSwap $19.69 🔻0.35%

💵Bloomberg USDGHS Cross Rate – *6.0400* (YTD – 🔺️+2.95%)

💰STANBIC BANK FX RATES💵

US$GH¢ Buy 5.9000 Sell 6.1200

GB£GH¢ Buy 8.1715 Sell 8.5148

EU€GH¢ Buy 6.9697 Sell 7.2681

🔼GSE DAILY GAINERS➖%CHANGE➖PRICE

FML ➡Gh¢1.76 🔼+3.53%

🔻GSE DAILY LOSERS➖%CHANGE➖PRICE

No losers for today

〽Inflation rate in Ghana  ➡  9.70% (🔺️+7.78%)

🏦Ghana Reference Rate ➡ 13.46% (🔽-0.37%)

✳Policy Rate in Ghana ➡ 13.50% (🔽-7.41%)

¶ TREASURY RATES💸

14 – Day Discount Rate 14.4196% Interest Rate 14.5000%

56 – Day Discount Rate 14.1836% Interest Rate 14.5000%

91 – Day Discount Rate 12.0751% Interest Rate 12.4510%

182 – Day Discount Rate 12.3933% Interest Rate 13.2120%

364 – Day Discount Rate 13.8670% Interest Rate 16.0995%

1 Year Fixed Note Interest Rate 16.5672%

2 Year Fixed Note Interest Rate 17.2500%

3 Year Bond Interest Rate 17.7000%

5 Year Bond Interest Rate 18.8000%

6 Year Bond Interest Rate 18.8000%

7 Year Bond Interest Rate 18.1000%

10 Year Bond Interest Rate 19.7500%

20 Year Fixed Rate Bond 20.2000%

🐂GHANA GOV’T EUROBOND RATES 🏦

7 Year Bond Coupon Rate 7.7500%

12 Year Bond Coupon Rate 8.6250%

20 Year Bond Coupon Rate 8.8750%

🛢Average Petrol & Diesel Price Per Litre – Gh¢6.38 (🔺️+2.41%)

🏧 MARKET INDEXES

*Dow Jones Index🚂⛽ 34,607.72 -271.66

-0.78%

*S&P 500 🏦 4,458.58 -34.70 -0.77%

*Nasdaq Index📲💻  15,115.49 -132.76 -0.87%

* NYSE Composite Index 16,563.48 -99.64 -0.60%

*London FTSE 7,029.20 +4.99 +0.07%

*Germany DAX 15,609.81 -13.34 -0.09%

*Japan NIKKEI 225 30,381.84 +373.65 +1.25%

*Tokyo TOPIX Index 2,091.65 +26.72 +1.29%

*Hong Kong HANG SENG 26,205.91 +489.91 +1.91%

*Shanghai Shenzhen 300 5,013.52 +43.51 +0.88%

*S&P/ASX 200 Index 7,406.63 +37.10 +0.50%

*Bloomsberg EU 500 305.39 -0.86 -0.28%

*France CAC All-Tradable 5,124.06 -18.78 -0.37%

*Dubai DFM General Index 2,897.01 -10.55 -0.36%

*MOEX Russia Index 4,002.66 +9.10 +0.23%

*FTSE/JSE South Africa 58,175.75 +155.20 +0.27%

*Nairobi SE 20 Share 2,063.44 +1.22 +0.06%

*Nigeria SE Main 38,921.78 -279.55 -0.71%

*BBG EMEA World Index 162.64 -0.38 -0.23%

*GSE Composite Index 2,800.36 +0.67 +0.02%

*GSE Financial Index 1,959.18 0.00 0.00%

🔼GSE 2021 GAINERS ➖ PRICE ➖ YTD%

MTNGH ➡Gh¢1.26 🔼+96.88%

GGBL ➡Gh¢1.50 🔼+66.67%

TOTAL ➡Gh¢4.62 🔼+63.25%

FML ➡Gh¢1.76 🔼+62.96%

SOGEGH ➡Gh¢0.97 🔼+51.56%

🔻GSE 2021 LOSERS ➖ PRICE ➖ YTD%

CPC ➡Gh¢0.02 🔻-33.33%

UNIL ➡Gh¢5.90 🔻-28.83%

ACCESS ➡Gh¢3.49 🔻-20.50%

ETI ➡Gh¢0.07 🔻-12.50%

SIC ➡Gh¢0.07 🔻-12.50%

GSE INDEXES ⏸ 2021 YTD RETURNS%

*GSE Composite Index 2,800.36 🔼+44.23%

*GSE Financial Index 1,959.18 🔼+9.90%

💧MUTUAL FUNDS IN GHANA♣️

📈EQUITY FUNDS ➰YTD%

Databank EPAcK 🔼+20.22%

Republic Equity Trust 🔼+14.22%

SAS Fortune Fund 🔼+16.97%

⚖BALANCED FUNDS ⏸ YTD%

EDC Balanced 🔼+22.55%

Databank Bfund 🔼+17.46%

Elite Mutual Fund 🔼+9.39%

Fidelity Balanced Trust 🔼+17.68%

CCMF 🔼+13.28%

CDH Balanced Fund 🔼+9.50%

CM Fund 🔼+10.48%

Dalex Vision 🔼+8.92%

Plus Balanced Fund 🔼+14.05%

Republic Future Plan Trust 🔼+11.27%

UMB Balanced Fund 🔼+7.47%

Databank EdiFund Tier 2 🔼+16.14%

⚙FIXED INCOME FUNDS 🛡YTD%

EDC Fixed Income 🔼+10.98%

Databank Mfund 🔼+12.90%

Fidelity Fixed Income Trust 🔼+12.69%

Financial Independence Fund 🔼+10.38%

Fixed Income Alpha Plus 🔼+12.68%

Nimed Fixed Income Fund Tier 1 🔼+10.55%

Nimed Fixed Income Fund Tier 2 🔼+11.47%

Plus Income Fund 🔼+12.42%

STANLIB Income Fund Trust 🔼+11.99%

Databank EdiFund T1 🔼+14.02%

MONEY MARKET FUNDS ⏱YTD%

SAS Midas Fund 🔼+10.13%

Stanlib Cash Trust 🔼+9.32%

EDC Money Market Fund 🔼+9.80%

Republic Unit Trust 🔼+10.44%

COMMODITIES MARKET

*Brent Crude $/barrel⛽ $72.92 +1.47

+2.06%

*Natural Gas 🏭 $/million BTUS $4.94 -0.09 -1.85%

*Gold 👑 $/troy ounce $1,792.10 -7.90 -0.44%

*Silver 💍 $/troy ounce $23.90 -0.28 -1.15%

*Corn 🌽 $/bushel $517.50 +7.50 +1.47%

*Cocoa 🍫 $/metric ton $2,603.00 -70.00

-2.62%

*Coffee ☕ $/pound  $188.05 +0.60

+0.32%

*Sugar🎂 $/pound $19.51 -0.41 -2.06%

*Lumber $/1000 board feet $607.60 +10.70 +1.79%

Rubber  USd/kg $160.20 +1.30 +0.82%

Sources: Bank of Ghana, Bloomberg, GSE, Reuters, Ghanaweb, Doobia, BBC, Graphic Business, B&FT,

Mark Darko

Senator (Ghana) World Business Angels Investment Forum

Share your story or advertise with us: Whatsapp: +2347068686071, +2348053062268, Email: [email protected]