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Gates Capital Management's ECF Value Funds have a fantastic track record. The funds (full-name Excess Cash Flow Value Funds), which invest in an event-driven equity and credit strategy, have produced a 12.6% annualised return over the past 26 years. The funds added 7.7% overall in the second half of 2022, outperforming the 3.4% return for Read More
Investing in land is one of the wisest investments in the world. You can strike it rich if you can identify the potential areas and invest in them at the right time. If you acquire knowledge about the real estate, research the promising areas, and act at an appropriate time, you can become wealthy in this business. However, it is easier said than done as a part of it depends on external forces and factors that are beyond human control.
Billionaires Owe Their Fortune To Real Estate Business
Globally there is a huge demand for land because the population is growing while the land remains the same. It is obvious that land is the safest investment. When you want to make it the best investment, you must acquire knowledge, exercise caution, and invest wisely. Research shows that most billionaires owe their fortunes to their real estate business and most real estate tycoons are from China.
Some of the business people who have become rich in the real estate business include Wang Jianlin, Lee Shau Kee, Michael Otto, Donald Bren, and Donald Trump. Here is a blueprint to invest in the real estate business successfully. Research about the real estate business based on your budget and interest. Identify the potential areas for investment. Acquire information from multiple sources, analyze, and look for long-term appreciation. Sit with cash because cash is the king in any business especially in the real estate business.
The sellers prefer buyers sitting with the cash. It helps the sellers to sell their property and invest their money in other ventures. Identify the sellers who are in the dire need of cash. You can identify such sellers if you have the right connections and reliable agents. Hence, prepare a list of loyal agents and connections to update you about the latest developments. Offer them incentives and reasonable commission to enable them to share with you the information from time to time. Here are some nuggets for novice investors.
- Have a vision. Be passionate, patient, and persistent. Purchase when the market is down and people are scared of investing. In a nutshell, be clear about your investments.
- Emphasize long-term prospects, not short-term gains. Emphasize value investing. Invest in the areas where there is access to main roads, infrastructure, educational institutions, and hospitals.
- Avoid purchasing the properties in saturated markets. Instead, purchase in unexplored and promising areas. Follow the road less traveled.
- Don’t diversify your investments for the sake of diversification. Look for appreciation for each investment. Purchase in promising areas in different locations to average your investments and ensure liquidity. Purchase directly from the landowner. Don’t be emotional when you invest your money. Look for appreciation. Use your head, heart, and gut when you invest your money.
- Purchase property near the dwellings to enable you to sell it quickly. Purchase a small piece of property beside big plots because big plots are usually purchased by affluent individuals and are likely to be developed leading to immediate appreciation.
- Additionally, purchase the plots near the main entrance of the ventures. Inform the seller that you plan to construct a home as sellers encourage buyers who are interested in building their homes for occupation.
- Prefer investing where diverse communities live peacefully because diversity adds value to the dwelling communities and real estate business.
- Don’t buy tiny plots. Buy plots with minimum size to enable the purchasers to construct their homes.
- Invest in branded companies if you have a low-risk appetite. Although prices in the branded companies are relatively higher, they provide you safety as all the documents are checked thoroughly and guidelines are complied with. Check the title deed and verify approvals and licenses. Check whether the property tax receipts and bills are paid if you purchase an apartment block.
- Invest in potential tourist destinations as tourism has huge potential to grow globally. You can construct a hotel and earn income regularly.
- Don’t purchase the plots with odd dimensions. However, you can consider purchasing them if you get at a cheaper price. But calculate and pay for the actual size of the plot after discounting the odd portions.
- Shortlist the best plots from the unsold ventures and purchase them because sellers might have purchased the land at a lower price and may sell you at a lower price quickly to move on to their next projects. If you sit on cash, you will be able to identify such plots and purchase them for long term appreciation.
- Build and rent your apartment blocks when you want to have a steady flow of income from rentals. You earn income regularly and the value of the apartment also increases. However, you will have to pay taxes regularly and spend money for miscellaneous repairs. Ensure that your income is higher than the depreciation of your apartment.
- Explore opportunities to strike it rich in the commercial real estate rather than in the residential real estate.
Given the choice between a plot that is available at a cheaper price without long-term appreciation and a plot that is available at a reasonable price with a long-term appreciation, prefer to purchasing the plot at a reasonable price with a long-term appreciation.
Become A Bird Dog
Explore becoming a bird dog. Bird dogs are constantly on the lookout for properties at a cheaper price to repair, model, and sell them later at a higher price. Such properties are known as distressed properties and are usually sold at discounted prices.
Bird dogs are like informers in the intelligence department who share information about the distressed properties to the real estate entrepreneurs and investors. They invest their money in such properties if they have capital. If they don’t have capital, they share the information with the real estate entrepreneurs and investors about the availability of distressed properties and charge a fee for each transaction. Don’t confuse distressed properties with litigant properties. There is no litigation involved in such properties. The real estate investors may sell their properties due to various reasons especially when they are in financial distress due to their business commitments and retail investors may sell their properties at discounted prices when they need cash for marriage or divorce or education or emergency needs.
Investment is an article of faith. To summarize, real estate is one of the best investments in the world. You need passion, patience, and persistence to succeed in this business. However, you cannot have easy liquidity the way you have in the gold and share market. Remember that the real estate business is for brave-hearted, not for fainthearted. Therefore, take all precautions before venturing into this business.
About the Author:
Professor M.S. Rao, Ph.D. International Leadership Guru
Professor M.S. Rao, Ph.D. is the Father of “Soft Leadership” and Founder of MSR Leadership Consultants, India. He is an International Leadership Guru with thirty-nine years of experience and the author of forty-eight books including the award-winning ‘See the Light in You’.
He was ranked #1 Thought Leader and Influencer on Culture Globally by Thinkers360. Rao invests his time in authoring books and blogging on executive education, learning, and leadership. Most of his work is available free of charge on his four blogs including http://professormsraovision2030.blogspot.com. Rao can can be reached at [email protected].