I’m going to tell you an open secret. It’s a great time to buy property. If you’re looking to grow a business – any business – Investing in real estate is a sure way to develop it into something potentially massive.
I know this from personal experience, though mainly from observation.
My wife’s extended family, and particularly her mother, are all entrepreneurs and business owners. They’ve developed and built businesses that include hospitality businesses, a clothing company, restaurants, nightclubs, rental agencies, construction companies, real estate agencies, a game farm, and even a microbrewery.
The most successful of them – my mother-in-law included – all got their start in real estate.
Why Real Estate?
US billionaire Andrew Carnegie once stated, “Ninety percent of all millionaires become so through owning real estate.”
Daniel Lesniak – a real estate broker co-founder of Virginia real estate firm Orange Line Living – sees how real estate offers a variety of options that other investments don’t. He says this about investing in the property market:
“With real estate, you have unlimited options. You can buy a house with the intent of flipping it, then rent it if the market turns south. If you buy a rental that appreciates in value significantly, you can sell it. Real estate can be refinanced, rehabbed, and rezoned. You can develop it, lease it, subdivide it, or add parcels to it.”
What is an investment property? Wealth creation often starts with property investment. Anyone with a good credit record and decent income can qualify for a home loan, using other people’s money to fund most of the investment. Though not risk-free, property investment is one of the safest long-term investments, and can provide you with capital from which to start other business ventures.
Why Now?
With interest rates low, property prices generally more flexible, and governments worldwide pumping money into businesses to keep them afloat, it’s a great time to invest in property. In the United States, the CARES Act handed out vast sums of money to businesses at incredibly low interest rates. Now is the time to take advantage of the situation and add assets that can provide collateral for future growth.
We’re already beginning to see positive signs from countries as they get coronavirus infections under control. The Chinese economy is emerging from the economic downturn caused by pandemic-related shutdowns, and developers there have shifted their focus.
Unsurprisingly, Chinese real estate speculators are moving away from commercial office space, particularly hard-hit due to limits put on workplaces worldwide. With a considerable amount of office work now dispersed and being done from home, its property developers have instead begun investing in domestic tourism and culture-related projects, along with health care.
With China’s property market bouncing back, it shows what will occur in other countries once they sufficiently control outbreaks. This actually bodes well for real estate investors in the United States, which continues to struggle with the COVID-19 pandemic. Although there are no major price slumps in the US real estate market, the disruption in property markets there looks set to carry on longer, and the chances of finding deals will be better.
Global real estate firm Savills surveyed experts in various countries in early June 2020 and found their mood positive, with about 30 percent of markets pushing for lifting lockdowns. The Asia-Pacific market, hit less hard than elsewhere, saw increasing demand in two thirds of the markets involved in the study.
As part of this region, Australia looks to return to a growth trajectory in the third quarter. With some of the lowest death rates in the world, confidence is returning, though real estate investors there are looking to safer investments in the industrial and multifamily residential markets.
Looking at the remainder of 2020 and 2021, warehouses and other logistics-related properties will continue increasing, according to Savills. With many e-commerce businesses utilizing such facilities and little vacancy available, this looks like a niche that will continue to remain profitable for the foreseeable future.
Yet the news is not all rosy. Widespread lockdowns saw direct investment in 2020 drop by over 55 percent in the second quarter and sales decline by 29 percent for the first half of the year. Though interest rates have declined, in some places stricter credit terms and conditions have been placed on buyers by financiers. Respondents in the United States and Arab Emirates in particular noted this. Even in the Asian market, 38 percent of respondents noted poorer financing options, while in Europe stricter financing was mainly confined to office properties, on which interest rates actually doubled.
Given the instability of the property market, any investors must prepare to be in it for the long haul, and to hold on to real estate if the market slips again. As with any investment, there is risk, even though in the longer-term, the property market looks favorable.
Why Not to Invest in Technology
Now, before anyone chastises me for this statement, let me explain. I’m well aware that anyone investing in Google, Amazon, Apple, Microsoft, Facebook, or any of today’s technology giants when they were in their infancy would make anyone fabulously wealthy.
I’m talking instead about not investing in technological hardware. For the most part, that ship has already sailed. Investing in high tech hardware if you’re not a tech company is a money pit. These days, technology is absolutely necessary to stay ahead of your competition, regardless of your business, but it’s not necessary for you to own it.
Even if you are a tech company, it often makes more sense to pay monthly fees to a cloud provider who can provide cutting edge technology with regular updates. Rather invest the money you save from buying hardware into something that will actually make you serious dough. Like property, and warehouse space particularly.
This is especially important as a startup or smaller business. You’ll need applications for accounting, a database for storing client information, tracking software if you’re shipping products, and perhaps even a secure messaging system.
If you’ve been in business for a while, and just considering migrating your apps to the cloud, it’s a good idea to study what’s best for your type of business.
Consider these five points:
- Knowledge Base: Look at who you’re putting in charge of the migration, especially at what kind of experience they have with cloud computing and their skill set. Do you have someone already working for you that can do the job? Will you need to hire someone who can do it? Or would it be best to hire a consultant who specializes in cloud migration?
- Analyze: Look at where you are and where you’re planning to go regarding tech, considering above all its feasibility. What applications or data storage should you move to the cloud? Are the cost savings and potential benefits you’ll glean worth the investment?
- Planning: Just like moving house, you need to plan moving your data and applications from an on-site location to the cloud. You’ll want this done as seamlessly as possible, so that there aren’t any hiccups or suspension of service, particularly if it could affect clients or customers. Creating a strategy with layers of backup plans is imperative.
- Taking Action: There are really only two choices here. Go all in, or take an incremental approach. Doing the former can be disastrous if your planning is flawed, though it may result in less disruption for your business if done right. Doing things bit by bit will take longer, but there’s less chance of massive failure.
- Monitoring: Once you’ve shifted your applications and data to the cloud, it’s important to ensure everything’s working as it should. Are your clients or customers happy? Is everything working as it should? Keep testing and watching.
If you’re in the business of financing property, this is particularly important. Keeping data safe is imperative when dealing with the large amounts of capital associated with real estate and property development, especially when it comes to signing legal documentation. Though e-signatures have been around and legal globally since about 2000, cloud technology has made it more accessible.
And, in the age of coronavirus, it can also keep you safe.
The key takeaway here is that you should invest in those things that hold value – like real estate – and rent those things that devalue quickly over time – like technology. This advice will help ultimately make your business more successful, and put you on the road to creating wealth.
Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Author’s bio: Currently an internationally-based freelance writer who writes about how technology affects business, D. A. Rupprecht is a former business owner and manager of property-based hospitality businesses. He also sometimes writes books.
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