Rental real estate refers to real estate purchased for the purpose of letting out to people for either residential or commercial purposes. Although it requires a high initial capital outlay, rental real estate as part of a diversified investment portfolio, can be one of the most lucrative forms of passive income available to investors.
According to the Ghana Living Standards Survey 7, 2019 (GLSS 7), 40% of households in the Greater Accra Region live in rented property. The country also has a housing deficit of about two million units stressing the high demand for housing units in a country which is urbanising at a significant rate.
To invest in rental property, one can either purchase the property outright, purchase through a mortgage agreement, lease or build. Incidental costs such as insurance, property rates, agency fees, maintenance costs and with-holding taxes must also be accounted for when acquiring the property. Furthermore, you also need to make provisions for empty periods, especially when the property is financed by a mortgage.
However, before you acquire a property for rental purposes, you must undertake extensive research on the housing market of the neighbourhood you intend to buy property in. You need to understand the demographic trends in the area because you expect the property to pay back the initial capital outlay over an extended period of time. If the location of the property becomes unattractive over time due to issues such as poor infrastructure, long distance from commercial centres or a high rate of crime the value of your investment could decline. Additionally, you also want to understand the types of developments that residents in that area demand, so that you do not over or under-build for that locality.
Rental real estate has the potential to generate higher returns than traditional investments such as stocks, bonds or mutual funds. However, it requires much more active management and has a higher level of risk. It would therefore be beneficial to start your journey into real estate investment as part of your larger portfolio by talking to a professional such as those at IC. With a call to +233 (0)308250051 or by sending an email to firstname.lastname@example.org, you will be able to speak with a professional investment advisor who will help you on the path to including rental real estate in your portfolio.
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