Property As a Vehicle For Investments

 

By Hannah Owusu Boamah-Online edito/Property Express

7 June 2012

In recent times, almost all categories of income earners are looking for productive ways to invest as a result of economic down- turns, future planning purposes and avenues to generate more income.

The common plans for investment are through stocks, shares, dividend reinvestment plans, index funds, discount brokerage account and mutual funds.

Some also prefer to buy commodities like gold, do currency trading or invest in government saving bonds.

According to Forex Management, an investment advisory group: “Capital investment decisions are not governed by one or two factors, because the investment problem is not simply one of replacing old equipment by a new one, but is concerned with replacing an existing process in a system with another process which makes the entire system more effective”.

An investor must carefully plan in order to make the rightful choice.

 However, among such investment plans, real estate and acquisition of other properties remain key determinant factors, especially in this part of the continent where the infrastructure and housing sector are largely untapped and thus possess huge potentials.

So, if you are thinking of where to invest, consider properties as a viable alternative.

Interestingly, most people in this part of the continent have ignored the investment potential of the property industry, thus have huge properties that are of no significant benefit to them.

Some acquire property for status reasons, just to show off or for fear of poverty, and this is a common practice in Ghana and elsewhere.  “I own of five houses to their credit’, a property owner will say, but is there any investment potential being realized?

To get a full grasp of the argument, the free dictionary will help to define property, as “Something owned, a possession, a piece of real estate; or something tangible or intangible to which its owner has legal rights”.

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Why Is the Property Sector Viable?

According to the UN Habitat, more than two billion people will be added to the number of urban dwellers in the developing countries over the next 25 years. 
 If adequate financial resources are not invested in the development of urban shelter and requisite services, this additional population will be trapped in urban poverty, deplorable housing conditions, poor health and low productivity thus compounding the enormous slum challenge that exists today.
In Ghana, urban population growth is at 2.7 per cent per year.  This is distributed into 48, 000 human settlements and 44 per cent classified as urban live in the Greater Accra, Ashanti and Western Regions.  Accra and Kumasi have population of 1.2 million each.
The national housing deficit is estimated at over one million units and 364,000 new houses are needed annually which has brought about an acute pressure on basic housing services and infrastructure.
The reality of housing situation in many developing countries means that new ways of micro-financing and community funds have to be encouraged if the poor are to be provided with adequate shelter and basic services.
 The way forward
In Ghana, most people own properties, which they might have financed themselves or have inherited it from a family member.
 However, a vast number of property owners have not fully realized its investment potential and general knowledge on the use of properties as a vehicle for investment remains relatively low.
In acquiring a property one must seriously consider the asset and liability factors, though investment can be a risk by looking out for ways that a property can yield high returns.
Assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset.
Liability on the other hand, can mean something that is a hindrance or puts an individual or group at a disadvantage, or something that someone is responsible for, or something that increases the chance of something occurring (that is a cause).
Therefore, there are a number of ways that properties could serve as an investment by being an asset, instead of just seeing it as an end to a means.
Therefore property owners in the country must begin to explore ways to yield more investment from their properties, instead of just enjoying the title of “Landlords” or for luxurious purposes.
Mortgage experts have also advised some ways to increase cash inflow from property such as upgrading facilities in rented apartments to maximum rent payment and providing furnished property for tenants.
They say you can even consider renting out your property by room. This provides a unique opportunity for target groups such as students, or opting for an interest only mortgage. 
One can also delay paying interest repayment by using a Cash Flow Mortgage, which allows investors to pay only a portion of the interest charged every year, and allows the interest component that has not been paid o get depreciation tax benefits from even an older property going back quite a few years if you haven't done a depreciation schedule for a while.
Those that have benefited from ‘Shylock” mortgage services and are finding it difficult to meet their financial obligation can also lease out the apartment for a period of time and use the revenue generated to seek a more cost effective residence elsewhere, whiles winding up to settle their debt.
Despite the potential that the industry has for property owners, that of foreign direct investment could not be overruled.
FDI in Africa has often been channeled to the oil sector, yet considering the UN Habitat statistics on housing deficits, there is a need for more funds into the sector as well.
These are but a few of the numerous opportunities for property owners to explore investments, and the country’s housing deficit provides the appropriate environment to do so.
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