Real estate investment decisions are those important steps or choices that any investor in real estate will have to make in order to achieve the investment objectives.
Real estate investment decisions are generally influenced by physical environment, economic, legal and socio-political factors.
There are many decisions that real estate investor will be confronted with at various stages which will ultimately determine the outcomes of the investment. Most important real estate investment decisions include;
- Location: In real estate, location is referred to as a particular place where the landed property situated or positioned geographically. Choice of location is the most important decision in real estate investment, this is due to the fact that real estate is essentially fixed and immovable in nature. An informed opinion is required in arriving at final decision on location to invest in, even though certain different locations might appear to be similar, there are no two locations that are exactly the same. There are peculiarities of every location, some of which are not physical and may not be obvious to a layman. Highest and Best Use of a vacant or partially developed land in a particular location will require an appraisal to guide in decision making.
- Types of Real Estate: Real Estate is considered to be one of the most popular and oldest form of investment, however, many people are not familiar with the various types of real estate that exist for investment purposes. Type of real estate are; residential, commercial, industrial, Agricultural and Specialised. Understanding and interpretation of real estate market will help in making the right decision on the particular type of real estate to venture into. For instance, there must be objective reasons for an investor to arrive at a decision to invest in residential real estate and then decision is made further as to what type of residential which could be block of flats, bungalows, duplexes, townhouses etc. Inappropriate decision on the type of real estate could lead to abandoned project, void and low returns on investment.
- Rent and Price Determination: Most of the real estate investment returns are realised through rental income and proceed of sale, this is why determination of rent and price is an important decision that have significant effect on the real estate investment. Valuation for rental or sale/ purchase purpose is usually required in rent and price determination. Arbitrary decision in fixing rent and price impacts negatively on the real estate investment especially when such decisions are at variance with the market values.
EMMANUEL OLORUNTAYO is an Associate member of Nigerian Institution of Estate Surveyors and Valuers (NIESV), a registered member of the Estate Surveyors and Valuers Registration Board of Nigeria (ESVARBON), and the Principal Partner of Tayo Emmanuel & Co. (Estate Surveyors & Valuers).