Real Estate Investing and Africans in Diaspora

Dec 2, 2020 - 05:32

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Real Estate Investing and Africans in Diaspora

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Unknown to most people, this is the purchase,ownership and management of real estate for profit. If you have always thought that real estate business is for a certain calbre of people, you are incorrect. Here are some of the resons why anyone should think of investing in real estate

Appreciation

Real Estate values tend to increase over time and with a good investment you can get a profit when it is time to sell. Rents overtime increase and this can lead to a higher cash flow.

Levarage

This is simply paying for something without coming up with a full cost. In real estate it is achieved by taking out a morgage to buy a property and only put down a fraction of the total cost.You get to keep all the income generated, all of the equity build up, appreciation as you also utilize the tax write-offs.

Cash Flow

Real estate has the ability of generating cash flow. It strengthens overtime as you pay down your morgage.

Tax

Real estate investors have the advantage of many tax breaks and deductions which can help them save money at tax time. You can deduct the reasonable cost of managing,operating and owning a property.

Improvement

Real esate is a tangible asset therefore it can be improved in order to generate more income.

Challenges faced in Real Estate

It requires a lot of research

Handling repairs and managing (rental properties owners)

High transaction cost.

Appreciation is not guaranteed sometimes.

Africans in Diaspora

Africans in Diaspora refers to people of African origin who live outside the continent irrespective of their citizenship or nationality and are willing to contribute to the development of the continent.

Many Africans living in Diaspora are faced with numerous challenges when it comes to investing in their native land.This can be due to lack of information,difficult procedures involved and informal channels.

Diaspora investments can be categorized into four types that is

a. Diaspora remittances

b. Diaspora real estate as DDI

c.Diaspora direct investment

d.Diaspora portfolio investment

a. Diaspora Remittances

According to world bank formal remittances to Africa reached $86 bn USD,Of this 70% recieved by Egypt,Nigeria and Morocco. 3million Kenyans living in North America and Europe were Estimated to have sent $3bn in remittances to Kenya(2019).Formal remittances account for over 10% of the GDP in countries like Comoro,Lesotho,Cape Verdeand Liberia. Annual remittances to Africa can be as high as $200 bn USD.(funds sent through formal,informal and in-kind remittances).

b. Diaspora Direct Investment

They include investments firms such as the African Diaspora Asset Managers(ADAM).

c. Diaspora real estate as DDI

Development of real estate is often the biggest investment that someone living in diaspora can make. Diaspora investors seek to acqiure real estate for reasons like retirement accomondation or commercial use,long -term leasing or outright sale. Diaspora investors can use assets like leverage and local bank loans to invest in their real estate ventures. Access to credit for property and real estate can be limited depending on the country of origin and country of residence.

d. Diaspora Portfolio Investment(DPI)

This is Investments made in the country of origin by a diasporan or groups of diasporians.These include the purchase of equity in companies of origin, investments made in fixed-income or other securities that lend money to firms in country of origin, investments made in mutual funds comprised of firms in the country of origin.

Portfolio investment products are more suitable and less risky for diaspora investors becasues unlike direct investment ownweship of securities does not generally lead to involvement in the management of the venture or asset. It is a form of passive investment, which is the reason why the sector is regulated by public authorities to protect investors among other things.

Challenges that have been faced by Africans in Diaspora who want to invest in Real Estate include:

Lack of trust between; Real Estate developers and diaspora members and diaspora members and their relatives.

Tittle issues. Some properties can be sold to more than one buyer.

Traveling to Africa to start investing is unattainable with reasonable means.

Lack of funding from banks due to reasons like offering sky high rates