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Reasons why investing in real estate is one of the best ways to build wealth
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Reasons why investing in real estate is one of the best ways to build wealth

Zimbabwe has had regular economic meltdowns that have seen a lot of people lose everything in the financial markets. People who had pension funds woke up to find their nest eggs wiped out. In all these turbulent times real estate has often been overlooked as a sound investment option. Today we will explore why investing in real estate is a possible way for you to claw your way out of poverty and go up the social ladder.

In an economy like ours real estate offers some positives that are absent in other investment options:

  • Property values can weather movements in the exchange rate

  • Your property’s value remains the same no matter what currency is in use

  • If you invest in property you do not have to worry about inflation

  • Properties are often used as collateral allowing you to unlock more financial opportunities

  • You can earn passive income through rentals

  • You can do what is known as live in rent out

  • You can do house flipping which is very profitable

  • It gives your offspring a leg-up and stops them from being a burden on you

Let us now look at these advantages in detail. The biggest reason why it would be prudent for you to invest in real estate as opposed to other forms of investment is that the property market affords you protection against movements in the exchange rate in ways other forms of investments simply cannot. Take for example the death of the first Zimbabwean dollar (ZWD) in 2009. Most people lost savings in their bank accounts and their pensions were wiped out but those who had built houses instead simply revalued them in the new USD currency. Your house doesn’t lose value simply because your currency has changed or lost value.

The same goes for inflation. With other forms of investment, you have to worry about how inflation is going to wipe out your savings. When you buy say a house or an apartment it simply appreciates in value. Of course, that doesn't mean that real estate is immune to inflation. It is just that in the case of Zimbabwe, real estate properties have managed to stay ahead of inflation. Even rentals have been faster to adjust to inflation compared to wages. It also helps that in Zimbabwe's urban areas, the demand for houses to rent or buy still outstrips supply.

Following a spate of bad loans during the 2008 era, Zimbabwe’s banks have shied away from lending. These days they tend to do their due diligence in terms of ensuring that whatever loans they are giving out will be paid back. At the very least they demand some sort of collateral. If you have a house you can use it as collateral to get more loans to invest in your business and become even more wealthy. Tired of power cuts? There are dozens of companies out there that will give you solar on credit if you have title deeds. Want to start a business? Need capital to start farming? All you need to do is walk into a bank with your title deeds. Without them, you will be laughed out of the bank

Rental income is a stable and predictable source of income for a lot of retirees and even those who are still going to work. Those who opted to invest in pension funds are at the mercy of their wealth management companies and sometimes their income is not so responsive to changes in inflation. If you opt to build a house or buy an apartment all you need to do is to simply adjust the rent in line with inflation. Property owners earn much more in rent compared to those who live on pension payouts. You can even do what is known as a “rent out live in”. This is where you buy a property that has extra rooms or a cottage at the back. You can rent out the cottage or main house and live in the unoccupied lot. This means that you can get more income each month.

These days millennials and Gen-Z are unlikely to own a house of their own due to economic hardships, they may remain a financial burden to parents well after graduation. If you own a property you can rent it out to them for a fee or simply allow them to live rent free thus reducing the financial burden on them and yourself. They have a leg up as they do not have to start from scratch. They can also use the house as collateral to leverage their way out of poverty.