Another week, another picture of Ghana from this Portuguese expat living in Ghana and loving it. It has been exciting to read your emails on this column’s articles and gain insight on different perspectives concerning investing in Ghana’s real estate. I appreciate and welcome all your feedback so please keep it coming! In the past few weeks however, I have noticed that certain questions have been asked frequently and would like to answer them for the benefit of all readers. I have selected four emails* that feature these questions for our consideration.
Email #1: “Hi Jorge, thanks for sharing your advice on real estate investment in Ghana. I’ve never actually considered real estate as an investment option so it was interesting to read your perspective on that. What I would like to know is, how do I get started in the first place? Is it smart to borrow to purchase a buy-to-let property?” – C. A.
This is a good question: how should you finance your real estate investment? Is it advisable to incur debt to support a buy-to-let acquisition since it will generate income once you find a tenant? This depends on a few factors, such as the loan’s interest rate and other charges and even how soon you expect to get a tenant to start earning rental income. A loan will not be a good financing option if your total repayment far exceeds the rent you expect to earn from your buy-to-let property. Consider the various credit options available to you and ask all the questions you want to ensure you are clear on all the terms and conditions which apply. The ideal is to already have a good part of the investment so you can do your down payment, and then leverage your investment borrowing a part. Please note that if your salary is in USD, you will be able to have a loan in the same currency with a much more attractive interest rate.
Email #2: “Dear Jorge, I really enjoy your articles but it seems as if you live in a different Ghana than some of us do. It’s not cheap at all to rent any of the dollar-denominated apartments you talk about, much more buy them! I would love to own one but really don’t see how this is feasible. Got any practical tips?” – E. K.
If I had one Ghana Cedi for every time I heard this sentiment, I would be rich! Although it is true that real estate is a costly investment, it is not impossible. It might require patience and planning, but it is certainly not impossible. First of all, take stock of your investment goals and compare to that to the average return you stand to earn on an investment in real estate. If the two are a good match, then identify at least three reputable real estate developers from which you can make enquiries. This is important to obtain first-hand information on what they have to offer while taking the quality and locations of their various developments into account. Finally, assess your average monthly income and expenditure as well as your total assets and liabilities to give yourself a clear picture of what you can afford in the short- or long-term. You might not be in a position to invest in real estate today, next month or even next year, but you can always work towards it.
Email #3: “Hello Mr. Osorio, I am a regular reader of your B&FT column and have a question for you. I inherited one of my father’s houses in Kumasi a few years ago and I am struggling to keep up with maintenance especially since I don’t live there. Wouldn’t it be better to sell the house and cut my losses?” – S. B.
Deciding on whether to keep or sell a real estate inheritance depends on a number of things. It is important to engage the services of an asset valuation company to accurately appraise the value of any real estate before considering its sale. Once this is done, you can consider your property’s location and what its potential for growth is. It would be a shame to regret selling a piece of property too soon for far less than it will be worth in a year or two. Indicators such as ongoing real estate development or the establishment of new businesses in the same area or nearby may point to a capital appreciation of your real estate in the near future. If you decide not to sell your property, you could also consider defraying maintenance costs with rental income by finding tenants or engaging a trustworthy agency to handle all maintenance works. Any inherited real estate automatically diversifies one’s investment portfolio at a fraction of the cost of acquisition (taking ownership documentation, insurance and property maintenance into account). Ultimately, the decision to keep or sell it depends one’s investment goals, the value of the property and the expected return on proceeds of its sale once invested in other ventures.
Email #4: “Dear C-level Executive Expat, your views on investing in Ghana are certainly interesting to read. What is your opinion on the fact that Ghana’s real estate development and ownership is being taken over by foreigners like yourself (I hope you are not offended) and taken out of the hands of indigenous Ghanaians?” – V. N.
No offense taken at all, yet this assertion may not be entirely factual. Although there are foreign-owned real estate development companies in Ghana, the country’s leading real estate company – Devtraco Limited – is an indigenous Ghanaian company. Devtraco’s award-winning real estate developments are proof that quality, world-class real estate is not exclusively delivered by foreign-owned local real estate companies. Also, there is no sure way of determining what percentage of Ghana’s real estate is owned by Ghanaians because such information is not readily available, which means that a lot of the “statistics” on real estate ownership might be purely hearsay. What I will say is that Ghanaians are notoriously discreet about their wealth and investments, so it is very likely that a lot of the real estate developments you see and admire are owned by people you know and socialise with! It is far more promising to become a real estate investor if you are not one already instead of wondering “who owns what”. In addition, Ghana as a country is the biggest beneficiary of any real estate investment irrespective of who owns what: a booming real estate industry provides jobs, builds investor confidence and contributes to national development.
I hope you have enjoyed this look at some readers’ experiences with and concerns about real estate investment in Ghana. Are there any other “burning questions” on your mind or would you like to send some knowledge my way? I would love to hear and learn from you, so do not hesitate to share them via email.
* senders’ initials used to maintain confidentiality