Valuation Request

TO BUY OR NOT TO BUY

TO BUY OR NOT TO BUY…

 

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Many people are asking if this is a good time to invest in Real Estate seeing that Trinidad & Tobago are in a recession.  Before answering that question, it would be wise to look at some of the advantages of investing in Real Estate while bearing in mind that investments in Real Estate are generally regarded as long-term.

As pointed out in the Association of Real Estate Agents (AREA) Principles of Real Estate classes held each year at Roytec, there are several advantages in such an investment.  Amongst them are:

 

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With this in mind, the present situation locally could present some opportunities to make such an investment.  Some of these are:

  1. Interest rates, (the higher the rate, the higher the instalment you pay).
  2. Term (length) of loan, (the shorter the term, the higher the instalment although you will pay less over the life of the loan).
  3. Loan-to-value ratio (the higher the ratio, the more you can borrow – all other things being equal).
  4. Management fees (sometimes called negotiation fees).  See if any of the banks will offer you any concessions and under what conditions.

 

As in all investments, caution is strongly recommended.  Real Estate investing requires a relatively large sum and one has to remember the closing costs.  In addition, economists are forecasting that there may be job cuts throughout Trinidad & Tobago. If you think there is any chance that your job might be in danger, it would be unwise to now go into a long-term debt like a mortgage loan.

It is also important for everyone, especially in today’s fragile economy, to have a nest egg to fall back on.  Experts recommend that you have 3-6 months of expenses put aside for emergencies.  If the cost of investing in real estate will wipe out all your rainy-day funds, you may want to save more before investing.

 

As you can see from above, while there are many reasons not to buy now, there are also several advantages why buying now might make sense.  Although historical data does not predict what will happen in the future, it may assist in making a decision.  Over the last 20 years, the yield on residential real estate has been in excess of 10% p.a. – despite the downturn in 2008.  In other words, a property purchased in 1996 for $200,000 would now sell for more than $1,300,000.

 

Finally, when purchasing a home, it is important to remember that while it can be a very good investment, there are other factors involved such as quality of life, pride of ownership, etc.  In the final analysis, the decision is yours and you have to carefully consider your personal circumstances before making a decision.

 

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