Dennise Williams

Contributor

Real estate is red hot right now in Jamaica and sources say that this is driven by the Business Processing Outsourcing (BPO) segment and the demand for short-term rentals for tourists.  This, according to sources, has resulted in applications at the Real Estate Board for residential projects in the Kingston & St. Andres area with as many as 12 stories seeking approval. The question is how can the average person with a steady and documented source of income profit from the current real estate boom?

According to our panel of income opportunities experts, the tried and true ways have not changed.  Attorney at law, Robert Taylor says, “Location, location, location. This is not a myth and the do or die decision of any investor or home buyer for that matter. Location including neighborhood will decide what kind of rental return will be achievable which will be determined by the demand of that particular location. If purchasing as an owner occupier the same issues apply as the key objective is to maintain and improve value over time which is the number one benefit of choosing the right location.”

So what are the locations that provide the value over time?  According to Janelle Brown, marketing and sales manager of West Indies Home Contractors (WIHCON), the critical issue beyond location is how much money will one have to take out of pocket to cover the mortgage when you make the purchase.

“When you are buying for investment, you want to get the highest rental you can to cover the mortgage.  Currently, research shows that at our Forrest Ridge development, rents go from J$60,000 to J$250,000 per unit depending on size.  And that development is at the foot of Red Hills which gives you easy access to Manor Park and easy access to the North-South highway.”  From that side of the corporate area and closer to New Kingston, Brown explains that rental income is also expected to be significant in the new Lofts development.  “Based on our discussions with realtors, we believe that one could collect $70k to $120k per month from our units.  Plus for persons who deposit now, they have 18 months to complete payment.  So that is a real win win.”

For persons seeking a residential rather than investment, Brown noted that the Harbour Head development will have easy access to the airport, Downtown and of course the many highways.

But what about commercial?

Dino Hinds, director of Micro Financing Solutions suggests that business owners make a careful decision in acquiring commercial properties.   “One of the best option to get your to get your money working for you with the lowest amount of risk is investing in real estate.  As with all investments, of course, timing is very important and I believe that it is a great time to consider investing in this asset class.  With interest rates being the lowest they have been in decades and financial institutions very motivated to lend, the average investor have a greater opportunity to own real estate.   Commercial real estate, however, can also be quite profitable.  Currently, in Jamaica, there is high demand for factory and warehousing space and also for space for call centers.”

Hinds added, “For a business man the decision to buy or rent comes down basically to whether it is cheaper to pay a monthly mortgage or to pay rent.  Also equally important in this decision is the amount of capital that the business has and whether investing in real estate will use up a significant amount of the liquidity in the company.  Most financial institution will require you to find up to 35% of the cost to acquire the real estate while funding just 65%.  This compared to them funding up to 90% on the purchase of a residential real estate.” Another consideration Hinds pointed out is, “One of the most important factor to consider choosing real estate as an investment asset is that it is typically long term.  So to get the full benefit you must be prepared for your cash to be tied up for a number of years.”

That said, Taylor noted, “You have to choose your property right.  Even if you choose the best location you can still select the wrong property type. For example, don’t go for a luxuriously built home in a relatively low income neighborhood as rental returns or property appreciation will not justify the investment. For owner-occupiers, the same applies. Also, a grave miscalculation by some homer buyers is to buy what they can afford and not what they need. Sometimes this is prudent when finances are really stretched but sometimes its best purchase “more than you can afford”. By stretching your finances the aim is that over time as your salary and income increases rising inflation will also result in the mortgage payments being less burdensome so long as they remain fixed.”

Working in real estate

And for those who also want to invest the time to be certified in the industry, Dr. Carolyn Hayle of UWI noted that the investment can pay off as the commissions earned by realtors is between 3 to 6 percent of the sale price.  “Well, according to the Real Estate Training Institute (RETI)   , you would have to take the salesman course which costs $63,000.  However, once you are certified, your commissioned earnings will certainly pay for the cost of the course.”

Investing in real estate

Now, for persons who want to collect a cheque but not deal with tenants, there are currently two stocks recommended by investment professionals that offer frequent payout of dividends.

According to traders, the two options are Kingston Property REIT(KPREIT) and 138 Student Living; both companies primary focus is investing in real estate. KPREIT last trade was at $7.15, the stock trades within 52 week range of $4.03 – $16. Last year 2016 KPREIT dividend yield was 3.14% , year to date for 2017 the dividend yield is 2.25%

There you have it two companies that give you exposure to real estate, speak to knowledgeable investment adviser to give you granular details as it relates to the companies.