Many years ago, my mother worked hard to put a roof over our heads. As a widow, she struggled to build a house, where we grew up. It was a fully-paid-for house, and at the time, it was valuable. I am forever grateful for this.
Today, we have moved my mother from that house, and have had to build her a modern house at a whole different location, with modern amenities. She prefers the new house to that old one she built herself—and that old house even if sold, wouldn’t fetch enough money to do anything meaningful.
The above is being repeated by our generation. We are investing heavily and sweating to build houses or businesses which wouldn’t stand against the future. While it’s true that houses or lands appreciate, it’s false to think all do, equally or at the same speed.
What really appreciates is the strategic location of the land and how well the building on it is built. Therefore, while it may seem prudent in the short term to just buy a piece of land anywhere, and erect any brick and mortar on it, you wouldn’t be leaving any asset to your future self or offspring—as this sort of investment wouldn’t stand against the future.
It’s not just a catch of real estates, this applies to all assets which a person wishes to acquire. One thing that must be always considered is, what would be the real value or income-generating nature of this asset in the future?
If you live in Accra and you are able to purchase a small piece of land at Cantonments, Ridge, Spintex, Labone, East Legon or the Airport areas, you are likely to derive huge returns from this land in the long-term, compared to someone buying a piece of land at Amasaman. Of course, the purchasing price of these two lands will be far different but for investment or asset appreciating purposes, the one who struggles or manages to purchase land at a prime area will receive the greatest return in the long-run.
I have recently been looking at shares—as I intend to heavily start investing in this sector. And the above knowledge hovers around in this department too. It’s not the value of the shares today that really matters, but the future value if held on.
So, someone can own 200 shares in company A, and another can own 200 shares in company B. Even if they were all purchased at the same time and at the same price, if in 10 years’ time company B’s share price increases by 20, and that of A increases by 3, it’s the purchaser of company B’s shares who will be receiving a greater return on investment.
It’s important that we do not just think about today. Even in our quest to satisfy today’s need such as seeking to provide a roof over our heads, we should also consider the future value of what we are acquiring, even if it is to meet our immediate needs.
A land or a house may be cheap today. That does not mean you should just acquire it. Today’s price should not always be the ultimate determinant of which asset we purchase. We should also consider the possible future value, and the sort of capital gains we can derive even as a by-product of the actual purpose of acquisition.
Many of us have parents who bought lands or built houses but we don’t want to have anything to do with these properties, because they do not reflect our taste today or do not have any much value in today’s world.
For instance, we didn’t just buy the house we live in the UK (fake asset) simply because we wanted our own home. We also considered when the house was built, the location and the possible value in the next 10 to 20 years. Smart living is always about seeking to kill 2 or more birds with one stone, if possible—and looking to obtain the maximum returns from any enterprise in the long-run.
This concept should linger on in all our dealings. If you are starting or buying a business and the business will make $2,000 profit in the 1st year, that’s great. However, what should really matter is, how much will this business generate in the near and distant future—and whether it will be able to stand against the future, in terms of income-generation.
It’s not always profitable or wise to chase the options which are cheaper today. Sometimes, you will have to push harder to get into the expensive quarters and acquire high-value assets, to be able to stand the economy and demands of the future.
Ask yourself this: would your children want to live in that house or location you are struggling to erect or buy? Maybe, they would want to sell it—even that, at what price? It is tomorrow’s value that investors take advantage of. And all rich people are investors, in every small way possible.
The owner of McDonald’s is reported to have once puzzled his audience when they answered that he is into the hamburger business after he asked, what business do you think I am into? He laughed at their answer and stated that he is into the real-estate business. Today, McDonald’s is said to be the largest single owner of real estate in the world, more than even the catholic church.
So while many regard him as a fast-food owner, his real value sits in the lands and buildings acquired to run the fast food. He does not just acquire any spot. He focuses on valuable location to derive high returns from his acquisitions. This is a man killing two birds with one stone in a profitable manner, no matter which way you look at this business.
The poor and the middle class are mostly unable to shake their generational value by their continuous acquiring of low-value assets which ultimately become useless down the line.
Sometimes, it is more profitable for a group of people to pull resources together and acquire a few high-value assets, than to acquire several low-value assets individually as the middle class and the poor do.