Some people feel that saving money in the bank is a good strategy to building wealth. Though it is very good to save, it is not a good wealth building strategy. The gains of real estate investment far outweighs that of saving in the bank for the following reasons.
1. Currency always diminish in value while real estate appreciates: The purchasing power of money continually diminishes. The things One million naira could buy five years ago are not the same things it can buy today as the prices of goods have gone up.
However, real estate always appreciates. If you buy a plot of land in a good location, take effective possession and perfect necessary documentation today, in five years time, you can sell it for double (or even triple) the price you bought it.
2. Return on savings is infinitesimal while returns on real estate investments are huge: When you save your money in the bank or do a fixed deposit, your returns on investment are usually single digit per annum.
Conversely, based on the rate of development in the area you purchase your landed property or building, the return on investment are often huge.
If you buy a house for example and let it out to tenants, between a decade to two, you will have recovered your investment and you will continue to make profit for the rest of your life.
3. Your money in the bank simply makes the banker richer while your money in real estate makes you richer: If you save money in the bank, the money will be used by bankers to give loans to customers and you will be paid an interest. The difference between the interest given by the customer who loans your money and the amount given to you is taken by the bank. Thus making the banker richer.
On the other hand, when you invest in real estate, the difference between the price you bought the property and the price you are selling it is taken completely by you. Thus making you richer.
4. Expenses always arise to deplete your savings but your property is always there appreciating in value: When you have money saved in the bank, no matter how disciplined you are, there will always be expenses that will arise to deplete the savings.
When you invest such funds into real estate, your cash is tied into an investment that will be appreciating in value no matter how lose you are with the remaining cash in your possession.
5. None of the rich ascribe their success in gathering wealth to saving but most of them have impressive property portfolios: Of all the wealthy individuals in the world, I do not know of anyone whose wealth strategy was saving in the bank.
However, a cursory look at the wealthiest individuals in the world, in Africa and even in Nigeria show that property investment is the preferred wealth building option.
Therefore, if you desire your money to appreciate with high return on investment which makes you richer and among the wealthy men in the world, consider investing in real estate.