Financial Adviser | Investing for high profit in Jamaica
QUESTION: What would be my best option to invest $1 million in Jamaica? What would that mature to in one to three years? Any advice on how I get into real estate taking advantage of nothing down and buying and selling for high profit?
FINANCIAL ADVISER: It seems that you are interested in interest-bearing securities and real estate, but have some misconceptions about the market.
An investment in a 365-day repurchase agreement (repo) attracts a rate of about 3.65 per cent. This should earn you $36,500 before tax and $27,375 after tax at the rate of 25 per cent per annum.
If we use recent Bank of Jamaica certificates of deposits as proxies for one-year and two-year instruments, you could expect rates of about 6.20 per cent and 6.70 per cent respectively for $1 million placed for those periods.
Before tax, you would earn $62,000 and $67,000, respectively, and $46,500 and $47,025 after tax per annum. These particular instruments pay interest every three months or quarterly.
With regard to investing in real estate, you should determine what you want, the location, type and size as these have a strong bearing on price. It would be prudent to engage the services of a reputable real-estate agent or company to take charge of the process of identifying a suitable property.
It would also be prudent to engage a reputable attorney-at-law or law firm with expertise in real estate matters to handle legal matters related to the transaction.
Once you have decided that you want to purchase a property, you should make an offer to the vendor or the vendor's legal representative either directly or through your legal representative.
If it is accepted, you would satisfy yourself, preferably through your legal representative, that what you are offering to buy is what you are indeed buying and that there are no hindrances to the transaction being concluded.
Two very important steps follow: The signing of the sales agreement, which is usually drafted by the vendor's legal representative, and the making of the deposit, which could be between 10 per cent and 15 per cent of the purchase price.
The agreement should be submitted to the Office of the Registrar of Titles and the government dues paid.
The property will be yours when you have made the final payment and it has been transferred to you.
I have just described a cash transaction. In the event that you would need to secure a mortgage, you would need to engage an appropriate financial institution, a process which would require time and additional costs.
So far as I know, your chances of succeeding in buying real estate in Jamaica by "taking advantage of nothing down" are remote, to put it mildly.
As to "buying and selling for high profit", I suggest that you temper your expectations and move cautiously and at a realistic pace on the path to wealth accumulation.
Oran A. Hall, a member of the Caribbean Financial Planning Association and principal author of The Handbook of Personal Financial Planning, offers personal financial planning advice and counsel.