Purchasing an investment property is a completely different process from buying a home to live in. Yet many first-time real estate investors make the mistake of applying the same approach, often leading to costly financial missteps.

At a recent Passport to Wealth forum, real estate investment strategist and CEO of McMillan Group Raymond McMillan explained that Caribbean investors can successfully build wealth through real estate — even in markets outside of Jamaica.

“We have to start thinking of real estate globally,” he said.

McMillan, who has been involved in global real estate for over two decades and is now a retired mortgage broker, emphasised that investing in property requires a clear strategy.

The first step is identifying what type of real estate you want to purchase, followed by where and why. Unlike buying a home — in which personal preferences like kitchen designs and neighbourhood appeal take priority — purchasing an investment property should be a calculated decision based on potential returns.

Investors need to determine whether they are targeting cash flow, appreciation, or a combination of both.

“There are different types of real estate: Single-family homes, condos, small or large multi-family properties, office space, retail, hospitality, and even industrial properties like warehouses. Jamaica is a tourist destination; hospitality investments here are a massive opportunity,” McMillan noted.

Identifying what kind of property investment one wants to participate in is the start of the journey. He pointed out special-purpose real estate categories such as health-care facilities, student housing, and even undeveloped land in what he refers to as “B and C neighbourhoods” — areas with more affordable land prices and untapped potential.

He stressed that successful investors rely on data, not guesswork. Understanding demographics — such as age, income levels, education, and employment trends — helps determine rental demand. Infrastructure developments, such as planned highways and commercial projects, can significantly increase a property’s long-term value.

For McMillan, B- and C-class neighbourhoods are where he sees the most opportunity, as these are areas where demand for affordable housing remains strong. Rather than targeting high-end markets with limited rental demand, he invests in areas where properties are consistently occupied.

“I don’t invest in high-end areas like Red Hills. There’s too small a rental market. We have a large number of people looking for basic accommodation. I’m trying to keep you out of homelessness,” he shared, citing that geographic location is another major factor in property valuation.

Prices and rental demand vary based on the country, city, zip code, and even specific neighbourhoods. Investors must assess whether they are buying in an urban or suburban area, a college town, retirement community, or a vacation market versus a long-term rental zone. Each of these elements impacts tenant demand and profitability.

He shared an example of a client who initially struggled with a single-family rental generating £800 per month. By converting it into a short-term vacation rental, the property’s monthly income increased to £4,000. This transformation was possible because of proper market analysis and an understanding of how to maximise real estate earnings.

“Most people think when you buy a piece of property and rent it out: ‘I bought it probably for US$200,000. My mortgage is perhaps US$2,000 a month; I rented it for US$2,500 a month; I made money.’ No, you just lost a lot of money,” he said.

Emphasising that real estate investing is not a hobby, but a business, McMillan noted the importance of investors understanding their “why” before diving into the market. Identifying the purpose behind the investment helps determine which benefits to pursue — whether it’s cash flow, lifestyle enhancement, or long-term wealth-building.

While tax breaks and reductions are also potential advantages, he cautioned that these benefits depend heavily on how the investment is structured. Investors must consult both an accountant and a lawyer to review their portfolios and decide whether to hold the property in their personal name, through a corporation, or within a trust. He stressed that there is no one-size-fits-all approach — just because one investor uses a trust doesn’t mean it’s the right option for everyone. Proper professional guidance is essential when deciding how to structure a real estate portfolio.

The most common benefit, however, is the appreciation of the property value. “We all know stories of properties bought for US$80,000 ten years ago now worth US$300,000,” McMillan said. But he cautioned that not all markets grow. He cited the 2008 US housing crash as a warning that real estate values can also fall — sometimes quickly. Natural disasters, crime, poor schools, and lack of infrastructure can all drag down property values, so research is essential. Beyond rental income, real estate can be used to build wealth through equity. McMillan explained that investors should look for undervalued properties, make strategic upgrades, and refinance to extract capital for their next purchase.

“Buy low, renovate modestly, and increase the property’s value,” McMillan advised. “You may spend $20,000 on paint, fixtures, and minor upgrades, and increase the property’s value by $70,000. Then refinance, pull out your equity, and buy the next property. That’s what I call ‘juicing’. And you repeat the process.”

Access to financing to purchase that first property is another key aspect of real estate investing. First-time investors often rely on personal loans, private lenders, or even credit cards to fund initial purchases. However, he suggests working with a skilled mortgage broker, because they can provide better access to structured financing options.

“Don’t try to do it alone,” he added. “Real estate is a business. Treat it like one.”