By Nwagu David
Real estate is one of the most viable kinds of investment. Investment in real estate can become a fortune overnight if the right mix is put in place.
The following are some of the mix to consider when investing in real estate and for those already involved in it to turn their presently dormant investment into fortune:
1. INVEST IN PROPERTIES WITH A HUGE DISCOUNTED VALUE: When buying at a good discount you have the flexibility of selling at worst case scenario at a profit. Here is what I mean. Recently, a friend put his property for sale at almost twice the price of the going rate in an area in Lekki. When I asked him why the unreasonable amount, he said that because he bought it for more than double the actual value. As a matter of fact, he is only left with barely a meagre profit.
The opposite should always be the case when buying a property. Any serious investor should realize that you make your profit from the start of a transaction in real estate and not at the point of resale.
2. ENSURE A SUPER FINISH: When investing in real estate, a few details can make all the difference. The difference between two buildings on the same street may be as massive as N1 million as a result of details. The details can attract a huge fortune to the property owner. Paying attention to details must be a priority to any serious investor if you care about good returns. For instance, Plaster of Paris ceiling as against PVC; Turkish doors as against local doors; wall screeching as against direct painting etc.
3. FOLLOW NEW DEVELOPMENTS: When making a real estate purchase, always ask questions about the kind of development that is coming up in an area; since development will most times attract other developments. An example is the Dangote Refinery; long before the Dangote Refinery project started, I had made a huge stake in that area. Thank God I did! Other developments in Lekki we may consider is Fourth Mainland Bridge; Lekki Seaport; Airport and the Lekki Free Trade Zone etc.
4. BUY PENNY PROPERTIES: Investing in penny properties means buying at rock bottom price. What I mean is buying the property virgin; buying long before there are roads, layouts, drainages or any form of development or title. I do this often. Some of the properties I sell today at N10 million were properties I bought at N200,000 seven years ago.
5. LOOK OUT FOR YOUTHFUL DEMOGRAPHY: When investing in real estate, we have to consider demography as this will determine a whole lot of other factors e.g. prices, development etc.
Recently, I have noticed that some areas have stopped developing as a result of the kinds of individuals staying around such area. An area filled with retirees will most likely not attract many up and mobile young people.
6. ENSURE YOU HAVE A FAIR IDEA OF THE EXISTING RENTAL VALUE: Recently, a young fellow approached me with a fairly good amount of money he was almost going to put into another property with a rental value in the range of N2.4million per annum. I discouraged him and at the same time took him to where he got another for same price with a rental value of about N6 million per annum
My formula which I call ‘’DAVID’’ formula is that you must consider at least 8% -10% ROI [Return on Investment] for any real estate investment per annum. Without which, it is a bad investment. Be it building land etc.
7. GO UP, DON’T GO WIDE: When investing in real estate, always consider going up as against going wide. Usually, going up will come cheaper for an investor on the long run than going wide. What it means is that you may consider a two- storey building than a seven bedroom bungalow if you want a serious return on your investment.
8. ASK FOR THE PREVAILING TYPES OF PROPERTIES: Building a four bedroom duplex in an area where the demography demands is a two bedroom duplex or mini-flat may amount to tying money down for too long. In certain areas, some kinds of houses are in high demand and this should be put in consideration when planning real estate investment.
9. ENGAGE IN DIRECT LABOUR: The first kind of profit is made from the start of a project. Recently, my neighbour entered into a brawl with his Engineer over very outrageous construction cost; a case where the Engineer charged over N80 million for a job of less than N45 million!
10. TITLE! TITLE!! TITLE!!! : A property with good title documents will sell any day. In the circumstance that sale becomes difficult the Bank will most likely bail you out when the property is with the right kind of title.
-David, an experienced property consultant based in Lekki, is available on: 08028550128, email: [email protected], Facebook:@fkr.ng, twitter @fkrNg and Instagram: fkr ng.