A friend once told me, that it is not a fact until it is well proven!. The same thing applies to real estate investment today, both locally and globally. And to this effect, real estate investment expansions have made some investors make bad decisions when making their real estate investment decisions.
In the cause of this write-up, I will be shedding light on some little avoidable real estate investment mistakes made by most investors, and to which, with years of real estate advisory services to most of our clients, we have been able to advise them better before selecting a perfect real estate investment decisions.
It is well understood and known that before any real estate transactions are completed, certain factors must have been put in check before any conclusions and decision makings are finalized. And these are just the fundamentals before exchange of funds from both parties. Some of the factors are listed below;
- Property inspection
- Offer letter
- Document exchange from the seller for proper search
- Document verifications and validations at land registry
- Preparation of exchange contracts (deeds of assignment, contract of sales, sales receipt)
- The signing of exchange contracts (as listed above)
- Transfer of funds to all parties (property owner, facilitators).
But in today’s write up, I will be insisting and assuming all these necessary basic rights to property ownership are known to readers as I will be shedding more light on avoiding investment mistake during decision making.
Before buying into any real estate investment, below are the necessary and crucial steps and guidelines to follow before even proceeding to the basics requirement as listed above in property acquisition.
- How versatile is your estate agent with market analysis
- What is the rate of demand for properties in the region
- What value is expected annually
- What are the rules and regulations surrounding the property either by the govt, or estate?
- How do you even make more money if such property is secured?
- What is the property acquisition urgency needed for its investment plans
- What are the regret factors to consider before buying?
How versatile is your real estate agent with the market?
In today’s real estate, taking Lagos state as a case study, most of the estate agent are not even conversant with change in the real estate industry and its market at large. Most real estate agents cannot even analyse the % change in the price of properties either land or building in particular geographical locations annually, and to this effect has misguided most investors in choosing the wrong real estate investment, although regardless “it is real estate, and your investment is secured” and your agent will definitely get paid to. But while others are cashing out big, you will be in the waiting period.
Before making your real estate investment decision, choose a realtor that understands the industry and market very well, someone that is into the market closely, and someone who can analyse your % returns accurately based on his or her market understanding and involvement. He or she will guide you accurately into making the right decisions. At 360luxe, we have guided hundreds of real estate investors accurately in selecting profitable real estate investment decisions, regardless of their pocket.
What are the rates of real estate demands in the region you want to invest in?
For you to make huge returns annually on your real estate investment, one key factor to note is the demands in the region and location. Property inflates using the law of demand and supply, and also the more the demands, the greater possibilities of the property investment to keep appreciating. Knowing the demands is more like being a visionary in your investment choice. Some locations appreciate at about 100% annually while some at 5-10% annually. Where would you rather invest? Also, note that appreciation in real estate does not project with a huge volume of monetary involvement. You can secure a real estate property in some locations for as low as N3m now and sell next year at N8M, while the same applies to where you purchased at N50M NOW AND CAN ONLY RESELL AT N60M NEXT YEAR. So choose wisely
What value is expected on ROI annually?
Just as stated in the previous outline, a good real estate agent’s duty is to provide services that cover a wide range of real estate investment advisory, some of which is helping clients choose the right real estate investment. Knowing the market shouldn’t be a problem at all for a qualified and professional real estate agent. So in your choice of investment, work hand in hand with your agent to factor out expected returns on investment based on the previous year of the property value in your area of choice.
A good real estate investment should be able to provide a minimum of 25% annual returns on investment. And such real estate investment that brings above 50% should not be taken for granted.
Government regulations and estate rules of development
These are other factors to be considered before making your real estate investment decision. i.e some landed properties in Lagos state has rules and guidelines for the development. What do I mean by this, in some areas that are regulated by the government of the state, there are certain categories of property that can be developed on plots as allotted, while such rules don’t apply in some areas? So if you looking at going into property development by securing land, kindly look into this factirs first before concluding on the purchase. Same thing applies to some estate development, you cannot build certain categories of buildings.
And if you are someone who has some particular sets of standards to be laid out when entering the property development market, all this could be a constrain and mid changing especially for those who cannot easily adapt to change.
How do you make money once property is secured?
Are you buying a building or land? If building, what changes can I make to increase my local rentals, is the area suitable for an Airbnb apartment (shortletting), and is the location well paved and good drainage system? Because these are factors that improve real estate investment.
Is it land you are buying? What values will be placed if property document papers are perfected, can a joint venture agreement with third party be actually possible where the land is? How fast is buildings selling and what prices are they selling. This are questions to find out before finalising
What is the property acquisition urgency needed for its investment plan?
The developers, mostly from the southeast of Nigeria understand this part of real estate investment and have so much benefitted and gained ground in the island part of Lagos State, if not Mainland inclusive self, due to their understanding of this part of real estate investment segment.
First and foremost, you have the raw cash ready to purchase your real estate, what factors could militate the need for urgency in the purchase of the real estate, without considering the investment benefit of the cash available.
Let me hint you! A good investor with N100m cash down will not just buy a building, but rather purchase land. The urgency in becoming a landlord makes many rush into the home to rent buying option as an investment benefit in real estate, while in the real sense of it, the land acquisition makes more money than already built property, only in the case of distress in a perfect investment location. A good investor would acquire land and look for investors to build with, or rather outsource for partmers and make more money rather than investing such on a home to rent houses with a yearly yield of maybe 4-8m p.a.
So it is best to understand the dynamics of property investment before diving into it. Regardless you will be making your steady income considering it is real estate, but many smart investors will be making more and cooler.
Lastly, the regret factor to consider before concluding on real estate investment purchase.
You know you can invest in real estate and still regret on the later end? Yes, you can seriously regret it. A client contacted us recently and shared his regret over the real estate investment choice he made 2 years back. He resold the actual investment with just 4 million Naira interest. He was even still stating how he regretted the investment by making such little until we pinpointed to him that he has even sold at loss! Why! He sold when the exchange rate to naira is alarming. He bought when dollar to naira is between 380-400 and sold when dollar to naira is closing up to 500. What a huge loss!. Why, he chose the wrong place to invest, wrong structure that looks dilapidated within a space of 2 years, worng developer to buy from, and the wrong agent to seek advice from.
During our years of real estate investment advisory, I can boastfully say, none of our past clients has ever complained of our choice of real estate investment for them.
Thinking of the real estate investment to start with , kindly look into the selections below;
- Buy to rent (annual rentals)
- Buy to lease (3 years and above)
- Buy to short stay (Airbnb)
- Buy to resell (flippers)
- Buy to keep for appreciation
- Buy for joint venture deal
- Joint venture
- Commercial real estate
Have something in mind? Send us an email via info@360luxeltd.com
