Popular opinion says investing in real estate is about the safest way to grow your money that you’ll find in Nigeria. It also offers some of the highest rates of returns on investment of any venture in the country. Not surprisingly, a lot of people with a sizable deal of cash to spare would opt to put it into securing property, in the hope that they’ll sell it at a higher price or lease them out in exchange for periodic payments.
But healthy net profits aren’t always guaranteed on real estate. That’s because there’s a lot that determines the extent to which lands and buildings yield good revenue for people who hold them. Some of these things aren’t present in every investment case. For example, you may find, to your dismay, that you incur excessive costs from multiple charges demanded by local authorities on a periodic basis. If these costs are big enough, they could shrink whatever profits you’ll make from the property.
Besides the widespread problem with taxes and vaguely explained charges, some spaces are more likely to have significant increases in valuation over time than others. How do you know which locations will have these big value appreciations, so you can take advantage of them?
Here’s a number of things to keep in perspective when you’re out hunting for the ideal real estate investment spot.
Why you want to buy real estate
What are the short, medium and long-term reasons for you buying property?
Maybe you’re purchasing land because you want to sell it off at a higher price sometime in the future. Or you could be developing property so you’ll rent it to tenants. These are relatively immediate to mid-term aims. In the long run, you’ll want to get more out of your investment than you’ve put in.
This means you should think about how the property you’re looking to buy will help you achieve these aims. Are they fit for this purpose?
Budget vs costs
The first question you’ll be asking yourself here is whether you have enough money to pay for the property in question. And if you’re developing it, you also have to consider construction costs.
However, you need to factor in the periodic payments you may have to make after acquiring and developing the property, including maintenance and property tax. How much could these cost? Can your present funds and future earnings cover these as you go on?
Find out whether the area you’re interested in is accessible, and if it has the sort of infrastructure you desire. You may be tempted to overlook these things if the property is cheap; we would advise that you resist this temptation. In fact, such spaces could have very low price tags precisely because they aren’t in a good state.
The receptiveness of locales
Smiles and handshakes are good, but they aren’t worth anything if they’re offered by people who also constantly demand illegal levies from you.
Unfortunately, this mixed signalling from land owners isn’t uncommon. Prospective buyers of property often have to negotiate their way through a series of demands from disparate groups and duplicated payments for land use. If investors are unable to manage this properly, they risk haemorrhaging revenues. Sometimes, they end up having to sell off their property at a net loss, just to relieve themselves of the trouble.
Thankfully, there’s always information out there about what areas are hotbeds for this kind of malaise, and which ones are just fine. Talk to people in the know, and find out whether your potential real estate buy is prone to this problem or not.
The pace of development around the area
If you’ll be buying at a low price to sell at a higher one, you may pick an area that’s just outside of a rapidly urbanizing region. These places tend to give the highest returns on investment over time. Examples include the outer edges of the Lagos metropolis or the newer developments in and around Port Harcourt. As these cities are pushed outward by their growing populations, the demand for spaces in the outlying regions will rocket upwards, taking property prices with them.
Local land acquisition laws
A lot of property buyers don’t pay as much attention to local property ownership laws as they should. Things like proper registration processes and checking in with development authorities often get overlooked. The consequences for this nonchalance are usually severe- they range from hefty fines to outright forfeiture of the property concerned.
Make sure you’re in step with the law all the way. Work with an agent who’s knowledgeable about the rules, and ensure that you let the authorities know all that they need to.
Have everything in writing, including receipts, official licenses and authorizations, and agreements you reach with the seller. Where it applies, you should have a legal agent as a witness to make your agreements legally binding. You will need to refer to these documents at some point in the future.
Have an eye on the economy
Property markets are depressed by recessions and thrive when the economy is booming. Most people aren’t trained to spot weaknesses in the economy before they become huge cracks. But you can at least get a feel of where things are headed by watching property prices. This should help you tell when you should be buying, selling, or staying out of the market altogether.