Real estate investment is no doubt one of the most profitable investments in Nigeria. Unfortunately, it could also be a sure way to disappointment if you don't know the right things to consider when embarking on the real estate investment journey.
Several investors are so excited about the thought of being real estate investors that they forget that the field has its laws. Rushing off as a result of such excitement will cause you to make avoidable mistakes. Unfortunately, such investors sometimes lose their hard-earned money.
Things to Know Before Investing in Real Estate in Nigeria
Before investing in real estate, there are certain lessons you need to be familiar with. These lessons even precede the consideration of factors surrounding investment in real estate. Without much ado, let us consider the things you should know before investing in real estate.
1. Master the Art of Recognizing Great Locations
Location plays a crucial role in real estate investment. It influences appreciation, demand and how much profit you can make from a property. Before venturing into real estate, you need to master the art of recognizing great locations. This is not something that happens overnight, you’ve got to do your due diligence.
As a real estate investor, master how to quickly recognize properties that have a high potential of developing. Possessing this skill will help you make informed decisions that will yield financial and social profits.
For example, when an area starts experiencing a high influx of people and getting overpriced, it might be best to invest in the outskirts. It is a no-brainier. Once the area that is being rushed gets low in land and properties for sale, people will naturally gravitate towards the outskirts. This focus on the outskirts will in turn lead to an increase in demand. As a result of the limited supply of land, property owners will be forced to increase the cost of properties. That way, they'd earn profits from their property.
2. Have Basic Knowledge of Pricing and Negotiation
No matter how tempting it is, never skip the negotiation phase. Negotiation is an important part of real estate investment. Most time, property sellers set the price above the asking price. While smart investors will purchase at the regular selling price, several investors will make the mistake of buying at exorbitant prices.
Unfortunately, purchasing properties at exorbitant prices will affect the profitability of the property. It reduces your interest margin and could make your property look overpriced when you are trying to sell it.
A major way to ace your negotiation skills is by conducting market research. Have an idea about the range of prices for similar properties in the neighbourhood. This will guide your negotiation and help you make the right decisions.
3. Real Estate is Work
Smart investors are aware that almost all investment types require efforts from them. This same rule applies to real estate investment. Real estate investment is real work that requires effort from you.
Even though you may not know all there is about real estate investment, you need to know the basics. Some real estate investors put their money into real estate investing without learning anything about the field. That could be very dangerous because it is a sure way to fail in real estate.
4. Never Underestimate the Power of Documentation
In real estate investment, never underestimate the power of documents. As basic as this sounds, several newbies do not know it. Rogues love to take advantage of unsuspecting real estate investors. So it's important to back up every deal, contract and real estate move with the right documents. You can even support these written documents with audio and video recordings.
Do not let your uncertainty about the procedure for real estate documentation deter you from investing. Several real estate companies can walk you through the process. Land Republic is always available to assist you in your property procurement process. Do not hesitate to reach out to us when you are about to procure a property.
5. Excessive Renovations are Not Directly Proportional to Forced Appreciation
In a bid to maximize forced appreciation, several investors go overboard in their renovation approach. While renovation and putting the property in good shape plays a role in appreciation, it is not all there is to be done.
Whether or not you like it, different property buyers have different tastes. In such situations, renovation of a property is insignificant in changing their tastes. When and if you have to renovate a property, stick to the basics – make the house look clean, get rid of odours and apply a fresh paint coat if necessary.
Essential Considerations Before Investing in Real Estate in Nigeria
1. Market Conditions
You need to consider the market conditions before investing in real estate in Nigeria. In simple terms, market conditions refer to the state of the real estate market. It includes the demand and supply of properties in an area, economic indicators and other factors that could affect property value and rental income.
The Investment and Securities Act (ISA) of 2007 mandates every person who intends to engage in the business of buying and selling securities, including real estate, to be registered with the Securities and Exchange Commission (SEC). The SEC regulates and supervises the securities market and requires all registered market operators to disclose adequate information to investors. This information includes information about market conditions and how they affect investors' real estate investments. Therefore, before investing, you should study the conditions of the market and its impact on your investment.
2. Property Management
Several real estate properties become obsolete because their owners failed to incorporate property management. When starting your real estate investment journey, you should have a laid down map of how the property will be managed. Some of the things you might want to include in your plan include the frequency of overseeing visits, how and when renovations will be done and the appropriation of rental resources for the development of the facility.
You should also consider tenancy relations and how ongoing maintenance and repairs will be done. Failure to play your role in the maintenance of your property could lead to legal consequences in Nigeria. For example, the Tenancy Law of Lagos State 2011 mandates landlords to ensure their houses are in good condition and conducive for habitation. The law also gives tenants the right to request repairs of the house when the need arises.
3. Legal Considerations
Real estate in Nigeria has several laws guiding and instructing how it should be done. Before transacting in the field, it is important to be updated on the laws and regulations. Failure to understand these laws before engaging in real estate investment could lead to legal consequences and liability. In some cases, you could forfeit your property.
As a Nigerian real estate investor you should be aware of the Land Use Act of 1978, the Land Instrument Registration Law, and the Nigerian Investment Promotion Commission Act. These laws give you the guidelines for obtaining approvals and registering title documents. Additionally, it contains the environmental and building regulations.
4. Financing Options
How do you intend to finance your investment plan? Real estate investment could be capital intensive. You should not venture into real estate investment without a financial plan in mind.
As a Nigerian real estate investor, several financing plans are accessible to you. You could get a loan, reach out to private lenders or even partner with other investors. Before choosing any of these financial options, you should evaluate the terms and conditions. Know the impact it will have on the investment and the future effect of your choice of option.
One of the factors that will help you maximize your financial options is for you to set a budget before you start. This budget should be an all-inclusive plan of what you intend to do and the costs of each item on the plan. You can allocate funds for miscellaneous expenses during the project. As much as possible, ensure you do not overshoot your budget when you start executing the plan.
5. Location
Different people have different tastes when it comes to choosing a location for your real estate investment. However, there are essential features of a location you should look out for. Look out for the property's accessibility and road network.
Also, it is best to avoid properties that lack connection to major roads. The last thing you want to do to yourself is acquire a property that will have you locked in when the area develops.
Also, factor in the proximity of the property to essential amenities. The presence of these factors will be an added advantage to the selling price of your property. Of truth, some of these factors might not yet be in place at the time you are acquiring the property. However, you could study the master plan of the geographical area to decipher future development plans for the area.
Conclusion
As a real estate investor, there are several factors you need to consider before investing. These factors have an impact on your investment and play a significant role in determining how profitable the investment will be. You don’t have to walk the real estate investment journey alone, land republic is committed to helping you. Contact us today via +2348122222283 and support@landrepublic.co.
