You cannot become a professional real estate investor if you are just starting out. You’d make mistakes. Is it, however, worth it to make mistakes with millions of naira?
This is why it is critical to conduct due diligence and consult with a professional who is well-versed in the local market in order to avoid regret in the end.
Real estate investment is one of the lucrative sectors in which Nigerians in the diaspora can invest, but it is fraught with difficulties, which is why it is not one of the investments you can dabble in. It is preferable not to learn the hard way.
While it is true that “experience is the best teacher,” it does not apply in the case of a multi-million naira investment.
So, what steps should you take before investing in real estate to minimize your losses (in the event that you make a minor error)?
Purchase Properties During the Dry Season
Don’t get me wrong: there’s nothing wrong with purchasing land during the dry season if you understand the topography of the area.
We’ve heard of people who bought apartments in some parts of Lekki only to complain about flooding during the rainy season. I wonder if they weren’t aware of the physical characteristics of the land before purchasing it.
Knowing the state of the land before investing your hard-earned money will help you determine the type of foundation and other building factors.
As a result, buying during the rainy season is ideal because if you were to make a purchase, you would have prepared a large budget to avoid floods.
Without a Goal
The biggest mistake anyone can make is to get into real estate with a specific goal in mind. Are you purchasing for your own use? Are you purchasing to supplement your income? Whatever your purpose is, you must have a specific goal in mind.
Failure to Investigate the Local Market
If you live in Abuja and want to buy a home in Lagos, you must first learn about the new environment. This is referred to as the local market.
You’ll need this to make purchasing decisions that are likely to reshape your investment portfolio. In fact, if you live in the Agege area of Lagos and want to invest in Lekki real estate, you must first understand the local market in Lekki.
Another common real estate investing blunder is making a purchase without taking environmental factors into account. Is there a risk of cultist attacks in the environment? Is it vulnerable to armed robbery and other security risks? I am sure you do not want to purchase a property only to abandon it later due to threats. Prospective tenants may avoid such locations even if the property is for rent. Nobody wants to be in a dangerous situation.
Give in to the Property Agent’s Pressure
Allow no pressure from agents or unprofessional property marketers if you are not purchasing directly from a real estate company. Because of their 5% or 10% commission on the property’s value, some agents may put pressure on prospective buyers.
Avoid making rash purchases; instead, take your time investigating the property and verifying the titles (documents) to ensure that they are valid.
Choosing the Wrong Developer
Working with the wrong developer may jeopardize your investment. Because of his interest, a shady developer would rather use subpar materials, putting your investment at risk.
Otta, Ogun State, received a branch of a new generation bank in 2006. The structure was finished in three months. Unfortunately, the bank was about to open the new branch when it went bankrupt. That’s how bad it is to work with a seasoned programmer. A good developer will provide you with professional advice.
Who Is Your Business Partner?
Look, you want to begin investing in real estate with a partner. What is his name? How long have you been friends? How much do you know about his past?
Is he a college classmate you haven’t heard from in over a decade? This is a property investment blunder you must avoid. If you must form a partnership, choose someone who shares your goals.
In 2015, a Nigerian living in Canada informed his sister in Nigeria of his intention to purchase some land in Lekki. He wanted his sister to assist him in establishing a real estate company in his preferred location. The sister lied and persuaded his brother to transfer the funds to her personal account.
The brother must be aware that his sister purchased three plots of land in an undeveloped area of Epe. Aside from the fact that the man desired five plots on the Lekki axis, his sister sabotaged his investment scheme.
The most common mistake in real estate investing is to buy because of the influence of a family member or because your brother is the seller. Your purchase should be one that meets your investment objectives.
Purchasing a House Because It Is Cheap
Even though it is important to take advantage of bargains, you must be able to distinguish between price and value. The value of the property you want to invest in will be greatly influenced by its location. For example, you cannot compare the value of a property in Lekki to that of a comparable property in Agege.
If you want to make a lot of money from renting out your property, Lekki is a good option, but you must be prepared to bear the financial consequences.
Failure to Establish a Physical Presence on a Property
One method of establishing ownership on land in cities such as Lagos, Ibadan, Abuja, and major state capitals in Nigeria is to erect a building or fence it. Do not make the mistake of leaving a property unattended for an extended period of time. Establish your presence on a property even if you intend to keep it for a long time.
Failure to Compute the Costs Involved
A real estate investor’s primary goal is to make a profit; he or she must convert a property into an interest-bearing investment.
The annual rental value of a three-bedroom apartment could be N3.1 million, and you intend to build ten units. This means that the property will earn N31, 000,000 per year. A business-minded investor will most likely calculate his return in three years in advance. That’s a great investment.
But have you taken the time to calculate how much it would cost you to purchase plots of land large enough to build ten 3-bedroom units on? What about material costs and other outlays?
Do not make the mistake of focusing solely on the return projection; instead, consult with a quantity surveyor and other professionals to determine the cost of completing the project.
Using Real Estate as a Quick Money Scheme
Real estate is not the same as MMM. If someone tells you that your investment will yield 200 percent interest in a month, he is either a liar or a skeptic.
Property grows in value over time. Though appreciation in a few months is possible, it will not double your investment in a month.
Do not treat your investment as a get-rich-quick scheme; instead, be patient.
Overlooking Rental Requirements
Simply put, match your investment to the types of tenants most likely to rent in the area where your property is located.
Because of the beaches around those axes, shortlets are rapidly growing in the Lekki and Abraham Adesanya areas of Lagos.
People looking for a good time would prefer shortlets with modern amenities over the typical 3-bedroom flat, which is popular with families.
Failure to Conduct Land Title Research
I’ve heard of several cases of forged land titles, such as Certificates of Occupancy (C of O), Governor’s Consent, and other vital documents.
While considering the long-term return on the property, don’t be too eager to pay for something you can’t independently verify. If the seller claims that the property has C of O, you can check the title at the Lagos State Ministry of Land’s Land Registry Unit in Alausa.
If the titles are not valid, regardless of how much you have invested in the property, the rightful owner will kick you out or the government will take over if the property belongs to the state.
Failure to Perfect Your Property’s Title
This is related to the previous point. Before making a financial commitment as an investor, you MUST verify the documents on the property.
Do not pay until the titles’ uniqueness has been perfected. Do not put the cart in front of the horse.
If possible, hire professionals who are well-versed in the local market, as well as the rightful owner of the property.
Putting Your Family Ties Before Your Investment
Even if a plot of land in your village costs N50K per plot, as an investor, your business goal comes first.
While family is very important, purchasing plots of land in a village that does not meet your investment goal will either set you back or completely defeat it. Do not make this investment blunder.
Failure to Maximize Value
If you buy two and a half plots of land in Idimu facing the expressway, you should be able to determine whether the land is suitable for office or residential development.
A typical property investor would most likely use such land to construct offices and lease them to a financial institution or another large corporation.
As a result, you should be able to maximize value. Is it worthwhile to sell and reinvest the proceeds in another property that will generate higher returns?
Managing Tasks Inadequately
Poor task management can have a negative impact on your real estate investment portfolio. You could entrust your work to plan everything while there are people.
For example, do not put too much faith in artisans; do not go on an unscheduled site visitation unless the job has been assigned to a reputable Building Engineering firm.
Even if your project is being managed by a trusted Engineer, it is important to pay an unscheduled visit to the site.
Get a Head Start on Distressed-Sale
A distressed sale occurs when an asset owner is eager to sell his property because he urgently requires funds to meet certain financial obligations.
Because the owner is eager to sell the asset, the prospective buyer offers a price far below the property’s market value.
If the market value of a 3-bedroom duplex is N100,000,000, you offer N40,000,000, and the seller quickly agrees, it would be the most erroneous investment decision to act without first conducting research.
To avoid regret, you must obtain answers to the following questions before purchasing a distressed sale:
Who is the true owner of the land?
Is there any pending litigation on the property?
Can the titles be verified?
What is the environmental history?
Was it constructed with subpar materials?
What is the owner’s motivation for selling?
Is the property owned by a large family?
Finally, consider this:
Real estate investment is not something you should dabble in; do your research and do not jump on a cheap property without due diligence to avoid regret.
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