Tamir Sapir once made a bold declaration “If you are not going to put money in real estate, where else?” this is doubtlessly a challenging and thought provoking statement. Donald Trump concurring with Tamir Sapir added “…it’s tangible, it’s solid, it’s beautiful, it’s artistic, from my standpoint, and I love real estate.”
Real estate is of course a familiar lyric in the mouth of most entrepreneurs today. Its success speaks loud, its smell allure many into investing into it. Real estate is really a big business across the globe. It is a business that thrives in every part of the world. It does not require so much, it essential require an understanding of the rule.
Legal dictionary defines real estate as the modern term for land and anything that is permanently affixed to it. Fixtures include buildings, fences, and things attached to buildings, such as plumbing, heating, and light fixtures. The business of real estate therefore is the buying and selling of land and everything fixed on it such as building etc.
The Prospects of Real Estate Business
The value of properties is on a daily rise both in Nigeria and across the globe. In Nigeria, the federal capital territory, Lagos and Port Harcourt have the highest value rate of real estate. A report by Propertywire.com has it that “real estate now accounts for around a fifth of the invested wealth of the nearly 200,000 ultra high net worth individuals, according to the analysis from international real estate advisor, Savills, in association with Wealth-X, an UHNW intelligence provider”. Still on the report, Savills estimates that the total value of the world’s real estate is now around $180tn, some 72 per cent of which is owner occupied residential property.
Forbes on March 4, 2014 released a billionaire list of 20 real estate tycoons. Some of these tycoons have a net worth as high as $19.6 billion.
The Position of the Nigerian Real Estate Industry
Real estate thrives most in an emerging economy. Forbes billionaire list of 20 real estate tycoons is a lesson to draw from. According to the report, “…20 wealthiest of the real estate moguls–include a whopping 14 people who hail from Asian-Pacific nations. Seven are from Hong Kong, four from China, two from Singapore, and one from Australia. Only six of the richest real estate 20 are Westerners: three each from the U.S. and the U.K.”.
This report serves as a compass for analyst. It reveals clearly that the market for real estate leans heavily in favour of emerging economies like Nigeria.
Why Invest in Real Estate in Nigeria
The robust and vibrant nature of the Nigerian market has been a major attraction for foreign investors. The Nigerian market is gradually been flooded by foreign investors. This has been a major catalyst for the rise of industries which invariables means the exchange of properties. The need to lease, buy and sell properties is fast increasing as Nigeria becomes more industrialised. Just like the case of China and Asia, Nigeria is the next big market for real estate investment. The ground is being prepared.
How to invest in Real Estate Business
People shy away from real estate because of the mythical believe that it is capital intensive. You don’t necessarily have to be a big shot to shoot into real estate market. Here are few tips for small businesses investment in real estate.
1. Go for land Speculation
You can begin by buying up land in up-coming areas where you foresee future growth and price appreciation. The result may come very quickly, it may also delay but it always will appreciate. A classic example of this in Lagos is Aja and Epe axis. That area used to be desolate, but today, a good number of the lands there have been bought up as development crept in gradually.
A lot of people have risen to fortune by speculating and then investing in up-coming areas. A word of causation; get a good lawyer for safe keeping purpose.
This another way by which a small business can invest in real estate. To minimize cost, you may go for fairly worn out house and then renovate. If you can buy right, plus a modest renovation, it will turn the property into a valuable asset for you. If you go with this option, a key factor to watch out for is the cost of renovating.
3. Focus on Commercial Development
Some investors focus on developing commercial outlets (stores, shopping complexes, office space, warehouses, etc) in strategic business areas. The size of such investments would vary, but we are more concerned about where a small investor could find space in this market segment. The truth, really, is that there is reasonable room for the small player. The 'magic', as in many investment actions, is in being motivated, committed and focused. Building a string of shops, which will tomorrow command high rental value and strong market price may simply require identifying, well ahead, where sizeable settlements or access infrastructure like roads will emerge. When roads pass and people settle, shops will spring up. As demand pressure mounts on the stock, their value will go up.
4. Look into Residential Accommodation Development
In major Nigerian cities like Abuja, Lagos, Port Harcourt and most state capitals, residential accommodation is a major issue. As population surge in these places, the pressure for housing accommodation increases. What this says is that residential accommodation will remain good business in a long time to come. To begin to meet market demand and come near market saturation will take long years and a special will from government, which is not evident yet. So, if you have money to invest, here is not a bursting market. You can also always find a location and house-type that could suit your pocket and still meet your returns expectation.
The list is in exhaustive.
I will continue on real estate in our next issue.
For more details, visit www.padronconsulting.com
Like and follow us on https://www.facebook.com/Naijainvest
"PadronConsulting assists foreign investors and Nigerians in the Diaspora develop, acquire and manage properties even without having an established presence in Nigeria."