How Long To Re-coup Rental Properties - Properties - Nairaland
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| How Long To Re-coup Rental Properties by ASHLAND(m): 1:32am On Oct 18, 2008 |
How many years should take Nigerian property investors to re-coup his investment on a rental property? NOTE: If he uses his capital, it will cost him less, but if he has to finance the property, it will cost not less than double the price. |
| Re: How Long To Re-coup Rental Properties by ASHLAND(m): 12:50am On Oct 22, 2008 |
Caution : Caution : Caution : If you can't find an answer to this fundamental rules of real estate investment, it's better you put your money in a CD account. Even though, the CD interest rate does not more than 5%. However, if your real estate is mainly for fashion, not for investment purpose, then you have nothing to loose. |
| Re: How Long To Re-coup Rental Properties by abujabooks(f): 10:10am On Oct 22, 2008 |
What is CD? |
| Re: How Long To Re-coup Rental Properties by ASHLAND(m): 3:44am On Oct 23, 2008 |
What is CD? CD means certificate of deposit, it's a bank account name. Likewise, they call it fixed deposit account in Nigeria banks. |
| Re: How Long To Re-coup Rental Properties by asitis(f): 9:14am On Oct 23, 2008 |
ASHLAND: To be honest, this would depends on location and the amount the plot of land cost as these factors would determines the rental income, in some areas you could get your money back in as little as 6-7 years, such area as seen rents being tripled overnight (as in the case of lekki), and in some areas we could be talking 10-12 years or even more. Financing the the property would of course makes the time scale to get your money longer depending on the interest rate, hope this helps. |
| Re: How Long To Re-coup Rental Properties by ASHLAND(m): 4:01am On Oct 24, 2008 |
To be honest, this would depends on location and the amount the plot of land cost as these factors would determines the rental income, in some areas you could get your money back in as little as 6-7 years, such area as seen rents being tripled overnight (as in the case of lekki), and in some areas we could be talking 10-12 years or even more. Financing the the property would of course makes the time scale to get your money longer depending on the interest rate, hope this helps. Asitis, you have tried, but if you look at Nigeria rents as of today, you will notice they don't match that your calculation. Nigeria rents are too poor compare to cost of properties .I think tenants need to be educated that they need to pay more. |
| Re: How Long To Re-coup Rental Properties by asitis(f): 4:34pm On Oct 24, 2008 |
ASHLAND: Yes Nigerians rents are poor but not in all area, that's why it's important to make lots of research before venturing into any investment especially property investment |
| Re: How Long To Re-coup Rental Properties by ASHLAND(m): 2:16am On Oct 29, 2008 |
BETTER ANSWER WILL SOON APPEAR. |
| Re: How Long To Re-coup Rental Properties by DisGuy: 12:06pm On Nov 04, 2008 |
ASHLAND: I dont think you know much about nigeian poperties and income you cant expect people to pay more than the prevaling rate especially when facilities provided by the homeowners are just standard and in some cases below standard even in the 'high brow' areas what with door handles coming off no furnishing, loud noise doors, dark mouldy walls etec You also have to realise people are made to pay yearly, usually two years in advance for a start I think people will be open to a premium if they are allowed to pay monthly (direct bank transfers) as done everwhere else in the world!!!! |
| Re: How Long To Re-coup Rental Properties by JJYOU: 12:19pm On Nov 04, 2008 |
nigerians generally dont like paying for anything and take advantage of someone's goodness Dis Guy:what would be a prevailing rate to you dear sir? we give 24hrs electricity in some of our houses and you get some tenants talking about not having money to pay. yet they have money for food and petrol my advice is if you can give your property to agents and dont get personal with tenants |
| Re: How Long To Re-coup Rental Properties by asitis(f): 9:42pm On Nov 04, 2008 |
ASHLAND: It's seems to me that you know VERY LITTLE about property market in Nigeria ASHLAND: You NEED to do more research on the topic yourself instead being insultive, why ask for people's opinion if you already have a believe (even though that believe is wrong) |
| Re: How Long To Re-coup Rental Properties by DisGuy: 12:17am On Nov 05, 2008 |
JJYOU: i don't know to much about the rent aswell but its obvious you don't expect people to pay more than 'the neigbhourhood' average in an area where 3bed flat is going for say 250 p.a, you'll probably have your house in the market forever if you charge something like 500k p.a except you get some desperate oil money miss road. seeing as they'll be experience about the same level of traffic,security threat, access to amenities etc 24hr electricity should be standard anyway  |
| Re: How Long To Re-coup Rental Properties by ASHLAND(m): 4:28am On Nov 08, 2008 |
You NEED to do more research on the topic yourself instead being insultive, why ask for people's opinion if you already have a believe (even though that believe is wrong)I thanks you for your comment. However, I did not appreciate it because there is nothing wrong in learning more, especially, if the avenue is open. Furthermore, try to remember that two heads are better than one. i don't know to much about the rent aswell but its obvious This Guy, your comment on this topic is part of the reasons that made me pause for other people's opinion. Actually, I am aware of the rents per annum, but for what value of the property? You may agree with me that, if I invested my personal cash on a 3 bedroom flat with regular amenities, that cost #7,000,000.00 . Let's say the location is amuwo odofin. According to my experience and fear investment idea, I suppose to re-coup the money back in fifteen years. That means #7,000,000.00 divided by 180 months, the monthly rent will definitely be #38,888.89. On the other hand, if I have to finance the property conventionally for thirty years, the interest and principal at the end of the term will cost me minimum of #14,000,000.00 . That means # 14,000,000.00 divided by 360 months, obviously, the monthly rent will be # 38,888.89. To the best of my knowledge, I shouldn't rent out this property less than the stated rental value per month. Although, I am one of those people that oppose annual rental payment, however, I do support correct valued rental payment. Regarding to your comment on neighborhood houses, if the value of their properties are different from mine, either low or high, that should definitely have effect on their rental value and that will make landlord with lower rental value develop idea to update his property to standard.( NIGERIAN LACK THE CULTURE OF PROPERTY UPDATING). Now let's talk about income, no where in the world that income is not competitive. You just have to live to your standard. Nigerians want to pay rent without having pain or effect on their salary. Many of us lives in abroad spends 28% of our income on rents, depends on where each individual resides.Any Nigerian tenant that wish to live up to his/her standard should not mind to give away up to 28% of his/her salary just as we do here in abroad. If a Nigeria tenant feel he like to live in a 3 bedroom flat and he is not willing to do away like #38,888.89 in a month, he has options, option like stepping down to neighborhood where 3 bedroom flats are selling for about #2,500,000.00 to #3,500,000.00 e.g IJEGUN, IJAGEMO, IBA , AJANGBADI e.t.c , definitely the rents in those places will be cheaper. In support of all the previous statement, any home owner renting his/her property below the market value of the property is doing nothing but selling himself/herself. ( BUT PLEASE STOP ANNUAL RENTAL PAYMENT). |
| Re: How Long To Re-coup Rental Properties by asitis(f): 10:32am On Nov 08, 2008 |
@ Ashland You need to learn to appreciate people's opinion when you asked for it, i know what i'm talking about as i'm in the property market myself. This same amount you talking about (N7000000), if you invest it in an area like ajah/lekki axis, lets say you purchase half a plot of land for N3000000, and you use the remaining N4000000 to construct a 3 bedroom bungalow, it'll be rented out for at least N500,000 per annum or more if the research on the area id done thoroughly before investment, it'll mean the investment will be recouped (your own word) in say 10 years time bearing in mind that the rent will not stay at N500000, the beauty of this is that after getting back the money invested through rent, the property would probably be worth twice the amount investment if not more, property investment is still one of most sound investment any day as long as you do your research,, in my own case, i bought a land at lekki axis for just N800000 6years ago in a developing area, within 2 years, it rose to 2 million naira and as of last year, plots of land were selling for 4-5 million and the location weren't even as good as mine, those reselling close to my area was selling for 7 million naira, a friend who bought at the same time as me decided to sell up after 3 years for 3.5 million naira, even without doing anything, i got my money back with very healthy profit within a very short period of time, i chose to invest in a developing area and i got there the right time too, it's will have been a different game entirely if i had decided to buy, build and live there within a short time, in that case i would go for a well developed area as in the case of amuwo odofin/raji rasag/mile two/festac. To me when it's comes to property investment, 15 years is too long (if it's going to be my home, then fair enough), but hey!!! guess our opinions are different. Another thing is that, you got the mortgage rates wrong, which bank gave you that rate? You'll have to be extremely lucky to even get a mortgage with an interest rate of 10% for 30 years, i don't think this even exist, although some private estate might offer some attractive rates but you'll have to pay a hefty deposit and in most cases the years is always about 10-15 years, even NHF loan is at 6% with the maximum amount of 5 million naira (not up to 7 million) and you have to contribute 10% of this. In a situation where you got a loan to finance the property, you'll have to do your homework if you know you won't be living in the property, in most cases investors would make sure the rent covers the loan repayment or at least most of it and at the end of the day you know the property is 100% your after the final repayment. |
| Re: How Long To Re-coup Rental Properties by ASHLAND(m): 4:31pm On Nov 08, 2008 |
You need to learn to appreciate people's opinion when you asked for it, i know what i'm talking about as i'm in the property market myself. I believe I appreciates people's opinion, but the people that asked me not to ask for it. Another thing is that, you got the mortgage rates wrong, which bank gave you that rate? You'll have to be extremely lucky to even get a mortgage with an interest rate of 10% for 30 years, i don't think this even exist, although some private estate might offer some attractive rates but you'll have to pay a hefty deposit and in most case the years is always about 10-15 years, even NHF loan is at 6% with the maximum amount of 5 million naira (not up to 7 million) and you have to contribute 10% of this. In a situation where you got a loan to finance the property, you'll have to do your homework if you know you won't be living in the property, in most cases investors would make sure the rent covers the loan repayment or at least most of it and at the end of the day you know the property is 100% your after the final repayment. I will encourage you not to be proofing people wrong all the time. If I need a loan, I will not get it from Nigeria banks. Furthermore, I said " minimum" I did not specifically state the interest rate. I understand property will appreciate, but that is not the only avenue an investor should focus on. Money is depreciating everyday, the value of one million Naira ten years ago is about ten million Naira or more as of today. Anyway, I appreciates your quick response. |
| Re: How Long To Re-coup Rental Properties by asitis(f): 5:43pm On Nov 08, 2008 |
ASHLAND: To be honest i can't say i understand your first sentence, but what i'm trying to say is that if people take time to answer your thread, you shouldn't insult them even if you disagree with their opinion after all they didn't have to answer the thread, you were being insultive to me by saying BETTER ANSWERS WILL SOON APPEAR, i couldn't just let it slide, ha-ha, why should i take the insult just because i gave you my opinion. About proving people wrong all the time, i can't say i understand your point here either, i wasn't out to prove you wrong or anything, i gave my opinion, i wouldn't have gone all defensive if you hadn't insulted me in the first place, i had to draw you back to the error of repaying back 7 million naira over 30 years which will become 14 million as you suggested, we are all here to educate each other after all, and remember someone who doesn't know much about Nigerian mortgage might read it and thought, ooh, that's not bad. I do agree with you on that money will depreciate, but the amount you'll loose when you paid for the property, you'll gain back in value (of the property), i also agree with you on that property investment is not for everybody but i have to say it's one of the best investment though. |
| Re: How Long To Re-coup Rental Properties by ASHLAND(m): 6:43am On Nov 09, 2008 |
To be honest i can't say i understand your first sentence, but what i'm trying to say is that if people take time to answer your thread, you shouldn't insult them even if you disagree with their opinion after all they didn't have to answer the thread, you were being insultive to me by saying BETTER ANSWERS WILL SOON APPEAR, i couldn't just let it slide, ha-ha, why should i take the insult just because i gave you my opinion. HELLO SISTER, THANKS FOR YOUR CONTRIBUTION SO FAR. IF THE STATEMENT " BETTER ANSWER WILL SOON APPEAR " HURT YOU, I APOLOGIZE FROM MY HEART. I BELIEVE THIS FORUM IS NOT TO CREATE ENEMIES BUT FRIENDS. |
| Re: How Long To Re-coup Rental Properties by asitis(f): 11:56am On Nov 09, 2008 |
ASHLAND: Thanks brother, i sincerely accept your apology, have a good day and a great week!!! |
| Re: How Long To Re-coup Rental Properties by sames(m): 1:35pm On Nov 10, 2008 |
In response to the question. One should understand the mindset of a prudent investor. His motive is primarily to maximize his returns. Of course, having a reduced payback period is also of great concern in any investment analysis. why i agree that the payback period for rental properties could take up to 10years in some locations, it should also be noted that areas such as Lekki has shown a considerable reduction in payback period for investors in recent years. On Ashland's comparison with fixed deposits, I strongly fault his basis of analysis. You forget that the capital used in acquiring the property is the principal on the investment while the rents form the interest on the property. If you are an investor who gets facility of N20million with a repayment plan of 7years? Would you fix it in a bank that offers up to 9% interest rate per annum or u rather invest in real estate that could give u a returns of 6%(I am been very extreme with the rates) On maturity, how much does the investor get if he invests in certificate deposits? All he gets will be just enough to service the loan you will agree. However, if he invests in real estate, the rents will service the loans and the capital gains on liquidation will surely be above the principal sum. enough to make the investor smile at himself and want to get into the next deal. So ALL, REAL ESTATE INVESTMENTS STILL OFFER GOOD RETURNS WITH REDUCED PAYBACK (if holding isnt your motive). However, care should be taken when acquiring property for investment purposes. It doesnt make sense acquiring a detached bungalow for investment purpose and expect to have a payback period of 5years. REMAIN BLESSED |
| Re: How Long To Re-coup Rental Properties by youngmill(m): 9:35pm On Nov 10, 2008 |
@Ashland I did some reading on different types of investments sometimes ago by a fellow nairalander, goggle search naijainvestment.weebly and read about investments you might find it useful as i did, You can also check out thirdeye articles. But must say, i agreed with Asitis and Sames, if you are investing in properties you should be looking between seven to ten year maximum, and even lower in some areas. |
| Re: How Long To Re-coup Rental Properties by Naija4ward(m): 11:50pm On Nov 10, 2008 |
ASHLAND, The answer to your initial question can only be determined by working backward (to get the number of years). The Return on Real Estate investment in Nigeria is between 3 and 5%. Anything beyond this rate MAY be misleading. If you divide 3 or 5% by 72 you will get the number of years required to recoupe your investment. If you invest say N10m in property in any part of Lagos (and you want to recoupe only by rental income) your rent will be 5% of N10m. Buying in Lagos Island (Lekki, Ajah, Sangotedo, etc), the cost of laying a raft foundation will tilt your cost higher. I dont recommend taking a Nigerian loan to buy property in Nigeria. Unless you plan to sell in two years or less. |
| Re: How Long To Re-coup Rental Properties by BAC: 5:05pm On Nov 18, 2008 |
If you are borrowing in Nigeria to build and rent don't try it if you do not have other sources of income to supplement. some tenants in Nigeria find it difficult to pay. But if you are looking at return on investment it can be very good if you buy now, build and sell in a few years time. |
| Re: How Long To Re-coup Rental Properties by kharis(m): 8:17pm On Nov 20, 2008 |
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| Re: How Long To Re-coup Rental Properties by lawyer(m): 10:10pm On Nov 29, 2008 |
@khari I dont understand you o! I believe this thread was to engage in meaniful property debates to educate our selves more and you still infiltrate it with properties for advertisment  You have the opportunity of opening your own thread to advertize ur properties, why didnt you? You guys pls refrain from making this property section a place for all forms of rougish activities. We want to own our own homes but we also want to know how we can live peacefully in it. Cheers! |
| Re: How Long To Re-coup Rental Properties by kharis(m): 5:03pm On Dec 01, 2008 |
Dear Lawyer, I assure you that my post on this thread was in error. I'd figured it all out now ok. My apologies. Kharis. |
| Re: How Long To Re-coup Rental Properties by freetalk1(m): 8:36am On Apr 23, 2017 |
Hi Guys so I created a thread dedicated to jv projects and advise , Your wisdom is needed. https://www.nairaland.com/3757449/need-practical-advise-starting-jv Thank you |
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