NATURE OF LAND AND BUILDING
Land and Buildings are the most favorite of all fixed assets. Real estate is an investment that is visible, concrete and viable.
Unlike liquid or fictitious assets like stocks, shares even bank financial facilities, land and building gives the investor a direct control over investment and external forces have little or no effect on the valuation of the property.
WHY IS LAND AND BUILDING A DURABLE INVESTMENT?
Here are salient reasons why investment in land and building is durable to a point that it can’t fail irrespective of the level of inflation, deflation, stagflation, recession or whatever form of negative economic condition.
1.SAFE INVESTMENT: Hard earned money or income needs to be invested judiciously as most investors don’t want to lose their money. The good news is that investment in land and building is the safest form of business investment as the returns is higher with a very low risk.
Remember the law of business “the higher the risk the higher the returns and vice versa”
Only Real estate/Property investment nullifies this axiom.
2.STEADY RISE IN VALUE: As the saying goes “the older the wine the better”. The more months and years comes upon your property the higher the value of your property.
Below is the price transition of properties between the year 2000 and the 2016.
A plot of land in Lekki as at the year 2000 was valued at about N3million. By 2007 it rose to about N6 million and today the same plot of land is valued at about N150 million to N160 million.
From the above, it is easy to deduce that there is a constant 100% increase in land and building over a short period time.
3.ALL DECISION IS YOURS: This is the only investment where you alone make all the decision. You can decide the following:
• Decision to set the value
• Decision to sell or not to sell
• Decision to develop or not
• Decision to keep or not
(All these decision will be discussed in further episode of property 202)
4.NO EFFECT OF EXTERNAL/
INTERNATIONAL INFLUENCE: Land and buildings is sparsely affected by externalities like Economic recession, political unrest, Scarcity of dollars, famine etc
5.NET PRESENT VALUE: This is the measurement of the profitability of an undertaking or investment that is calculated by subtracting the present value of cash flow from the present value of cash inflows over a period of time. Land and Building has a super positive net present value (NPV).
6.ALTERNATIVE USES: Only real estate investment has varied tangible uses. No wonder banks and corporate bodies are rest minded when you default when they have a real collateral (land and building).
7.DAILY ADDED VALUE: Every little activity on the land and building raises the value of the investment. These activities including clearing, foundation, fencing, painting, renovations etc.
I hope we had an exciting time with fkr.ng
Stay tuned tomorrow
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