baconline:

a building has a life span,renovation could be quite expensive,even then d building depreciates.Concretes life span is 25yrs then it starts to lose strenght,so if u have a 20yr house and u think its like new, sorry

Yes a house has a lifespan before you would have to spend real good money to make it look real good . . . . ,
However, let us do the calculation first . . . . how long will it take you to recover the money back?
On the average how much would renovation on a yearly basis be?
Besides, once you are good at maintenance, renovation wont be as bad as you are trying to scare people off . . .

6 Flat * 400K Naira = 2.4M per year and that means in like 9 years Max, considering renovations and maintenance and remember when landlords collect rents, they do collect money for damages too . . . . .

daroz:

Building a house for rent is a good long term investment, but i don't consider it a good business cos its returns are usually very slow and small, in comparison to when u invest the cash in other business. But having a landed property can actually be seen as a safe haven for your money instead of leaving it there at the bank, cos house in Nigeria hardly depreciate.

snowdrops:

very true.

ps; are you in benin city and austria at the same time

Fhemmmy:

Yes a house has a lifespan before you would have to spend real good money to make it look real good . . . . ,
However, let us do the calculation first . . . . how long will it take you to recover the money back?
On the average how much would renovation on a yearly basis be?
Besides, once you are good at maintenance, renovation wont be as bad as you are trying to scare people off . . .

6 Flat * 400K Naira = 2.4M per year and that means in like 9 years Max, considering renovations and maintenance and remember when landlords collect rents, they do collect money for damages too . . . . .

baconline:

A tenant does not pay for wear and tear,he pays for obvious items ,like locks and windows,doors.
Finishing is what makes a house,commercial houses mostly have slightly inferior or totally inferior fittings,therefore they go bad easily,there is a limit to what a tenant will be held accountable

Fhemmmy:

I thought you were the same gentleman that started a thread about if financially wise to build a house?

Reflector:

Yeap na me. The other thread was on the financial committment in build to live while this thread  is about the financial returns in[b] building to rent[/b]

master2:

If u really want 2 make money in real estate buy a virgin land to resale is the way. No building cost, no tenant wahala, no maintainace cost. U may even make up to 100% return and buy more. The demand for land is always there so no fear of no body coming 2 buy.

Fhemmmy:

Depreciation still holding better value than what you spent when you built the home . . . . .
You spent 20M Naira to build a home where a rent could 400K a year and you build 6 block of flats . . .  now tell me how long it will take you to realize your money back and yet have the house still as yours, and you are still making money on a yearly basis.
By the way, when a tenant leave and you have to renovate, how much would it cost you, remember those are bricks and only paint or fix doors and lighting, so i have no idea what kinda money you have to spend that will be so terrible.

dejia:

lovely thread.

I think especially for those abroad, looking at moving to Nigeria in 3-8years or in the future, building and renting out is the safest business u can do in Nigeria , that u are sure, of your money, if u try to import cars or any other thing, u stand a big risk.

I will build and rent out in cities like abuja that has lots of potentials, presently in apo Mechanic village, u can get about 100sqm land for about 1M, build a shop and a flat ontop of it, in total u will spend about 6M; U will get rental of about 1M yearly ( the shop is about 600k the 2bedroom will go for 400k) and u sure that your rental will definately go up  by at least 15% after 2years.

I see building to rent as a way of saving money instead of making a fixed deposit in the bank

Dis Guy:

But after collecting the first rent of two years, what do you do next?

Reflector:

A good investor does not put all his money into one investment, he goes for a balance portfolio consisting of the following
1. Real Estate investment (build to rent, shop to let etc)
2. Stocks and bonds
3. A regular business (manufacturing, service etc) that generates money on a daily basis.

Fhemmmy:

Depreciation still holding better value than what you spent when you built the home . . . . .
You spent 20M Naira to build a home where a rent could 400K a year and you build 6 block of flats . . .  now tell me how long it will take you to realize your money back and yet have the house still as yours, and you are still making money on a yearly basis.
By the way, when a tenant leave and you have to renovate, how much would it cost you, remember those are bricks and only paint or fix doors and lighting, so i have no idea what kinda money you have to spend that will be so terrible.

kabukabu:

My question is why only Lagos and Abuja?Im sure in the future a lot of suburbs in cities like Benin,Warri and Asaba will be prime for rental development,Anyone who has an idea of what the market is in these areas,how is it right now?

Reflector:

Lagos and Abuja because they give the best return (higher rent and a high demand).  

Rent in warri used to be about half of what an equivalent apartment goes for in Port-harcourt, while port-harcourt rent is about what is charged in mainland Lagos.

Price of cement is about the same anywhere in the country so why spend 20million to build in Benin and collect a fraction of the rent when you can make more in Lagos!

Am Alone:

@ Poster I have said this before and I still think so!
Building to rent for me is not a very good business
I have done my calculations over and over again
and I realize that at an average, you will have to wait
for like 14years!!! before you can get your initial investment(all things being equal.
That is excluding renovation and increase of rent with time. So I say, the extra increase
of the rent over time, should be used for renovation then). Again after the first 3 to 4 years
the house is no more new and its rent by then will not be as high as a new building by that time!!
To explain my point, Fhemmy a block of 6flat will cost around 18 to 20Million(in Lagos if you are building 3bedroom each)
Again, if the cost of 3bedroom is 400k per annum, then the cost of land around that area is most likely to be around 8m to 12m
To earn 2.4m per annum from housing, you need to invest around 28m to 30m or more!!!!

Then on the order hand, building can be a very profitable business, if you get your land very cheap or it was inherited
or the land you have before you build has already appreciated to maybe 5 or 10times it price. Then when you build, it
can be more easier to get your investment back asap and start making profits!!!!

What I advise and will always advise is build to sell!!!
or if you are building, make sure you are building a plaza,shops,warehouse,night club etc.
Sometimes you may even regret building yourself a house when you get few bad tenants
Again, I think building a house can be one of the safest way to tie you money down and tap from on yearly basis in Naija!
Again, renovation is not expensive at all. Except when the house is already dead!!!
Now for commercial houses, one of the best to build is a storey building
when they gets very old, they depreciates a little compared to the 2,3 or 4 storeyed buildings
I mean na who go won buy so much stones

Abali1:

This is a very good thread. For people who are afraid to venture into build for rent, I will advice that you fear not.
I will only advice that you try to use your own money to build, even if you have to go for a loan let the initial 60 to 70% be your own money or your family's money.
Great wealth grow slowly, but grow it must. You may not witness it in your own generation but if you teach your children how to prudently manage the family's wealth, then you can die being rest assured that your children will be well taken care of.
for instance my family has been living off the rent collected from the family apartment building. And am looking towards building more apartment buildings for rent. Now imagine in the next 40 to 50 years when more apartment buildings have been added to the portfolio the amount of income that the family will be generating fro PASSIVE INCOME. And we do not have business men/women in the family, only salary earners.
But most young men want to drive flashy cars and go out with even more flashy women, while paying rent to landlords.
Just know that even your landlord's DOG is your LANDLORD.

Reflector:

Keep 20% to 30% of the money for any maintenance request that may come up during the year. If you had built with quality fittings, used experienced craftsmen, and chosen responsible tenants then your maintenance cost would be very low or zero. Invest the remaining rent collected in something else (buy land, start another building, buy stock, do buying and selling etc) and turn over the money or just blow it and enjoy your self. The choice is really yours.

Roland17:

its a very good investment, especially if the house is properly maintained, but then in Lagos, land policies and reform change occur frequently.

2dmax:

What about those country homes in the villages wasting? What are the rationale for building them, and can they be put into proper money making use?

Reflector:

I learnt Lagos state government is about passing a law to regulate how months rent a landlord can collect in advance as well as pegging the rents? does anyone know more about this?

Reflector:

country homes are a pure waste of money and are built for sentimental reasons to massage egos and tell oue peers that we have arrived. these homes are very diffisult to rent especially those in the villages and most times the owners don't spend more that 2 to 4 weeks in an entire year there. the homes just gather dust while some are burgled.

my advice to friends building in the village is to do a small bungalow.

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