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Nairaland Forum / Nairaland / General / Properties / Is Commercial Property Really An Investment (15112 Views)
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|Is Commercial Property Really An Investment by yak(m): 8:10pm On Feb 17, 2016|
Fellow Nairalanders, av bn thinking this in my mind and I decided to throw it open to the public: does building a commercial house especially residential a competitive investment judging by what u spend building the apartment and what u eventually get as rent.
for example, u spend say 3.5m to build a 2bedroom Bungalow. on a rent of 200k, it wil take 15years or so to recoup meanwhile I estimated that rent may go up every 5yrs. So, lets look at it 2geda
|Re: Is Commercial Property Really An Investment by jossy26: 8:43pm On Feb 17, 2016|
@ for short term in my opinion is NO, for long term YES, and ofcourse low risk investment equals to low returns one other advantage to the property is in that 15years the cost of land in the area would have appreciate a lot.
|Re: Is Commercial Property Really An Investment by hotmas911(m): 4:19pm On Feb 21, 2016|
Commercial property investment like residential apartments is for those who choose to play safe. It is a game for those who value security over freedom. There are better ways to invest in real estate than just building apartments for rent. But if done through a good mortgage plan it might be a good investment.
I love getting more with less. There are other real estates plans with the potential of generating invested amount as yearly return. For example you can invest 3.5 millions like the OP said and be making about 3.5 million annually from same or be making 200k like the in rental property. It's a case of thinking outside the box. Which do you want security or freedom.
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|Re: Is Commercial Property Really An Investment by kennyman2000(m): 5:04pm On Feb 21, 2016|
Lemme learn.. Really been thinking of this as well..
|Re: Is Commercial Property Really An Investment by thefakestan: 5:05pm On Feb 21, 2016|
It's safer and a long term thing, especially if u just got quick cash from elections for example or something sudden like increase in dollars /naira and it favoured u, u can invest in such.
|Re: Is Commercial Property Really An Investment by domack99(m): 5:05pm On Feb 21, 2016|
Building a house is more of security than investment. As someone mentioned earlier, is for people who want to play safe and that the category most Nigeria fall into.
Housing infrastructure should have been more of government liability.
|Re: Is Commercial Property Really An Investment by yak(m): 6:29pm On Feb 21, 2016|
I can c this thread is growing gradually and am learning quite a lot let me hope more ideas will flow in
|Re: Is Commercial Property Really An Investment by yak(m): 6:31pm On Feb 21, 2016|
sir, can u please educate us more on this
|Re: Is Commercial Property Really An Investment by hotmas911(m): 7:52am On Feb 24, 2016|
@ Yak, we can always learn from eachother.
An example of worthy investment is cashew
plantation. Check what
4.5million will yield in 16 years on a rental
property compared to
cashew plantation in the same period
A) Building a 3-bedroom apartment in a low-
Building cost--Approx. 4.5million naira
Average yield per year---250,000naira
Time of cost recovery----16years
Returns in 16 years----1 old apartment and
B) Investment in Cashew
Land + cultivation------Approx. 181,000 naira per
i.e. 4.5million will guarantee minimum 24 acres of cashew plantation.
***Starting from the first 4months, returns will start coming in through intercropping with short term crops like grains, vegetables or some selected tuber.***
cashew itself starts fruiting in 3years
1 acre of cashew will yield average of 600kg per
acre annually i.e.
14,400kg in 24 acres
Therefore in 16 years, it will yield 14,400kg * 13
which is 187,200kg
At the average price of 240,000naira per ton-----
187tons in 16 years means 44,880,000naira
So tell me a rental property of 4.5million that will
44million in 16 years i.e. over 2.8million annually
Note: This yield is aside from the short term crops of the first two years.
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|Re: Is Commercial Property Really An Investment by yak(m): 9:09am On Feb 24, 2016|
am really loving this.
on d other hand, if u build a house, u can remove your eyes from it, visit once in a while. but d cashew plantation would need ur physical presence and employment of hands. I have tot abt palm plantation but I dnt av d time to giv to it cos am in a full time job
|Re: Is Commercial Property Really An Investment by czarboy: 10:18am On Feb 24, 2016|
yak:. I agree with hotmas911, I don't have to be on the farm to supervise, I can have a farm manager that will give me report on a daily basis(that means am a boss) and I can inter crop with other short time crop that will take care of farm expenses, salary etc and still have leftover
|Re: Is Commercial Property Really An Investment by olumide4christ: 1:09pm On Feb 24, 2016|
Your analysis of the investment in 3-bedroom bungalow is wrong.
1. No STANDARD 3-bedroom bungalow with toilets, car park, fence, soakaway, electrical and plumbing works can be built FOR N4.5 million; it would surely cost more than that, unless the owner/builder decides to cut corners, which many of them do and after a few years, the structure begins to have issues. A standard 3-bedroom bungalow would cost nothing less than N7,000,000 and above, depending on the location.
2. As far as rent is concerned - take Lagos & Abuja as a case study, you can only find a 3-bedroom flat for N250,000 per year in the outskirts of the city e.g. inner parts of Ikorodu, Mowe, Ibafo, etc. A 3-bedroom flat in main city of Lagos (whether standard or sub-standard) ranges from N400,000 - N1.5 million; in the area of Abuja (off the airport road) where I have my personal project, rent for 2-bedroom goes for between N750,000-N850,000. I presently pay N350,000 per year for the 2-bedroom flat where I live somewhere in Lagos, which is quite cheap when compared with going rates. The 3-bedroom flats in the area where I live are going for N700,000 - N1,000,000 per year.
From the above, if you spend N7,000,000 constructing a bungalow & spend N4,000,000 for land (cost of land could vary higher or lower), making a total investment of N11,000,000, if you rent out such property at N900,000 per year, you will make N11,700,000 after 13 years i.e. breakeven. Also note that it could be much earlier than this since rent increases after every 2-3 years, depending on the landlord.
This does not negate your claim that investment in cashew has a higher yield; I am just setting the records straight, as a construction professional.[/b]
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|Re: Is Commercial Property Really An Investment by hotmas911(m): 5:59pm On Feb 24, 2016|
I appreciate your professional opinion on this. Well I said earlier my cost were based on a low cost areas.
Real estate is wide, my opinion is just to make people see other part of real estate.
For a business minded fellow, 13 years is too long to break even.
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|Re: Is Commercial Property Really An Investment by yak(m): 7:26pm On Feb 24, 2016|
I appreciate all views so far! but isn't eleven yrs so long a tym to break even in investment?
|Re: Is Commercial Property Really An Investment by olumide4christ: 7:34pm On Feb 24, 2016|
Well, real estate is a long term investment, not short-term, reason being that it is capital-intensive to start with. I can't think of any real estate investment where the breakeven period is 5 years or even 10 years. Thats the reason why in cases where people give their properties to developers (either local or established, if you know what I mean) to develop, the period during which the developers would use the property to recoup their investments and make a profit before handing over the property to the owners is usually between 20-30 years.
|Re: Is Commercial Property Really An Investment by hotmas911(m): 9:57pm On Feb 27, 2016|
You are right, real estate is a long term business. I have seen real estate investor who went into agriculture. Simply by buying massive land and cultivating crops like cashew( also inter-cropping with short term crops) and they end up generating returns right from the first four months of investment. The advantage is that they can still use such land as collateral for other business.
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|Re: Is Commercial Property Really An Investment by yak(m): 11:55pm On Feb 27, 2016|
what am taking from dis is dat we all need to go green. Go agric and stop importation of food items
|Re: Is Commercial Property Really An Investment by hotmas911(m): 12:48pm On Mar 01, 2016|
You can take part in the free farmland promo going on in Ogbomosho where you get 2ACRES FREE FOR EVERY 20ACRES YOU BUY. ...this is only valid till the end of March.
This in my opinion is another real estate option!!
Check my signature for enquiry.
|Re: Is Commercial Property Really An Investment by lennywillz: 8:31am On Mar 02, 2016|
|Re: Is Commercial Property Really An Investment by Nobody: 8:32am On Mar 02, 2016|
It's not a business. It's just a lifetime (unending) investment
|Re: Is Commercial Property Really An Investment by ngmgeek(m): 8:32am On Mar 02, 2016|
I believe so
|Re: Is Commercial Property Really An Investment by Yeecar(m): 8:35am On Mar 02, 2016|
Landed property is a life time investment, generations to come will also benefit from it. But it requires patience...
|Re: Is Commercial Property Really An Investment by TruthHurts1(m): 8:38am On Mar 02, 2016|
In places like Lagos, Abuja and Port Harcourt it is an investment that can make you very rich.
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|Re: Is Commercial Property Really An Investment by hardywaltz(m): 8:39am On Mar 02, 2016|
|Re: Is Commercial Property Really An Investment by agriboom: 8:41am On Mar 02, 2016|
Not that great of an investment, you always use almost half of the rent to fix it up when ever a tenant packs out, so make your 15yrs calculation x2.
Develop and sell, that's the right way to go as far as property is concerned
|Re: Is Commercial Property Really An Investment by erico2k2(m): 8:44am On Mar 02, 2016|
yak:The title you gave in your post does not correspond with the narrative in ur example. Commercial properties are non residential. Ie shops and offices. If that's what you are asking then yes.it's highly profitable but.bug but.it must be in a choice area.that figure you quoted up there will not yield even a foundation and dpc level of a 3 flat@2 bedroom. What I have discovered over the yrs is that building cost is almost same across Nigeria however its the cost of land that differ.So invest in high yield areas then you are guaranteed high returns. If you have Mega buck then you can build and sell that's more profitable
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|Re: Is Commercial Property Really An Investment by erico2k2(m): 8:45am On Mar 02, 2016|
TruthHurts1:That's correct, truth does hurt though
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|Re: Is Commercial Property Really An Investment by Nobody: 8:46am On Mar 02, 2016|
That's some great post. Seriously, I value freedom over security. I couldn't believe my ears when my former landlord lamented and wailed openly to me because of the poor returns he keeps getting from his mini estate of close to two decades. He's yet to get up to 60% of the investment. ...for me that's very slow and discouraging.
I believe the times are changing. I no longer see commercial house rent business as smart for ME.
All in all, it depends on what the person's short term and long term investment needs are but I will never encourage anyone to venture into it. I prefer buying and fencing my lands than putting a structure on them.
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|Re: Is Commercial Property Really An Investment by reflx(m): 8:46am On Mar 02, 2016|
nothing beats land and property in my opinion though.
less stress in the long term, first solving my own housing problem then creating housing solutions for others.
you can buy and build, or simply buy and hold to resell.
i know someone who bought a land in port harcourt for 900k like six years ago and sold it last year for over 20M.
no sweat, no headaches, or supervision etc. our population keeps growing and so communities will keep expanding, development improving and land costs in or near the center still increasing. though it is speculated to plateau at some point, real estate for now is a long term wealth spinner while you focus on your day job and still get paid.
except you have a passion for solving the food problem...again as our population increases we have more hungry mouths.
my 2 kobo
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|Re: Is Commercial Property Really An Investment by erico2k2(m): 8:46am On Mar 02, 2016|
Elijahrona2:It is if you approach it with a business minded individual's attitude
|Re: Is Commercial Property Really An Investment by Eneze1(f): 8:47am On Mar 02, 2016|
@hotmas911 very apt analysis. One of the major crop that can be invested on which brings easy return is Plantain and Banana cultivation as this has some other branches which brings in quick money.
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|Re: Is Commercial Property Really An Investment by Nobody: 8:47am On Mar 02, 2016|
What's the gain in it? 15 good years
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