Introduction

It is expedient that any responsible person who has a source of income through which he sustains himself; should equally have a plan for the future when he may no longer be able to work and earn income the way he does now. This can be done by regularly setting apart a certain percentage of one’s income for investment purpose.

Investing a part of earned income is not a new idea in Nigeria. In fact, within the last decade; Nigerians have developed a strong and growing culture of savings and investment especially in stocks. This culture was boosted by the banking reforms that took place earlier in the decade and its resultant influence on the stock market which led to the recording of an unprecedented skyrocketing of the prices of stocks. Unfortunately, this period was followed by another global recession which saw the prices of stocks crashing drastically.

The stock market is a good place to invest for anyone who plans to invest towards the future. This is so because despite the periodic rising and falling, values of stocks eventually rise in the long run. However when there is a crash in the market; those who invested in the market at a period when it was at the mid to peak of the previous rise, may have to wait for a long time to see their stocks rise to the value it was when it was bought and eventually rise above that level. This may be undesirable and discouraging. The above factor has led to a skepticism amongst would be investors as well as already existing investors who are afraid to lose their hard earned incomes on unpredictable stocks.
Real estate is a more secure alternative for investors as it has an advantage over stocks in that unlike stocks which are artificially created, real estate is a natural resource which is in limited supply, hence its value continues to rise as its supply becomes more limited due to development.

What Is Real Estate?

The term real estate simply refers to Landed properties which include both undeveloped land and partially or fully developed lands. Real estate could cover agricultural land, residential lands, recreational parks as well as industrial areas. It can also be used to refer to the manmade structures erected on these lands.

Why Invest In Real Estates?

Real estate is a viable and probably better option of investment because unlike stocks it does not depreciate in value; rather it appreciates gradually or rapidly and continuously over the years.
Using the Abuja real estate sector as a point of reference; in the last five (5) years, the value of real estate across the territory has appreciated by an average of 300% therefore a property that went for N5 million five years ago, will now go for approximately N20 million. As mentioned earlier, the prices of real estate does not depreciate rather it appreciates continuously, therefore in comparism with the stock market; real estate is a better investment option.

What It Takes To Invest In Real Estate

Real estate investment is in various categories, an investor may choose to invest in fully developed properties, semi-developed properties or un-developed properties. To invest successfully in real estate, one should be well informed about the availability of land or properties for sale, the title on the land/property, and the proposed development plan for the particular area where such land or property is situated. With this information at hand; the next thing to consider is the source of funds to invest in the properties.
At present in Abuja, estate developers fund their operations with any of the following arrangements; which includes sole finance by the estate developers especially for estates built for the sole purpose of tenement. Another finance option is a joint arrangement between the estate developer and a finance institution where the estate developer uses his money to secure the choice land(s) and secure a financial facility to cover part of the funds for developing the property from either bank(s) or mortgage institution(s). This arrangement is suitable for an estate intended to be built and sold out. A third finance option is to utilise a tripartite finance arrangement where the estate developer uses his money to acquire land in promising and choice areas, then secures finance facilities from bank(s) or mortgage institution(s) that would be used to finance part of the project, while the third part of the arrangement would come from part payment for the semi-developed houses by prospective buyers.

Real Estate Investment Options

As mentioned in the above section, real estate investment is in various categories, which are:
Investing in fully developed properties,
Investing in partially developed properties, and
Investing in un-developed properties.

• Investing In Fully Developed Properties
Investors who are interested in investing in properties in fully built up areas would likely adopt this method. This is so because it will be easier to buy an already built property and modify it to taste; than to get a virgin land in the midst of a built up area and building from scratch. This kind of investment has its advantages and disadvantages, therefore investors should weigh the pros and cons before venturing into it. In brief the advantages of this option are that it saves time, and one already knows the kind of facilities available in the neighborhood. However, one may not be able to fully determine the quality of materials used in developing the property, and it would be more expensive than buying land and building from scratch.

• Investing in Partially Developed Properties
Investing in partially developed properties is another option open to real estate investors. This involves buying buildings in various stages of development (carcasses) and completing them to desired taste. This option is a faster way of developing property especially in built up areas and still be sure of the quality of materials used to a large extent. It has the advantage of being faster than building from scratch, knowing and determining the quality of materials to a large extent as well as knowing the general outlook of the neighborhood beforehand. However, it could be more expensive than building from scratch, and the quality of materials cannot be fully determined as is the case when building from scratch.

• Investing in Un-Developed Properties
This type of investment involves sourcing for virgin plots of land, designing and developing the property to the desired quality and design. While it takes a longer time to achieve, it is cheaper and more cost effective than the previously highlighted options. Undeveloped properties can be utilised in different ways; value can be added to it by developing the necessary infrastructures such as road net work, power supply, drainage system etc. and partitioning it in to serviced plots to be sold to individuals. It could also be developed into tenement blocks of flats and apartments, or even into commercial blocks for lease or sale.

Benefits of Real Estate Investment:

•It is as a better alternative to stocks as investment in the sector appreciates faster than most stocks can ever appreciate (at least a 25% appreciation in value every year).

•Real estate is a more secure investment option because unlike stocks it does not depreciate in value; rather it appreciates gradually or rapidly and continuously over the years.

•It offers the option of making considerable income from leases or rentals while allowing the property to increase in value for possible future sales.

•A well utilised and managed property would generate the principal invested on it as lease or rentals within 7 years, while the value of the property would have increased geometrically.

•It can be used as collateral for raising funds for other investments in real estate or any other sector.

If this write up has gingered an interest in real estate investment in you, you can contact LS Properties® concerning project consultancy, development, and management.

Lanre Sobola
08023533384
lanre.sobola@yahoo.com, lsconsultingnigeria@yahoo.com
(Property Consultant/CEO LS Properties