₦airaland Forum

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?

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!

Very rough estimate 6 to 10million depending on size, soil condition and how you finish it.

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

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.

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.

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

Indeed for those abroad it is the safest business to do as it is a cash cow once completed, requiring very little of your time to run it. Also you have access to cheap loans out there. A friend of mine in the US said he could get a loan with a 4% interest rate. with that kind of interest rate you can do a build to let with a return of 8 to 10% and still make some profit.

The only challenge people abroad have is getting a truthworthy person to supervise the project for you and not use your money to build / enrich himself.

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.

The danger with undeveloped virgin land is that someone can resell it and put you in serious legal tussle. If this is what you want to do then you must be ready to loose some or roll up your sleeves and fight with people who are ready to die for it.

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

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]

@Fhemmmy no. If you can afford it build yourself a home, you need a place to call your own when you retire, a place where you cann't be harrased by any landlord. Just make sure you manage your expectations well.

I agree with you folks that we all need to own a home in order to secure a roof over our heads and provide security if we fall on hard times and cash is no longer rolling in. for instance when you retire your persion may drop to less than half of what you used to earn and you may find it difficult to continue paying rent.

Nevertheless owning a home and thinking it is saving you money is a false belief. Yes it has potential to make you some good money if you sell and can find a buyer but then how many people sell their homes? Remember the stock market boom when lots of people were paper rich but never cashed their money same thing happens when you look at your home as an asset but never sell or use it as collateral for a loan.

For me an asset puts money into my pocket while liabilities take money out.

By this definition owning your own house is not an asset. you might think that since you don't have to pay rent then indirectly it keeps money in your pocket but if you compute the yearly cost of living in your own house (acquistion cost/no of years you think you would leave in it) most often than not the amount is more than what you would have paid as rent elsewhere. In addition you would need to carry out regular maintenance such as fixing plumbing problems, painting etc add this up and you would discover that more money is spent living in your house.

For me the benefit of living in your own home is definitely not financial.

The reason why I created this thread is to encourage people to do proper analysis before they jump into the real estate business. Current interest rates charged by banks make it suicidal to take a loan and use in building for rent. However if you have your own bulk money or have some spare funds every month you can indeed invest in build to rent.

The properties are cash cow if well developed (built with quality fittings to reduce maintenance cost) and would provide you the much needed extra income when you retire (Pension is about 40% or less of you last salary).

And for those currently staying in rented apartments and believing their landlords are shylocks, do realise that even with the rent he is charging it would take an average of 10 years or more to recoup the initial capital outlay, meanwhile he would have to carry out regular maintenance.

For me build to rent is a good long term investment but if you need quick return on investment then build and sell is the answer, anywhich way guage your market, know what people want and build accordingly. For instance duplexes are not so popular in PH, most are vacant for 2 yeasr or more, so I would not advice you to build a duplex for rent in PH.

Dipuu2life true the amount used in building a house 10 years ago would not build the same house today, but then also the rent on the house would not remain constant for 10 years. Somehow rent increases over the years tend to maintain the value of money spent in building.

If at the intial stage a 10 year payback was calculated, if you add up all the rents received in the ten year period it should be enough to build that same property again, remember rents take into cognisance inflation.

For example 10years ago rent for a 3 bedroom flat was 130k per annum, cement then was 620 per bag, today the same apartment rents for 450k per annum and cement is about 1.9k per bag, both have gone up 3 fold in 10 years.

maclatunji I think the worse mistake anyone can make is sharing a building with tenants (building 4 flats and staying in 1 of them). Some tenants could be a pest and would run to you for every little thing. Others may be a nuisance and disturb your peace of mind. My advice is to seperate your personal home from those for tenants.

Type B apartment (2. nos)

Type A apartment (6. nos)

Hmm okay I agree with you Olasu to an extent. Yes the value of the property goes up with time but how many of us really sell houses we sweat to build? Very few!. Our children on the other hand don't have such qualms hence they sell freely without any sentiments when they eventually inherit the property from us.

Years back when I finished building my own home I did a comparison between the money I spent on the project and my current rent in the 3 bedroom flat I was staying and discovered that the money I spent in building my own home would have paid my rent for 100 years!!!!

From my analysis average yield on apartments for rent is between 8 to 10%.

Yield is calculated as follows:

Total Annual Rent from the apartments X 100
_______________________________
Total cost of apartment building


Note that total cost of building includes the cost of land, associated levies and taxes, construction cost, finishing, fittings cost etc in summary the entire money spent on developing the property.

With a yield of 8 to 10%, payback time is from 10 to 12.5 years.


Do you own apartments for rent? What is the yield on your apartments?

What do you think?

Each apartment consist of the following

[list]
[li]Front Porch
Sitting Room
Dinning Room
Hallway
Bedroom with full wardrobes
Bathroom (floor and full wall tiles)
Kitchen (Floor and full wall tiles)
Kitchen Porch[/li]
[/list]

Front of the apartments. 8 in total.

Would send details to any interested parties.

Indeed the secret in real estate business is building to sell or buy and sell. However if you drive along lekki road you would see lots of estates developed during the stock market boom when people were making money from stock and using to buy apartments. With the crash of the stock market buyers have dried up. I know a particular estate after lekki 3rd roundabout where 3 bedroom flats were being sold for 65million, now the price has crashed to 45million and yet buyers are not flocking to pick up the properties.

The build and sell market is very dicy now but may pick up in future.

Hmm okay but let me put some figures down.

The popular residential apartment building of 4 flats, 3 bedroom each in a 1 storey building cost about NGN20 million to build this is excluding the cost of Land. Assumming you took a bank loan at 20% per annum you would be paying an interest of NGN 4 million per annum meaning you have to charge a minimum rent of NGN 1million per flat in order to pay back the interest on that loan.

If the property is in Lekki axis no wahala but if on mainland you probably cannot get more than 500k per flat as rent per year. At this rate you need to find another N2 million every year to meet up the interest payment and it would take 10 years to recoup your investment.

Does it still sound like a good investment?

What do you think?

Nice work bro