Investment Opportunities in Real Estate During Recession
It is no longer news that the Nigerian economy has officially been declared to be in a recession. Due to the recession, the value of real estate has plunged to astonishing depths. However, because shelter is one of human’s basic need, no matter how much the economy fluctuates, there is always a demand for real estate. It is generally understood that several people who could easily afford real estate investments are no longer able to do so. The number of real estate properties for sale is far more than those with the willingness and the ability to buy. Buyers are unwilling to spend and sellers are unable to increase prices. It is now a buyer’s market. Smart investors especially Nigerians in Diaspora should actively participate in real estate at this time when the value of land assets is low which will not only reduce housing cost but will also give them good returns for their money in the long run.
It is more profitable to buy a house now rather than embark on building a new one. The cost of building materials have appreciated over the months the economic crunch have lasted hence calculating the cost in terms of finishing a building and the stress will be far more than what it will take you to just walk into a real estate firm and buy a house.
It is also profitable to invest in properties in locations that are home to major economic developments. An example of such location is Ibeju Lekki in Lagos state. This area is in close proximity to ongoing projects such as the Lekki Free Trade Zone and the new International Airport. Naturally, considering these are major economic projects, once completed, the number of people migrating to these areas would increase, resulting in a corresponding increase in value of properties. The wise investor should be looking to acquire properties now that they can be bought at fairly cheap prices, because they would definitely be sold at double the amount, if not more, in the foreseeable future. These areas also provide the best of commercial relevance because of its proximity to accessible roads and commercial enterprises.
There are so many reasons Nigerians in Diaspora should invest in real estate this period, some of them are under listed:
- In recession, the power of negotiation is strongest
This period, sellers are willing to consider offers that they would not normally consider and agree to terms that they will not have agree to. There is also a chance of getting significant discounts. This offers an opportunity to buy properties with flexible payment terms and also provides you with the opportunity to pay amounts that will not disrupt your financial plans as well as avoiding the need to use high interest bank loans.
- You get more value for your money
With the high exchange rate between naira and other foreign currencies, converting pounds or dollars, for example to naira equivalent will yield a higher naira value. It therefore makes good sense to buy properties in Nigeria now. The recession will only last a while and thereafter the market will pick up and restoring lost value.
“It is therefore important to strategically position yourself and recognize that this is the best time to invest”
- Technology has made investing significantly easier
You don’t have to be physically present in Nigeria to invest in real estate property. You can link up with credible real estate developers or agents online. Advertising units is as simple as posting on a property website or blogs. Cleaning services can be ordered online. Tenants can pay rent online or via banks. Your agent can set you up with automated email alerts for new listings. You can take virtual tours of neighborhoods. Today, a real estate investor barely needs to leave the comfort of home to manage a portfolio of rental properties, thanks to technology.
- Credible Real Estate Developers
There are a number of credible and authentic real estate developers and agents in Nigeria that you can work with. You are however advised to due diligence before settling for one. When you are ready to invest in a property, the first thing is to hire a reliable lawyer to oversee the property documentation and verification. The lawyer would do the verification to ascertain the legitimacy and authenticity of the real estate agency. There are a lot of required documents to be ascertained and verified prior to payment. Hiring a lawyer could be an added cost but at the end it serves the purpose. Also, a real estate agent that is authentic must be able to provide the buyer with buyer/seller agreement before the transaction. This is an official agreement between the agent and the buyer/seller. He must tell the commission and other necessary information about the transaction must be outlined and agreed together by the parties involved prior to payment and concluding any transaction. You should pay only to the company’s official bank account. The company must be registered by CAC, have an active website and they should operate from a standard office.
- Knowledge is free
The internet has democratized learning in a way that makes real estate investing education completely free. There are thousands of blog posts, e-books, podcasts, websites, forums and more sources that help real estate investors connect. Today, the best job security is enjoyed by those who take an active interest in gaining skills and knowledge that can be used elsewhere. Real estate investing is one of the greatest ways to gain financial independence so your job can become optional rather than required.
Below are some real estate investment options that should be considered this period:
- Cash payment
This is the simplest and easiest method of buying properties. There is no need for extra paper work and security that you will need to comply with if you are sourcing the funds from a third party. There are no monthly payments and thus, less sleepless nights if you have a drop in your cash flow or lose your job if you are an employee. However, if you do not have the bulk cash that you need to buy a property, there is are other options.
- Payment in Installments
Several real estate companies have payment in Installments option in place to encourage real estate investors. This innovation is making buying a property easier for first time buyers in particular. All you need is to find the right scheme that fits your budget on monthly or quarterly basis, do your due diligence and go for it.
- Mortgage payment at single digit interest rate per annum over a period of 10 years
The Minister for Power, Babatunde Fashola, during this years’ annual conference of the African Union for Housing Finance called for real estate developers to accept mortgage payments for real estate property at single digit interest rate per annum over a period of 10 years.
Real estate experts and most developers have given their backings to this call by the Nigerian government. Rock-bottom mortgage rates — and low home prices — can open the door for you to buy more house for your money in less time. The advantage of a 10 – year mortgage is that you will be able to pay off the debt and build equity faster than you would with a longer-term mortgage.
- Form a Cooperative
Another easy way of buying a property is to team up with other people who are interested in acquiring properties but do not have enough money set aside for the purpose. This is the philosophy behind cooperatives. With small monthly payments, you can become part of a big estate project and benefit from the values that coming together creates. One of the benefits is that when you buy land in acres and hectares, it gives you greater negotiating powers with the seller. It is possible for you to negotiate and be given bigger discounts that may not be available to an individual buyer.
- Buying properties off plan
This is another way to come on board a property investment train. Developers are often pressed for money at the inception of their project. Some have to borrow from financial institutions at very high interest rates before they can commence their project. Thus, it is in their interest to have investors even before they put the first block on the ground. Such an expression of interest in the project that is backed with cash deposit considerably reduces the financial burden on the project. Also quite naturally, it draws several other people to the project. Many developers have several options and concessions available to early investors.
- Trade your present property for the one you desire
If you are already investing in real estate you can scale up by trading your present property for the one you desire. It is very possible to convince a seller to accept your property in exchange for the one you desire and you can then pay money for the difference. You should not allow limited finances to hinder your property investment dream.
This is not to say that investment in just any piece of real estate is going to make sense. You still need to understand what you are doing. You still need to critically analyze your investment decision. You still need to hustle to find the 1-in-100 deals that actually makes sense. But by all means invest in real estate now because
“Ten years from now you’ll wish you had started today”
Investing takes time. I’m not promising you that tomorrow you’ll be rich if you start investing in real estate today. But I am telling you that in ten years you will likely look back at 2016 and say, “Why didn’t I start back then?”
“ We are now at a unique point in history where real estate investing just makes sense. Wait too long and you’ll miss out.”
There are other creative financial strategies that you could come up with if you put your mind to it. Real estate is also not just about buying and selling land and houses. It is also about renovation, reconstruction and property development. These opportunities now abound in the market. This is the perfect time to seek those opportunities and preferably sign agreements with the various stakeholders for its implementation.