If you are already conversant with the business model of Real Estate and Investment GPS (REIGPS) Ltd, you probably would have known that the business is designed to help as many people as possible. These include and is not limited to Property Owners, Real Estate Investors, property managers, Real Estate Agents, Realtors, Real Estate Consultants, Developers, and all those who wish to achieve financial freedom using Real Estate.
A lot of articles and videos will tell you that Real Estate is the best and fastest way to make money, but they won’t tell you that Real Estate can also be the fastest way to lose money in bulk.
This is true because Criminals are always targeting the most lucrative part of every Economy and this explains the reason we have too many fraudulent and dubious transactions every day and if you are not very skilled in the art of due diligence, then the probability of losing your money while investing in Real Estate will be very high.
In this new article, we are going to be showing you how to be a successful Real Estate Investor in Nigeria. These include Secrets of the most successful Real Estate investors and Companies that you can incorporate, make them your own, to experience success in your Real Estate investing endeavours.
Please don’t read this article in a hurry, as there are tons of unique lessons and ideas hidden in each paragraph. You might need to bookmark this to read it as many times as possible.
Let’s dive in…
1. SUCESSFULL REAL ESTATE INVESTORS STARTS WITH A GOAL IN MIND
Successful Real Estate Investors don’t play the game of chance. They don’t gamble their money speculating. They begin with a goal in mind and consciously drive their investments through these goals. This means that they approach Real estate investing like a Business, having defined goals.
Just like successful businesses draw business plans, Smart Real estate Investors draw their investment plan before embarking on the investment journey
This investment plan if written correctly will outline everything you are going to be facing which must include, Investment Goal and Timeline, Structured Budget, Investment Strategy, Management Structure, financing techniques, etc
A well crafted Real Estate Investment Plan should contain the following –
a). Goal and Timeline – This simply implies what you intend to achieve with this property and a fairly accurate forecast based on feasibility studies, revealing how long it might take to achieve this goal. You can further break this goal down into 1 year, 2 years 5 years, 10 years, 25 years, etc depending on your vision for the investment and how long you plan on staying on this investment.
b). Structured Budget – Your Real Estate Investment plan should be able to contain a structured budget. This budget should be structured on how much you are willing to spend, how you plan to go about the spending, which includes but is not limited to
– the price of the property
– the price of documentation
– building approval
– the price of construction
– management process
– property maintenance
– miscellaneous expenses
c) Investment Strategy – One major characteristic of gambled investors is the fact that they don’t have an investment strategy and this is the reason they are been screwed by their investment daily.
Real estate is a broad business that covers a wide variety of different activities. Each of these real estate activities is unique to another and will take a different strategy to be successful. Therefore you need to define and master your investment strategy to be able to choose the right location and the right tools that will perfectly implement your goal for the best returns on investment.
d) Management Structure – If you are already a Real Estate investor, you can agree with me that it’s easier to acquire property than to have your property perform at optimal.
Robert Kiyosaki (Author of Rich Dad, Poor Dad) once said that the most important person in your team is your Property Manager, unfortunately, a lot of investors still hand this task to a mediocre and wonder why their investment suffers.
Most people believe that Real Estate Management is a secondary aspect of the transaction, Unfortunately, this is not very true. Successful investors start their property acquisition journey with a Property manager because there are tons of valuable advice and recommendations and because of their level of experience and understanding of local laws, they can help you handle due diligence very effectively, making sure the property is safe and serves the purpose of investment, simultaneously.
Depending on whether you are planning to finance the property acquisition yourself or involve a financier, your Real Estate Investment plan might also include Your Company Description, An Executive Summary, Market Analysis, SWOT Analysis, Marketing Strategy, Management Structure, and Exit Strategy
Though overlooked by the majority of investors, an Exit strategy is very important as it helps you envision how long you want to stay on this property and how you are going to implement your exit.
2. SUCCESSFUL REAL ESTATE INVESTORS UNDERSTANDS RISK
In simple words, Risk is the probability of having a negative outcome or negative effect on a venture.
Lazy people do say that what they don’t know can’t kill them, but in reality, What you already understand, you can mitigate and what you don’t understand, can crush you completely.
For instance, understanding that a property you wish to buy is currently under Government acquisition will help your buying decision and will save you from making a buying mistake, just like knowing the precise point of a leaking roof will save you some cost in repairs, and knowing the structural integrity of a house you wish to buy is also critical to the decision-making process.
Every investment involves risk and rewards, and in some cases, the higher risk might equal higher potentials for a significant profit and higher returns on investment if the risk is well calculated and understood.
Men stumble on stones, not mountains, and these are stones of ignorant that could have been eliminated through asking the right questions and doing proper due diligence
Understanding risk composition, and what can be done to mitigate risk is a basic routine of successful Real Estate Investors.
3. SUCESSFULL REAL ESTATE INVESTORS ASKS THE RIGHT QUESTIONS
One big challenge facing most Real Estate investors is not knowing the right questions to ask. The quality of your questions will always be directly proportional to the answers you get and these answers are going to be the bedrock of your investment decision, and your success will be directly proportional to your decisions.
For most investors, the only questions they know how to ask is asking for the title of the property and verifying topography. These questions are very important, however, there are important information we get from the families, others we get from the Real Estate Companies and there are other information we get from the grapevine
This information is compounded analyzed and verified before buying decision is made.
For instance, if you read our Article, Titled – Important Land Titles And Documents In Nigeria, you will come across the story of a piece of land that was sold to 9 different people in Abia State.
This type of information could only have been gotten from the grapevine by asking tactical and calibrated questions without revealing intentions.
Asking the right questions will reveal the true owners of the land, the real title of the land, the topography, and structure of the land, ongoing disputes on the land, among others. It’s also very possible to find out if the property has been sold to a previous buyer by asking the right question.
And finally, you will be able to ascertain if this location fits your investment purpose and avoid falling for locations that are overhyped by marketers.
4. SUCESSFUL REAL ESTATE INVESTORS UNDERSTANDS MARKET TRENDS –
Understanding the Real Estate market trends in your location of choice is very critical to your success as a Real Estate Investor
Investors, who wish to be successful must understand the state of housing, market trends, demography, and the specific behaviour of the neighbourhood where they are considering investing. You must understand that every market is different and drive your investment decisions based on this understanding.
For instance, Real Estate Market in Victoria Island is driven by people who want to have their businesses in the spotlight of African’s Commercial Centre and 2nd largest City, and these have attracted both local and international investors and businesses across the world
Lekki Phase 1 is driven by a sense of security, prime amenities and closeness to the spotlight.
Moving towards Ajah, the market is driven by closeness, affordability, a sense of security, and access to amenities.
Central mainland areas like Surulere, Yaba and Ojuelegba are mostly populated by students and middle-income earners.
Festac, Satellite Town, and Ago Palace Way are mostly inhabited by small and medium business owners as the Alaba and Trade-Fair Traders and CEOs are seen in their numbers in these locations.
AGO PALACE WAY LAGOS NIGERIA
You can also look at the statistics like the average number of houses currently in the market, number of houses looking for buyers, number of houses looking for renters, prevailing rental price, and demands that are not yet met in the neighbourhood, also keeping your eyes on the buyers and seller’s market and understanding what drives each.
Note that Real Estate is a local business. Every community, village, local Government, town, county, City, State have their unique marketplace and behaviours, coupled with local laws and government regulations.
For instance, an average fully detached duplex in Lekki Phase 1 sells around 250 million naira, and you can get the same structure and design in Aja on average of 85 million.
In the heart of Victoria Island, you will scarcely get a brand new fully detached duplex to buy, therefore you will be buying the same detached house, but a 20-year-old structure for somewhere around 350 million naira.
Successful investors differentiate the market using 3 criteria. These are
– the buyers market
– the seller’s market, and
– the balanced market.
The buyer’s market refers to a locality, where there are more available houses than there are buyers. In this type of market, buyers usually have the upper hand as they have multiple choices.
Real estate prices decrease, and homes linger on the market longer. So, sellers will have to compete with each other to attract buyers in the buyer’s market.
In this case, sellers will drop their asking prices to gain an advantage in the market. Furthermore, they are much more willing to negotiate offers to prevent buyers from walking away.
The seller’s market is the opposite of the buyer’s market. In this type of market, sellers usually have the upper hand as there are very few houses for sale with many buyers coming for them.
In a seller’s market, homes sell faster, and buyers compete with each other to secure a property. These market conditions often make buyers willing to spend more on a home than they would otherwise.
In a seller’s market, buyers are stripped of some of their powers to negotiate and are often willing to accept the property as it is.
The balanced market refers to a location, where the number of houses for sale is in equilibrium with the number of buyers.
Smart Real Estate investors gather necessary information on the prevailing market trends and use them to make informed buying and selling decisions at all times.
5. THE RIGHT LOCATION
Real Estate Gurus will always tell you that Real Estate Investing is all about location. This is very true because location plays a very significant role on your returns on Investment.
Imagine opening a sachet water factory in Lekki Phase 1 or Ikoyi, you will realize that you will be running at a Net Operating Loss (NOL) because the business will not be able to take care of the operating expenses for this property.
It would be better to run this business in Awoyaya or Bariga and supply to Ikoyi and Lekki Phase 1 from there.
However, if you are building a hospital that targets the elites of the Society and High Net-worth individuals. Awoyaya and Bariga might be very wrong places to establish this Business.
If your Team is capable, then Ikoyi, Victoria Island, and Lekki Phase 1 will be ideal locations for consideration.
Note that location is directly proportional to your purpose of investing and there is no such thing as one location fits all.
6. SUCESSFUL REAL ESTATE INVESTORS UNDERSTANDS THEIR NET OPERATING INCOME (NOI)
Net operating income(NOI) is a valuation method used by real estate professionals to determine the precise value of their income-producing properties.
NOI is calculated by subtracting total operating expenses from the income that property produces.
In addition to rental income, a property might also provide revenue through amenities provided. Operating expenses include the cost of running and maintaining the structure. This might include taxes, insurance, legal fees, repair cost, janitorial fees, etc
NOI helps real estate investors determine the capitalization rate, which in turn helps them calculate a property’s value, thus allowing them to compare different properties they may be considering buying or selling.
When the operating expenses are higher than revenues, the result is called Net Operating Loss (NOL)
NOI is used to measure the profitability of a real estate investment. The calculation involves subtracting all operating expenses on the property from all the revenue generated. Higher revenue and lower expenses will guarantee higher profit for investors.
7. SUCESSFUL REAL ESTATE INVESTORS HAVE EXPERT IN THEIR TEAM
Although some amateur investors have argued that they don’t need experts in their team to begin their Real Estate investment journey, I would recommend you read the true-life story below to determine if you need an expert in your team.
THE STORY OF HIGHEST AND BEST USE
After John’s father died in 2014, John inherited a 7 bedroom fully detached house from his dad in the heart of Allen Avenue Ikeja. Being the only son of his father, he decided to put the house up for sale.
2 months later a buyer shows up offering John 110 million naira. Of course, this is the average price of houses within Allen avenue at that time. So John picked up the money happily and moved on. By the way, John’s father left another 4 bedroom duplex in an estate at Ajah and this one looked more glossy and modern for John to enjoy with his family.
And come to think of it, John lived most of his life in the UK with his family, so for John, the Real Estate Business in Nigeria is just not worth it and John had no expert on his team who gives him investment advice. He prefers to run to random agents whenever he wants to buy or sell a property.
6 months later, John realized that the guy who bought this property (Mr Ken) had just done some little fixes on it, and a bank just rented it, paying 13 million naira per annum for 10 years. That’s a whopping 130 million naira.
The ten years rent has just paid more than the cost of the property plus about 20 million profit. Mr Ken who bought the house had a formidable team of Real Estate experts.
6 years into the rent, the bank came back to Mr Ken and offered to buy the building at 380 million.
John never knew that there is a better use for this property because he never thought it smart to hire the services of a Real Estate Advisor or have some experts in his team.
Purchasing, selling, renting, or converting a piece of Real Estate Asset into a profitable venture can be a challenging, complex, and time-sensitive process especially for a busy person like you who devotes most of his time to his job or other businesses and who have little or no knowledge of Real Estate trend in Nigeria.
An expert will navigate your team through the best opportunities, setting you up for the best deals and helping you find the highest and best use for each property and your budget.
It might cost a little money to hire an expert but the reward is always worth it.
Real estate is a broad business that covers a wide variety of different activities. Each of these real estate activities is unique to another and will take a different strategy to be successful. Therefore Defining and mastering your investment strategy is very critical to your success as a Real Estate investor. One of the biggest hacks of most successful Real Estate Investors is as simple as having an expert in their team.
How do you intend to go on your next Real Estate Investment journey? Do you have an expert on your team?