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By 2011, only 37% of Nigerians were house owners. This gap can be bridged by providing relevant and timely information to potential investors and to the general public. Additionally, there is a need to break down the barriers to investing in the sector by simplifying the process. That said, consider these 8 steps as you go about putting your hard earned money in the property market.
1. Research

If you are interested in the property market, there are great platforms to find information you need, including the mass media, online and around you. Talk to locals. Visit Google and relevant Nigerian property sites. Create Google alerts for search terms. This way, you will always be in the loop. You have to understand it before you can get into it. It is important to note that Real Estate information in Nigeria is scarce and thus requires effort on your part, whether you are in the country or abroad.
2. Decide on the specific property market

Depending on your goals, pick a sector that will benefit you more. It could be office, industrial property, retail centres or residential units. For instance, if you want speedy returns, investing in the residential market may not be for you. According to a developer in this BusinessDay article, a shopping mall in Nigeria is sold off before it is even complete while residential units take several years to actually sell out.
3. Identify booming real estate markets

They may not be booming now but owing to infrastructure development and ease of access to central business districts, that may be changing soon. Where a highway is constructed, it eases traffic and the working class tends to move in that direction, making it a worthy cause to build high-rises to rent out to them.
What does this mean? If you have identified residential real estate as your interest, you need to target the middle class. Nearly half of the middle class in Nigeria (people earning an average monthly income of N80,000–N100,000) are purchasing goods or planning to do so to improve their lives as years go by. This indicates a significant consumer boom.
4. Decide on where and how you will get finances

Depending on where you are in life, the source of financing may vary. It could be from friends and family or financial institutions. You could also have the money yourself. When you approach the bank or institution, make sure you know what you are doing. Your plan has to be viable enough to make them give you the money. As stated here last time, the Nigerian government secured a $300 million loan from the World Bank to establish Nigerian Mortgage Refinance Company (NMRC) at the beginning of 2014. Hopefully its effect in terms of liquidity and bank lending is being felt now. You could benefit.
Remember that property in the better parts of Lagos and similar upscale urban areas is as expensive as in some Western markets.
5. Get the details right

Be careful not to enter into deals with untrustworthy people. Talk to industry experts, a lawyer and make sure you get everything ironed out right from the federal government requirements down to the owner’s issues. It is another known fact that property scammers run amok in our big cities; pretending to sell houses whose owners are away, complete with fake title deeds. Beware. Get the advice of relevant professionals such as surveyors who will check out the property and advise you accordingly.
When you get down to the construction, enlist the services of architects and service engineers. Do not do things hurriedly only to incur unnecessary costs. The Knight Frank head in Africa was quoted saying that a building in Nigeria that is about 5 years old will look like a building that is 15 years older in Europe.
If you are a foreign investor at corporate level, the best thing is normally to partner with locals like Actis.
6. Know the Law

You have the right to own property as a Nigerian. All the same, the 1978 Land Use Act gives state governments authority over land within their borders. They in turn avail it to you after an intricate and bureaucratic process. You will then receive a certificate of occupancy to actually use the land i.e. sell it or develop it. Your right can also be denied if you are living in a place that is not your area of origin, which can be very subjective at the very least and can create ethnic tension.
7. Look to the future

There may not be basic infrastructure where your property of interest is currently at, but if it is in the line of the ever expanding urban areas, you can never go wrong. A few years down the line, you may sell it at millions over and above what you buy it for. Do not be too short-sighted.
8. Online Marketing

You cannot afford to ignore the Internet in this day and age. Whether it is having a website or maintaining a social media presence, the Web is one of the affordable ways to get traffic to your venture once it hits the ground running. If you want to attract buyers or sellers, online marketing could be your way to achieve this.

Mistakes can be made in the real estate market in Nigeria as in anywhere else and that is why one needs to practise patience and wise resolve. Remember, Nigeria is a developing market with great potential in sight.

The post 8 Steps to Successfully Invest in the Real Estate Sector in Nigeria appeared first on 9japroperty.

By 2011, only 37% of Nigerians were house owners. This gap can be bridged by providing relevant and timely information to potential investors and to the general public. Additionally, there is a need to break down the barriers to investing in the sector by simplifying the process. That said, consider these 8 steps as you go about putting your hard earned money in the property market.

1. Research
If you are interested in the property market, there are great platforms to find information you need, including the mass media, online and around you. Talk to locals. Visit Google and relevant Nigerian property sites. Create Google alerts for search terms. This way, you will always be in the loop. You have to understand it before you can get into it. It is important to note that Real Estate information in Nigeria is scarce and thus requires effort on your part, whether you are in the country or abroad.

2. Decide on the specific property market
Depending on your goals, pick a sector that will benefit you more. It could be office, industrial property, retail centres or residential units. For instance, if you want speedy returns, investing in the residential market may not be for you. According to a developer in this BusinessDay article, a shopping mall in Nigeria is sold off before it is even complete while residential units take several years to actually sell out.

3. Identify booming real estate markets
They may not be booming now but owing to infrastructure development and ease of access to central business districts, that may be changing soon. Where a highway is constructed, it eases traffic and the working class tends to move in that direction, making it a worthy cause to build high-rises to rent out to them.
What does this mean? If you have identified residential real estate as your interest, you need to target the middle class. Nearly half of the middle class in Nigeria (people earning an average monthly income of N80,000–N100,000) are purchasing goods or planning to do so to improve their lives as years go by. This indicates a significant consumer boom.

4. Decide on where and how you will get finances
Depending on where you are in life, the source of financing may vary. It could be from friends and family or financial institutions. You could also have the money yourself. When you approach the bank or institution, make sure you know what you are doing. Your plan has to be viable enough to make them give you the money. As stated here last time, the Nigerian government secured a $300 million loan from the World Bank to establish Nigerian Mortgage Refinance Company (NMRC) at the beginning of 2014. Hopefully its effect in terms of liquidity and bank lending is being felt now. You could benefit.
Remember that property in the better parts of Lagos and similar upscale urban areas is as expensive as in some Western markets.

5. Get the details right
Be careful not to enter into deals with untrustworthy people. Talk to industry experts, a lawyer and make sure you get everything ironed out right from the federal government requirements down to the owner’s issues. It is another known fact that property scammers run amok in our big cities; pretending to sell houses whose owners are away, complete with fake title deeds. Beware. Get the advice of relevant professionals such as surveyors who will check out the property and advise you accordingly.
When you get down to the construction, enlist the services of architects and service engineers. Do not do things hurriedly only to incur unnecessary costs. The Knight Frank head in Africa was quoted saying that a building in Nigeria that is about 5 years old will look like a building that is 15 years older in Europe.
If you are a foreign investor at corporate level, the best thing is normally to partner with locals like Actis.

6. Know the Law
You have the right to own property as a Nigerian. All the same, the 1978 Land Use Act gives state governments authority over land within their borders. They in turn avail it to you after an intricate and bureaucratic process. You will then receive a certificate of occupancy to actually use the land i.e. sell it or develop it. Your right can also be denied if you are living in a place that is not your area of origin, which can be very subjective at the very least and can create ethnic tension.

7. Look to the future
There may not be basic infrastructure where your property of interest is currently at, but if it is in the line of the ever expanding urban areas, you can never go wrong. A few years down the line, you may sell it at millions over and above what you buy it for. Do not be too short-sighted.

8. Online Marketing
You cannot afford to ignore the Internet in this day and age. Whether it is having a website or maintaining a social media presence, the Web is one of the affordable ways to get traffic to your venture once it hits the ground running. If you want to attract buyers or sellers, online marketing could be your way to achieve this.

Mistakes can be made in the real estate market in Nigeria as in anywhere else and that is why one needs to practise patience and wise resolve. Remember, Nigeria is a developing market with great potential in sight.

The post 8 Steps to Successfully Invest in the Real Estate Sector in Nigeria appeared first on 9japroperty.

Tutorial: Exploring Real Estate Investments

Basic Rental Properties

This is an investment as old as the practice of landownership. A person will buy a property and rent it out to a tenant. The owner, the landlord, is responsible for paying the mortgage, taxes and costs of maintaining the property. Ideally, the landlord charges enough rent to cover all of the aforementioned costs. A landlord may also charge more in order to produce a monthly profit, but the most common strategy is to be patient and only charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit. Furthermore, the property may also have appreciated in value over the course of the mortgage, leaving the landlord with a more valuable asset. According to the U.S. Census Bureau, real estate has consistently increased in value from 1940 to 2006, then proceeded to dip and rebound from 2008 to 2010. (To learn more, read The Benefits of Mortgage Repayment and Understanding Your Mortgage.)

There are, of course, blemishes on the face of what seems like an ideal investment. You can end up with a bad tenant who damages the property or, worse still, end up having no tenant at all. This leaves you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments. There is also the matter of finding the right property; you will want to pick an area where vacancy rates are low and choose a place that people will want to rent.

Perhaps the biggest difference between a rental property and other investments is the amount time and work you have to devote to maintaining your investment. When you buy a stock, it simply sits in your brokerage account and, hopefully, increases in value. If you invest in a rental property, there are many responsibilities that come along with being a landlord. When the furnace stops working in the middle of the night, it’s you who gets the phone call. If you don’t mind handyman work, this may not bother you; otherwise, a professional property manager would be glad to take the problem off your hands, for a price, of course. (For further reading, see Tips For The Prospective Landlord.)

Real Estate Investment Groups

Real estate investment groups are sort of like small mutual funds for rental properties. If you want to own a rental property, but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you. A company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company, thus joining the group. A single investor can own one or multiple units of self-contained living space, but the company operating the investment group collectively manages all the units, taking care of maintenance, advertising vacant units and interviewing tenants. In exchange for this management, the company takes a percentage of the monthly rent.

There are several versions of investment groups, but in the standard version, the lease is in the investor’s name and all of the units pool a portion of the rent to guard against occasional vacancies, meaning that you will receive enough to pay the mortgage even if your unit is empty. The quality of an investment group depends entirely on the company offering it. In theory, it is a safe way to get into real estate investment, but groups are vulnerable to the same fees that haunt the mutual fund industry. Once again, research is the key.

Real Estate Trading

This is the wild side of real estate investment. Like the day traders who are leagues away from a buy-and-hold investor, the real estate traders are an entirely different breed from the buy-and-rent landlords. Real estate traders buy properties with the intention of holding them for a short period of time, often no more than three to four months, whereupon they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or are in a very hot market.

Pure property flippers will not put any money into a house for improvements; the investment has to have the intrinsic value to turn a profit without alteration or they won’t consider it. Flipping in this manner is a short-term cash investment. If a property flipper gets caught in a situation where he or she can’t unload a property, it can be devastating, because these investors generally don’t keep enough ready cash to pay the mortgage on a property for the long term. This can lead to continued losses for a real estate trader who is unable to offload the property in a bad market.

A second class of property flipper also exists. These investors make their money by buying reasonably priced properties and adding value by renovating them. This can be a longer-term investment depending on the extent of the improvements. The limiting feature of this investment is that it is time intensive and often only allows investors to take on one property at a time.

REITs

Real estate has been around since our cave-dwelling ancestors started chasing strangers out of their space, so it’s not surprising that Wall Street has found a way to turn real estate into a publicly-traded instrument. A real estate investment trust (REIT) is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges, just like any other stock. A corporation must pay out 90% of its taxable profits in the form of dividends, to keep its status as an REIT. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed its profits and then have to decide whether or not to distribute its after-tax profits as dividends.

Much like regular dividend-paying stocks, REITs are a solid investment for stock market investors that want regular income. In comparison to the aforementioned types of real estate investment, REITs allow investors into non-residential investments such as malls, or office buildings, and are highly liquid, In other words, you won’t need a realtor to help you cash out your investment. (For further reading, check out How To Analyze Real Estate Investment Trusts, How To Asses A Real Estate Investment Trust and The REIT Way.)

Leverage

With the exception of REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy order. Even if you are buying on margin, the amount you can borrow is still much less than with real estate. Most “conventional” mortgages require 25% down, however, depending on where you live, there are many types of mortgages that require as little as 5%. This means that you can control the whole property and the equity it holds, by only paying a fraction of the total value. Of course, your mortgage will eventually pay the total value of the house at the time you purchased it, but you control it the minute the papers are signed.

This is what emboldens real estate flippers and landlords alike. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that tenants pay the mortgage or they wait for an opportunity to sell for a profit, they control these assets, despite having only paid for a small part of the total value. (For more on taking out a second mortgage, read Home-Equity Loans: What You Need To Know and Home-Equity Loans: The Costs.)

The Bottom Line

We have looked at several types of real estate investment, however, as you might have guessed, we have only scratched the surface. Within these examples there are countless variations of real estate investments. As with any investment, there is much potential with real estate, but this does not mean that it is an assured gain. Make careful choices and weigh out the costs and benefits of your actions, before diving in.

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The devaluation of the naira has impacted on most sectors of the economy. How is it affecting real estate agency?

It is really affecting the response we are getting from our clients. To them, it is now better to invest in properties overseas than here in the country. Most people are now buying real estate overseas instead of bringing down the money here because they don’t really know the value that the money can get for them.

To us, we have seen a reduction in the level of patronage because people are diverting funds overseas, even to West Coast countries such as Ghana, Togo and Benin Republic. They prefer going to such places than investing here in Nigeria and it’s really affecting us.

The whole thing actually started about two years ago, long before the devaluation of the naira. People found it more lucrative to invest outside because of the cost of perfection of documents. In our neighbouring countries, you don’t go through those hurdles where you have to pay multiple taxes. You have to pay to the Federal Government, the state and local governments on just one property. So, when they realise that the money can’t get them what they want here in the country, they take it overseas where they are sure that they will not experience these problems in real estate transactions.

Recently, the Lagos State Government reduced the charges for land transactions; how has this impacted on your business?

The damage has been done a long time ago. It is like something that is too late to rectify. The only thing that can improve the situation and bring back the peak period is when the naira appreciates and the different arms of government develop a singular policy on property documentation in the country. Not when you will be paying land charges to the state government and the federal will come and later the local government will also come to get their share.

And within the same locality, you also have the local government revenue that has to do with land. The damage has already been done; it is only when we have a singular policy, for instance, fixed amounts for specific transactions and not paying to different tiers of government in the name of revenue.

Despite the state government’s tenancy law, it has been discovered that some estate agents still charge two year’s agency fee and commission, while landlords are made to accept one year’s rent. Why is this so?

The truth is that we have tried to enlighten most of our clients that it is better to always patronise government licensed estate agents who are simply regarded as the service providers in the housing sector. Most people taking two years agency fee and commission are doing illegal business.

A couple of months ago, the service providers in Lagos entered into an agreement that we should take one year rent, agency fee and commission. And that the rate should be 10 per cent agency fee the one year rent.

If, for instance, people are having that kind of problem, they should channel their complaints to the appropriate quarters such as the Lagos State Real Estate Transaction Department and associations like ERCAAN are also there to help such people. If it is our member, we have ways of dealing with the compliant and if the agent is not our member, we will report him to the Lagos State Government.

Some programmes have been introduced in the last two years to eliminate quackery and improve the lot of estate agents. What has been the achievement so far?

Nothing much has been achieved in the sense that the government has not been supportive in that area. The government has not been assisting us even though we feel it is a collective responsibility; the government, with its law enforcement agencies, and professional bodies like ours need to come together and take quack, fake and dubious agents off the streets; but in spite of the efforts, nothing has been done and it is quite unfortunate.

The government said it is going through a process of regulation; it wants to have a large number of professional estate agents and service providers in Lagos State before they it embarks on picking the off the streets but we say this is taking too long a time.

The government needs to do it side by side; as it is licensing professionals, it should also be taking the quacks who are not fit to practice off the streets, and there should be a process of taking them off the profession.

Has there been an increase in the number of people coming forward to register with your association and others?

In the last one year, we have received improved numbers of application better than what we used to have in the past; people have been coming forward to register. But the area that is still lacking is enlightenment. Not many people know that the government now has licensed estate agents like they have licensed customs agents. The government needs to do more in that area; they need to create an enabling environment for enlightenment, they need to embark on a process of enlightenment of members of the public that they should not patronise unlicensed estate agents.

They need to tell Lagos landlords that they should not entrust their properties to unlicensed estate agents, it is only the licensed government agents that should be given properties to manage. Government has not been assisting in that area and those are the little things that affect the real estate agency profession adversely.

How can one identify a licensed real estate agent?

A licensed estate agent must have an origin where he emanates from. It is either he belongs to our association or to the Association of Estate Agents in Nigeria, which is being facilitated by the Nigerian Institution of Estate Surveyors and Valuers. He must also go through the process of licensing with the Lagos State Government. This entails that he must have an office and his business must be registered, and he must be knowledgeable in the profession; all these should be in place before he can obtain a licence. The licence is like a document from the government that you are capable of transacting that business and differentiates you from the quacks on the street.

If members of the public are looking for properties to buy or rent and they come into an estate agent’s office, they should first ask if he is licensed and also ask to see the licence issued by the government, which is an authority for the person to practice.

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