Timing can make or mar any decision however sound it may be, and this is very true when it comes to buying or selling a building. It is far easier for many people to make a decision with regards to selling land than it is with selling a building. A building in this sense refers to both residential and commercial properties. The timing of your purchase and of your sale determines the rate of return that you will get from your investment. Understanding timing requires clarification of a few issues.

Many investors often get confused when they hear stories of those who have made fantastic profits from real estate investment. They often assume that it is the property that has gone up in value in general terms. But there is always the need to make this clarification. From the moment you complete a building, using economic terms, it begins to depreciate. Infact, the amenities inside the building lose significant value within the first year. The property over several years will continue to lose value and when a professional is asked to give an estimate of the building value after 20 years you might be surprised at how low a value will be assigned to it.

This scenario makes sense even from a practical perspective. In most cases, after a few years, most building designs go out of fashion. The facilities in the building are outdated. Modern and more fashionable designs are likely to spring up nearby and command higher rents. The cost of maintenance and replacement of old amenities become so expensive that many property owners would simply avoid such a project. In a sense, most buildings can only depreciate more rather than appreciate in value. What goes up in value is the land on which the building stands and those focused on the building have simply overlooked this crucial fact.

If you intend to make good money on a building, the best time to do so should be during its first decade. During this phase of the building, rent will still be competitive and maintenance cost low. This, however, depends on the structural soundness of the building. If the building was not properly built and it develops several issues early, it will depreciate faster and can result in a loss to the owner. Most property development projects target recovering their initial investments or most of their initial investments within a decade of project completion.

Once the building depreciates to a certain level, the pragmatic options available to the owner are limited. One of the options is to demolish the building and erect a building that relates more with the built environment physically and economically. In the intervening years, it is possible that the use of similar properties in that location has changed. It could change from a predominantly residential to commercial area. Another option is renovation and partial redevelopment. This is a scenario in which the building is repurposed and restructured. This could lead to a higher and better use of the property in a way that leads to greater income being generated from it.

Whenever a building has reached a certain phase in its use, it is best to make a decision to sell if you do not have the fund to redevelop or massively renovate the building to a more contemporary use that has greater economic advantage. In making a decision to sell, especially when it comes to residential buildings occupied by owners, you need to detach yourself from sentimental value. Many owners become unreasonable with the sale price due to the amount of money they have spent on the building. In many cases, these are not recoverable, especially if the amount results in a sales price that is far higher than the value of land in that location.

Ultimately, the key determinant is your short and long term strategy and how much you have to invest. Where you are thinking of higher and better use for your money without the need to further invest, it makes good sense to sell a property that has reached its prime. Where you have more money to invest, it makes good sense to redevelop or renovate the property.

PUNCH

Timing can make or mar any decision however sound it may be, and this is very true when it comes to buying or selling a building. It is far easier for many people to make a decision with regards to selling land than it is with selling a building. A building in this sense refers to both residential and commercial properties. The timing of your purchase and of your sale determines the rate of return that you will get from your investment. Understanding timing requires clarification of a few issues.

Many investors often get confused when they hear stories of those who have made fantastic profits from real estate investment. They often assume that it is the property that has gone up in value in general terms. But there is always the need to make this clarification. From the moment you complete a building, using economic terms, it begins to depreciate. Infact, the amenities inside the building lose significant value within the first year. The property over several years will continue to lose value and when a professional is asked to give an estimate of the building value after 20 years you might be surprised at how low a value will be assigned to it.

This scenario makes sense even from a practical perspective. In most cases, after a few years, most building designs go out of fashion. The facilities in the building are outdated. Modern and more fashionable designs are likely to spring up nearby and command higher rents. The cost of maintenance and replacement of old amenities become so expensive that many property owners would simply avoid such a project. In a sense, most buildings can only depreciate more rather than appreciate in value. What goes up in value is the land on which the building stands and those focused on the building have simply overlooked this crucial fact.

If you intend to make good money on a building, the best time to do so should be during its first decade. During this phase of the building, rent will still be competitive and maintenance cost low. This, however, depends on the structural soundness of the building. If the building was not properly built and it develops several issues early, it will depreciate faster and can result in a loss to the owner. Most property development projects target recovering their initial investments or most of their initial investments within a decade of project completion.

Once the building depreciates to a certain level, the pragmatic options available to the owner are limited. One of the options is to demolish the building and erect a building that relates more with the built environment physically and economically. In the intervening years, it is possible that the use of similar properties in that location has changed. It could change from a predominantly residential to commercial area. Another option is renovation and partial redevelopment. This is a scenario in which the building is repurposed and restructured. This could lead to a higher and better use of the property in a way that leads to greater income being generated from it.

Whenever a building has reached a certain phase in its use, it is best to make a decision to sell if you do not have the fund to redevelop or massively renovate the building to a more contemporary use that has greater economic advantage. In making a decision to sell, especially when it comes to residential buildings occupied by owners, you need to detach yourself from sentimental value. Many owners become unreasonable with the sale price due to the amount of money they have spent on the building. In many cases, these are not recoverable, especially if the amount results in a sales price that is far higher than the value of land in that location.

Ultimately, the key determinant is your short and long term strategy and how much you have to invest. Where you are thinking of higher and better use for your money without the need to further invest, it makes good sense to sell a property that has reached its prime. Where you have more money to invest, it makes good sense to redevelop or renovate the property.

PUNCH.     

Deposit Money Banks have put up for sale over 1,000 properties belonging to several customers, who were unable to service their loans, investigations by Sunday PUNCH have shown.

This came about eight months after the amount of bad loans in the banking industry rose sharply by 78.8 per cent to N649.63bn at the end of 2015.

Impeccable industry sources revealed that most of the 19 commercial banks in the country had engaged the services of estate surveyors, prominent realtors and lawyers to help them to sell the properties.

The move, according to the sources, was part of efforts by some banks to recover bad loans and shore up their capital base in the face of current economic crisis.

The properties had been used as collateral in obtaining loans by the banks’ customers.

Some of the realtors and lawyers, who spooke on condition of anonymity Sunday PUNCH, confirmed that they had been contacted by the banks to market the properties.

According to documents obtained exclusively by our correspondents, the over 1,000 properties include, multimillion and multibillion-naira mansions, luxury hotels and petroleum tank farms, located in highbrow areas of Lagos, namely Ikoyi, Lekki, Ajah, Ikeja and Apapa.

They also include parcels of lands, detached houses, high rise commercial buildings, terrace houses and warehouses.

Other properties are scattered across the country in states like Enugu, Abia, Kano, Kaduna and Ogun.

Some of the banks include Guaranty Trust Bank Plc, Skye Bank Plc, First City Monument Bank Limited, Zenith Bank Plc, United Bank for Africa Plc, First Bank of Nigeria Limited, Stanbic IBTC and Fidelity Bank Plc.

While some of the properties are being offered for sale at their open market value, many others were offered at their forced sale value, which is the value the properties would sell for when a seller is under duress, and it is usually the two-third of the open market value.

In a bid to avoid litigation that could be instituted by some of the debtors, the banks, Sunday PUNCH learnt, had notified the owners before putting them up for sale, making many of the properties to be under consent sale.

One of our correspondents, who visited some of the properties, confirmed that the properties were up for sale while some were still being occupied by their owners.

A comprehensive document released by one of the banks, listed 97 properties, which included a building on one acre of land on a popular street off Adeola Odeku, Victoria Island, Lagos, offered for N2bn.

Another property is a block of flats comprising two and three bedrooms on 1,895square metres on Admiralty Way, Lekki Phase I, offered for N650m; and an industrial complex on 11,000sqm at Mobolaji Johnson Avenue, Oregun/Alausa offered for N4bn asking price.

The list include a tank farm comprising eight storage tanks for petrol totalling 50 million litres capacity and two tanks for kerosene on 11,830sqm offered for N15bn; six blocks of two and three-bedroomed luxury flats on 1,895sqm at a popular street off Admiralty Way, Lekki Phase I, offered for N700m; and plots of land with Certificate of Occupancy on 19,400sqm in Banana Island, Ikoyi, Lagos offered for N6.5bn.

Also, there is a luxury hotel on 3,286.161 square metres of land in Ikoyi, offered for N2.5bn; a purpose-built office complex on four floors, occupying 760sqm in Ikeja, offered for N250m; another luxury hotel comprising 84 rooms with a swimming pool, gym, elevator, hall and other top-notch facilities on 1,664.68sqm in Ikeja, offered for N1.6bn.

A tank farm with storage capacity of 21.5 million litres on 4,203.48sqm at Apapa Port, was offered for sale at N6bn.

Also, on the list are a filling station on one acre of land in Sango Ota, Ogun State, offered for N90m; a purpose-built property on three floors comprising of four numbers of two-bedroomed service flats, with a four-roomed service quarters, a gym and a swimming pool on 1,294 sqm in Osborne, Ikoyi, Lagos, offered for N700m.

There are  blocks of office, warehouse and other ancillary blocks on 1623.36sqm in Apapa, Lagos, offered for N500m; a detached house on about 1,000sqm on Glover Road, Ikoyi, offered for N850m; and a guest house with 17 standard rooms on four floors in Lagos Island.

In another list, obtained from a source in one of the banks, there were about 39 properties, including a property on Ahmadu Bello Way, Kaduna and a building on 2,947sqm offered for N250m; a storeyed building on 833.4sqm in Kano State, offered for N150m; a bungalow with some stores on 500sqm in Aba, offered for N8m; and a plot of land in Enugu, with a Deed of Assignment, offered for N50m.

Two wings of five-bedroomed semi-detached houses with boys’ quarters and gate house, all sitting on 3,430sqm in Ikoyi, offered for N1bn and a purpose-built banking and commercial structure on 862.80sqm in Victoria Island, Lagos, offered for N450m were also in the list.

On another list from one of the banks, some of the properties up for sale include a 14-floor building in Victoria Island offered for N13bn; a three-bedroomed semi-detached house in an estate in Abuja, offered for N48m and four-bedroomed terrace mid unit in an estate off the Lekki-Epe Expressway, Lagos, offered for N27m.

The prices placed on the properties, according to the documents, are subject to negotiations, all in a bid to dispose of the properties.

At the 326th meeting of the Bankers’ Committee held recently in Lagos, the Director of Banking Supervision, Central Bank of Nigeria, Mrs. Tokunbo Martins, had shed light on the incidence of the non-performing loans in recent times.

Giving reasons for the NPLs, Martins attributed it to the economic downturn.

But the CBN spokesperson, Mr. Isaac Okoroafor, while commenting on the incidence of NPLs in banks, said loans were parts of business, adding that they should not be seen as a sign of weakness in the banking sector.

Commenting on the development, industry analyst and Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, attributed increased cases of NPLs to the current economic recession.

He said, “Increased level of loan default is one of the many negative fallouts of economic depression, which in some instances affect the health of banks.”

Spokespersons for UBA, GTBank and FCMB, could not be reached for comments but the spokesman for First Bank, Mr. Babatunde Lasaki, said the lender might not comment on the matter due to bank-customer confidentiality agreement.

PUNCH.

However, they note that the real estate market will grow despite the predictions of major economic downturn, retrenchment and hardship for employers and employees.

As a result, they have highlighted some methods that brokers can utilise to sell more properties.

Importance of business credibility

The Chief Executive Officer, Poise Nigeria Limited, Mavi Isibor, points out that it is important for professionals in the real estate sector to fashion out ways to succeed in business.

She says it has been predicted that the real estate industry will enjoy some growth despite the 2016 economic doom.

However, she says potential investors in properties will still be sceptical when investing due to lack of credibility of operators and unpleasant experiences that they may have had in the past.

As a result, Isibor emphasises that an important trait that real estate brokers should build is credibility.

While addressing stakeholders at the Poise Nigeria real estate forum, she explains, “The chances of being swindled are high and can be linked to mismanagement of funds by operators. What will matter in this sector is credibility and ethics. How do you ensure that your organisation build a credible image? Build a strong ethical code and a way to monitor or regulate the activities of your employees.

“You need to be able to build a system that will engender trust between your organisations and your clients. In a tough business environment terrain, the best thing to do is to sell more.”

How to build credibility

The CEO, John Zedomi and Associates, Mr. John Zedomi, says that it has been observed that there is always an economic downturn every six years and people must do business against all odds.

According to him, credibility is the ability to inspire belief in the mind of clients and businesses can only thrive if it is credible.

“We live in a society where ethics is not upheld. It is either you are ethical or unethical. People have the ability to rate you based on your ethical conduct,” he adds.

Highlighting the elements of credibility, Zedomi says that integrity, which means commitment to the truth and fairness, has to be developed by stakeholders in the sector.

He adds that people with expertise will enjoy a level of credibility than those without.

He says, “Have a sound judgment. What is your track record of relationship in the past years? Have emotional intelligence. It is the ability to connect with people at a heart-to-heart level. Soft skills are good and they will set you apart. Be likeable because people will do anything for people they like.

“Keep exposing your business, shout and attract attention to yourself. Competition will be very stiff and these qualities will set you apart.”

Find the right customer

The Managing Director, UPDC Plc, Mr. Hakeem Ogunniran, says that targeting the right customer is the first step in selling a property.

According to him, real estate operators cannot afford to sell in a crowded market. He says that they have to create a market for a particular set of people and be flexible in the niche they have created.

“Segment your customer based on income and occupation. Consider the benefits the customers will enjoy. Most times, operators think for customers without finding out what they really want. Find out customers values and preference. Let your customer validate the values you are bringing. Find out the lifestyle of the customer by segmenting them based on geographical location and family size.”

Have the right product

Sell what people want to buy. When you get your location right, pricing will be secondary.

He says, “Have a product that speaks to the value your clients are looking for. Not everyone wants a swimming pool, boys’ quarters, lawn tennis and 24 hours electricity in an estate.

“Determine which housing variants they want. Ask whether they will prefer to have terraces; detached houses; semi-detached houses; flats; or bungalows. What recreational facilities do they value? What number of parking lots or visitors’ car park do they want? Will they need children play area, swimming pool; gym or lawn tennis court? What is their budget? What can they pay for a particular type of offering?”

Start the marketing drive

You can’t sell real estate with sealed lips, Ogunniran says.

He suggests that operators can start their sales drive by listing all the market channels open to them and utilising them.

The UPDC boss says existing data base, yellow pages, estate agents, referrals, alliances, corporate bodies, government, parastatals, ministries, banks, oil companies as well as other corporate organisations are marketing platforms.

Acquire selling skills

You have to meeting new people, Ogunniran says.

According to him, people who never meet anyone new people will never have anyone new to sell to.

He suggests that operators should learn to make personal connections and follow up on every sales lead.

“You don’t have to be the best at everything to succeed in this business. You just have to be competent and likeable. People buy from people they like. Follow-up is a big area where most sales people fail. If you aren’t going to take every lead you get and work it to death, then you’ll never be a top performer,” he adds.

 PUNCH.