Simple Rules Guiding Investment in Real Estate

Simple Rules Guiding Investment in Real Estate

By Omolaoye Kunle (ACA)

If you ever consult a friend or family for places to invest, the word ‘real estate’ is sure to pop-up probably nine out of ten times. This is because for many generations, one simple rule regarding real estate was considered sacrosanct—buy now at a very cheap price, see the price grow, and sell it later in the nearest or far future.

Lo and behold, it is not an ideal way to invest in real estate, if some factors are not considered . You could buy a land or an apartment in a considered profitable location, but if you do it without considering certain aspects, you set yourself up for loss. The reasons for this are not far-fetched, the following guides for investing in real estate market will be of great advantage to you.

1. Maintenance

Quite often, people end-up buying real estate without thinking about the whether they can afford it. Now, let’s say you purchased an apartment in an estate in Lekki Phase 1, Ikoyi or Eko Atlantic part of the Lagos. Can you afford the maintenance and upkeep of the residence? This alone with the loan you took to facilitate the purchase in the first case. Remember, it is not just about buying, maintenance is often a tougher act to handle. Though some buyers buy through their accumulated wealth, yet you still have to maintain.

2. Understand what appreciates

The rule mentioned in the first paragraph of my article: buy now for cheap, see the price grow, sell. People assume it applies to all types of properties, it does not. A residence or home may see its value depreciate because of the locality’s reputation or because people consider it as a bad investment due to superstition. The price of land will always appreciate, nothing else. Therefore, consider what’s the prospect of a particular location you want to invest in.

3. State of liquidity

One of the major reasons people buy real estate is to sell it once the price appreciates, a few good examples are Lagos, Abuja and Dubai Real Estate Investors. It is an excellent way to gain wealth but this market is highly illiquid. It takes years for many people to sell their property. So think twice and take a thorough consideration of the future market indicators before investing.

4. Be Wary

When you are checking out a property, be wary of what the realtor or broker tells you. Right from the carpet area or built-up area to amenities and designer residences, their job is to sell you the property and collect their 5% -10% commission. You need to keep your ears and eyes out for any deviation from their sales pitches.

Investment in the real estate market is a long-term act. Make sure you do not regret doing so.

 

Omolaoye Kunle, is a Chartered Accountant a partner at Frontline Property.

Twitter @adex0057

Contact 08065616809

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There is 1 comment for this article
  1. Christopher at 10:53 PM

    One investment that I’m reluctant to do is real estate. You buy and wait for years to profit. Or you build, rent out and wait for years to make profit while at the same time maintaining.

    I don’t know much about real estate though, these are just my opinion.

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