Why holidays may be best time to invest in real estate

With an inflation rate estimated at 18.6 percent, the value of money in Nigeria is better imagined than expressed. Viable investible assets that could be used as hedge against this soaring inflation have vanished from the investment market save real estate.

In spite of the biting economic recession, many yield hungry investors still want to invest and as 2016 approaches its home-ward journey, the on-going holiday provides an ideal time for savvy investors, families in Diaspora, professionals and leading executives to invest in real estate which in Nigeria today remains the only investment asset class that makes meaning .
Udo Okonjo, CEO, Fine and Country (WA) International, notes that with an influx of cash flow, increase in bonuses and tendency for emotional spending, people with cash are encouraged not to fill the void with material things, but rather invest in assets that “keep on giving” not just during the holiday but all year round.

“We offer premium residential properties which have proven to be hedges against inflation because rising prices increase the resale value of the properties over time and such real estate investments can also be used to generate rental income and there’s no better time than now to take advantage of the opportunities presented”, she assures.

To make a success of any investment, whether now or in the future, investors are advised to recognise before committing to a purchase, especially in a market with numerous shades of opportunities, that there will always be some good, many terrible, and other marginal properties.

“Your task as an investor is to dig through the marginal and terrible ones towards identifying the great opportunities. It requires asking the right questions, working with trusted professionals and educating yourself through independent research”, Okonjo advises.

In making this decision to invest, especially in the upmarket locations in Lagos, a real life residential project, Oakwood Residences, located on Cooper Road in Ikoyi, readily comes to mind as a case study for analysing key success factors that make a good residential investment.

In real estate, whether the decision is on investment or residence, the first thing to consider is the location of the property and prime location which is what makes Ikoyi an investment destination is key.

This location remains one of the most desirable residential locations in Nigeria for the affluent and aspirational class. It will always be an appreciating location as far as real estate prices go.

There has always been stories of people who bought properties years ago and today the properties are worth significantly in excess of what they paid.

In prime locations, when the market rebounds, typically the rate at which prime locations grow exceed other locations exponentially. In addition, Cooper Road in particular is still one of the best preserved roads, retaining its old colonial charm and serenity. This gives it an added value over other busy or not so favoured locations even within Ikoyi.

Another factor to consider while making investment decisions is the property’s low price, great value and immediate equity. In this instance, buying off-plan typically gives an opportunity to buy below the actual market price upon completion. In some cases, developers release an early bird investors pricing to kick start the project and this is usually the time to get the most benefit and room for growth as prices are usually increased as more properties are sold.

Oakwood Residences, for instance, has not yet been launched, and is currently being offered at below average Ikoyi prices, plus discounted further for early bird investors. It holds promise for growth, at least, 30-40 percent by completion stage. This is a hidden secret for astute investors and it beats having cash depreciating in a savings account or on low yield assets.
High rental yield potential is yet another factor to consider and, in the case of Oakwood, rent is estimated at N13-15 million per annum, amounting to approximately 10-12 percent yield of current early bird and estimated completion prices.

Because it’s priced below market price, an investor can charge a sensible rent and get good quality tenants rather than have the property vacant for long periods of time while waiting for an unrealistic rent like most investors who bought over-priced properties. Average rental yields for most investments are approximately 6-8 percent.

CHUKA UROKO