31/05/2023
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Wait a sec!
You are probably thinking of investing in real estate ๐ค right?
With the potential for high returns and the allure of passive income, itโs no wonder that many people are drawn to real estate investment.
It is one of the lucrative sectors in which Nigerians both home and in diaspora can invest, however, like every other investments, real estate comes with risks and is fraught with many difficulties, which is why it is not one of the investments you can just dabble in, to avoid making costly mistakes.
Thatโs why itโs important to educate yourself on these common mistakes to avoid when investing in real estate so as to increase your chances of success.
In this post, weโll discuss the mistakes that real estate investors make and provide tips on how to steer clear of them.
Whether youโre a seasoned real estate investor or you are just starting, these tips will help you invest with confidence and avoid costly mistakes that could derail your financial future.
So grab a seat and some popcorn๐ฟ, letโs dive into these common real estate investment mistakes that you should avoid at all costs.
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Purchasing Lands or Properties During the Dry Season:
Hey, donโt get me wrong. Thereโs nothing wrong with purchasing land during the dry season if you understand the topography of the area.
Weโve heard of people who bought lands or even apartments in some parts of Lekki only to complain about flooding during the rainy season. I wonder if they werenโt aware of the physical characteristics of the land before purchasing it.
Knowing the state of the land before investing your hard-earned money will help you determine the type of foundation and other building factors of concern in such property.
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Buying during the rainy season is ideal because if you were to make a purchase, you would also prepare a large budget to avoid floods or for sand filling if the state of the land is not dry.
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Failure to Conduct Proper Research:
One of the biggest mistakes that new real estate investors make is failing to conduct proper research of the land or landed properties they intend to purchase, land title documents and previous owners of a property . This is known as doing your due diligence.
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Before you invest in any property, itโs very important to research the market, the property itself, the land title documents and the surrounding area. This includes researching the propertyโs history, verifying all documentation including a certificate of occupancy, potential issues with the title, the local market trends, and the crime rate in the area. If possible, employ the services of a real estate consultant or a property lawyer to assist you in making your research.
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Failure to Compute the Costs Involved:
A real estate investorโs primary goal is to make a profit; he or she must convert a property into an interest-bearing investment.
Let's take for instance, the annual rental value of a three-bedroom apartment could be N3.5 million in some areas in Lagos, and you intend to build ten units. This means that the property will earn N35 million annually. A business-minded investor will most likely calculate his return in three years in advance. Thatโs a great investment.
But have you taken the time to calculate how much it would cost you to purchase plots of land large enough to build ten 3-bedroom units on? What about material costs and other expenses?
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Ensure you factor in every cost and expense involved before you set out to purchase a property. Do not make the mistake of focusing solely on the return projection; instead, consult with a quantity surveyor and other professionals to determine the cost of completing the project.
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Disregarding the Importance of Location:
Another common mistake that real estate investors make is disregarding the importance of location. Location is one of the most important factors in real estate investment, as it can determine the value of a property and its potential for appreciation.
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When looking for properties, consider factors such as proximity to schools, shopping centers, airports and other transportation, as well as the quality of the neighborhood.
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Purchasing a Land or House Because It Is Cheap:
Even though it is important to take advantage of bargains and discounts, you must be able to distinguish between price and value. The value of the property you want to invest in will be greatly influenced by its location. For example, you cannot compare the value of a property in Lekki to that of a comparable property in Ifako.
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Don't buy a property because it is cheap, consider how strategic the location is and the future value of such property before making any commitments.
If you want to make a lot of money from renting out your property, Ibeju Lekki is a good option to buy a land or house but you must be prepared to bear the financial consequences.
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Failing to Account for Vacancy Rate:
This is an important factor to consider especially if you are investing in real estate for rental purposes, because this directly affects the income generated from the property.
Vacancy rates refer to the percentage of rental properties that are unoccupied or available for rent at any given time. In other words, it is the number of vacant units divided by the total number of units in a rental property.
If a property has a high vacancy rate, the income from rent will be reduced, which can make it difficult to cover the expenses associated with the property, such as property taxes, and maintenance costs.
Vacancy rates can also be influenced by factors such as the local economy, job growth, and population growth.
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It is very crucial to research and understand the vacancy rates in the area where you plan to invest in real estate so as to make informed investment decisions.
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Using Real Estate as a Get-Rich-Quick Money Scheme
Real estate is not the same as MMM. If someone tells you that your investment will yield 200 percent interest in a month, he is either a liar or a skeptic.
Being impatient with your real estate investments can be a deadly mistake. Itโs important to have a long-term mindset and to be patient when it comes to seeing returns on your investment. Property grows in value over time. Though appreciation in a few months is possible, it will not double your investment in a month.
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Do not treat your real estate investments as a get-rich-quick scheme; instead, be patient. Rushing into a decision because you want to make fast profits can lead to financial losses and missed opportunities.
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Putting Your Family Ties Before Your Investment:
Even if a plot of land in your village costs N100K per plot, as an investor, your business goals should come first.
While family is very important, purchasing plots of land in a village that does not meet your investment goal will either set you back or completely defeat it.
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Do not make this investment blunder, just because you want to impress your village people or show them that you have "arrived". Seek for fast developing locations that meet your business goals and can also help you maximize value for your properties.
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Failure to Establish a Physical Presence on a Property
One method of establishing ownership on land in cities such as Lagos, Asaba, Awka, Abuja, and major state capitals in Nigeria is to erect a building or fence it.
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Establish your presence on a property even if you intend to keep it for a long time. Do not make the error of leaving a property unattended for an extended period of time. This can expose your property to land grabbers.
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Failure to Seek Professional Advice:
Real estate investment can be complex, and itโs important to seek professional advice to help you navigate the process.
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Working with a real estate consultant, a real estate lawyer, and an accountant to provide professional advice on your real estate investment will ensure that you make sound financial decisions.
Finally, real estate investment is not something you can just dabble into. It can be both lucrative and risky. Hopefully, this post has provided you with valuable insights into some common mistakes to avoid when investing in real estate. Remember to always do your due diligence, seek professional advice, and have a solid plan in place.
But hereโs one thing to note; as much as it is important to avoid these mistakes, itโs also crucial to take action and start investing in real estate as soon as you can.
Real estate investment is an investment that has stood the test of time, and it can provide a stable source of passive income for years to come.
So, if youโre ready to take action and start investing in real estate, I encourage you to consider working with us today.
Contact
deunikrealtor
Chinwendu Tricia
08036511261
[email protected]
