you thought you couldn’t play in the property market for lack of sufficient capital, we’ve got good news for you. There are ways you can still participate in the lucrative property market without owning tonnes of money. If your case is that you can fund it but haven’t plugged in because you can’t figure out what direction to go, we also have a searchlight to beam for you. Globally, real estate remains a strong and profitable investment (some will rank it the highest) and, provided you apply basic rules of prudent investment, you are unlikely to fail colossally. More probably, you will meet with remarkable success and build a solid wealth base.
Historical Performance
A decent number of the world’s richest people, you probably know, build their wealth in real estate. More importantly, many started small and grew big over time. Their successes have been owed more to strategy than their capital outlay. The implication: even without much money, you can replicate these successes by applying same or similar strategies or, better still, developing an effective self-crafted approach.
Getting Started Your Own Way
If you accept that there is no good justification for excluding yourself from the high-yield property market, here are some tips on how you can flag off your participation, on your own terms.
1. Invest In Property Companies
This is perhaps the easiest option, especially if you have very limited funding at your disposal: buy into companies that invest in real estate. For the quoted companies, this is a hassle-free process – you just buy their stock on the stock exchange. The key attraction here is that this option is ultra-empowering, enabling even a student that has just N5,000 to become a real estate investor. Other attractions: the company you buy into is run by a management that has relevant expertise and a pool of resources to invest even in costly but highly lucrative property businesses, indirectly giving you a bite into these otherwise exclusive market segments; if your investment fund is managed by a fund manager (by direct placement or by investing in a dedicated managed fund), you enjoy another level of expertise and diversification: the manager can switch funds based on the performance of the property companies.
If you are going for quoted companies, your two major options today will be the UACN Property Development Company PLC (a developer and investor) and Union Homes (a primary mortgage institution financing housing projects and often co-investing). Currently at N10.13, N5,000 will buy over 500 units of UACN Property. For Union Homes at about N3.5, it will fetch you over 1,400 units.
2. Go For Land Speculation
For reasons of limited funding or pure investment strategy, land speculation may also prove a lucrative engagement for you. There are those who focus on this investment channel: buy land in up-coming areas where you foresee future growth and price appreciation and dig in and wait. Often the result comes quickly, while in other cases, a protracted wait may be required. If you choose well, excellent (sometimes outrageous) returns will be your reward. Today, much of the land lying from Aja to Epe in Lagos has been bought off, though largely undeveloped. Many of the owners have no ultimate plans to develop and are merely waiting for the right moment and price, knowing that the area will continue to record a more-than-average pace of growth.
If you choose to pursue this course, a word of caution. Land title, especially when you fail to develop promptly, could get slippery, particularly in high-demand locations like Lagos. Be sure you deal with rightful owners, and perhaps in a collective context (a group of buyers). A good lawyer, versed in land matters in the area of your interest, will also be a good safeguard. You may also effect some minor development, to secure effective possession, over the waiting period.
3. Buy And Renovate
To minimise your outlay, you may also target fairly worn or even dilapidated structures which you can secure at a bargain price. If you buy right, the cash outlay plus a reasonable cost of modest renovation will still leave you at a comfortable investment cost. Most times, that modest renovation you carry out will turn the property around and catapult the value. You can exit quickly, having made a decent margin.
If you go on this option, a key factor to watch is the cost of required improvements. If you grossly underestimate this, you could end up with a huge hole in your pocket. The lessen: get reliable professional assessment of the scope of deterioration and the necessary scale of restoration work. Cost carefully, adopting a worst-case approach, to determine how much to factor in for renovation cost.
4. Pursue Buying And Redeveloping
Buying to redevelop is similar to renovating, except that the old structure will not count as it will be totally uprooted and replaced. A bigger investment outlay is therefore implied. This strategy will work well if an aged or unbefitting property is located in an area that commands good market value. While the environment will reflect on the price of the existing structure, if you secure and rebuild it, the value differential could be massive, yielding you a handsome return.
5. Focus On Commercial/Market Developments
Some investors focus on developing commercial outlets (stores, shopping complexes, office space, warehouses, etc) in strategic business areas. The size of such investments would vary, but we are more concerned about where a small investor could find space in this market segment. The truth, really, is that there is reasonable room for the small player. The ‘magic’, as in many investment actions, is in being motivated, committed and focused. Building a string of shops, which will tomorrow command high rental value and strong market price may simply require identifying, well ahead, where sizeable settlements or access infrastructure like roads will emerge. When roads pass and people settle, shops will spring up. As demand pressure mounts on the stock, their value will go up. This happens every day around us. The question is, if you’d desire to make money from real estate, why couldn’t you run this simple formula that works? Besides, there are other creative ways the small investor can tap into investment opportunities in this segment. Of course, if you can undertake bigger projects or access established locations like major markets or commercial areas, your chances are even better enhanced.
6. Log Into Residential Accommodation Development
For cities like Lagos, Abuja, various state and commercial capitals, residential accommodation will remain under pressure, given the acknowledged low ratio of the housing stock. The population growth has continued to outrun the snail pace of housing development, leaving a huge, yawning gap. Little wonder that vacant property gets quickly snapped up. It is common knowledge in Lagos that you don’t delay to pay when you see a property you desire. Quite often, a number of other interested parties are queued up, a development often abused by mischievous property agents who end up collecting payment from multiple sources, leaving some subscribers in the cold. What this says is that residential accommodation will remain good business in a long time to come. To begin to meet market demand and come near market saturation will take long years and a special will from government, which is not evident yet. So, if you have money to invest, here is not a bursting market. You can also always find a location and house-type that could suit your pocket and still meet your returns expectation.
Our list here is certainly not exhaustive, but throws a challenge as to ready options you can pursue to begin making money from the high-earning property sector. Unless you deliberately choose to stay off, it is clear that there are creative ways to get your feet into this business, without breaking into a bank. You only need motivation, focus and a strong will to achieve.
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