Real estate is a powerful investment tool for anyone seeking financial independence or freedom. It is not a business for the rich, rather it is a business for those trying to get rich.
According to Investopedia, real estate is a property made up of a land and the buildings on it, as well as the natural resources of the land including uncultivated flora and fauna, farmed crops and livestock, water, and any additional mineral deposits.
This article is designed to help that individual out there who is struggling to make a decision on whether to build or buy his or her first house for living or for rent investment.
I am aware of the euphoric and elated feeling of being a house owner,popularly called a landlord in Nigeria. However as an investor, getting your first personal house for living is a liability.
Liability is any thing that takes money away from you and has no plan to return the money anytime soon. Remember, the goal is to multiply your source of income, not to increase your expenses.
Therefore, as exciting as building your first house may be. It is important to ask yourself these few questions before taking the decision.
1. Do you want financial freedom or you just want to be free from paying rent?
I believe its high time you knew that paying rent does not make you a tenant for life, you can be paying rent and also be a landlord.
Permit me to share with you a lesson from a millionaire mentor. He lives in Lagos, one of the mega cities in Africa. He works on the island and earns 5 Million Naira monthly. However, in a bid to be close to his place of work, he lives in an apartment around Lekki, where he pays the sum of 15million Naira annually.
However, he owns about four different multiple units apartments in Ikeja that is producing over 25million Naira income for him annually.
This is the catch, to friends and families he is another tenant or a renter but to an investor, he is a smart investor.
Just with half of his rental income on his properties in Ikeja, he can conveniently take care of his rent in lekki, leaving him with over 10million Naira in profit. Remember that he also earns 60 Million Naira annually from his job.
With his wise decision, he has saved himself from work and financial stress.
2. How long are you planning to stay in your current city?
This is another question alot of house owners do not ask themselves before they start to build. They invest so much into their first house and after a few years, better opportunities might surface in another city or outside the country. This could render the beautiful apartment useless and possibly make the owner to sell the property off in distress.
3. Is this location profitable for rent?
There are some locations in Lagos, Nigeria that has reached their maximum market value. No matter how luxurious the property built in that location, the profit is limited both in sales and in rent.
Also, there are some areas that no matter how expensive the apartment is, the low social economic status will affect the rental charges. You can’t go higher than the current rental price in that area.
4. What is the future of real estate in the location in the next 10years?
You must be futuristic and realistic when you want to build. Market survey should be conducted in the area to determine its future market value, this should not be done based on assumptions but on facts and the involvement of experts.
5. How much rental income would the apartment generate?
Multiple units guarantees good investment returns compared to single or double unit apartments.
6. Why are you building your first house now?
Quite alot of people join the wagon of the landlord train not because they have answered any of the questions above but simply because they feel they have the capacity to build a house now and they want to be accorded the respect that comes with being a house owner.
In a developing country like Nigeria, multiplying your source of income is non negotiable and your rental income is better enjoyed when you manage your properties with mydaki.
Mydaki is a rent focused real estate company that help landlords to get tenants at ease.
All you have to do is upload your property on the website and have mydaki connect you to a renter, and also ensure your rental income comes on time.
Stay tuned for more episodes!