EDIDIONG IKPOTO investigation of a popular claim by some real estate practitioners that the chances of losing money investing in real estate are slim to non-existent

One of the first things a potential investor will typically learn before making the big bet of committing funds to an investment line is the caveat surrounding that particular holding. At this stage, some salient questions will be asked, such as, what are the risks involved? When will I break even? How soon will I be able to recover my investments? How much profit will I make over a long period of time?

The answers to these questions are as varied as the different forms of investment themselves. The only certainty given is that each form of investment involves particular challenges and risks.

Today, it has almost become a credo in the investment world to say that the safest way to hide your money is to invest it in real estate. This is apparently due to the dynamism that encompasses not just the world of business or investment, but human existence by extension. The general rule here is that while the dynamic nature of human existence can quickly overtake existing systems, real estate is the only exception to this rule as it is not susceptible to being overtaken nor can it be removed.

An investor who decides to invest his money in electronics, for example, might be faced with the biting reality that these products could become obsolete and completely unfashionable in less than a decade. Not to mention the risks associated with transporting large shipments of fragile products across shipping lines.

A piece of land, on the other hand, is never obsolete, regardless of the era or dispensation of human existence.

There is a fundamentally universal belief that the monetary value of a landed property still costs less today. Therefore, an investment in real estate almost certainly guarantees a good return on investment as time goes down.

Perhaps this is why real estate alone, of all known forms of investment, has remained a permanent feature throughout all ages of human existence. Long before the existence of stock markets and cryptocurrencies, real estate was a formidable player in the investment market, and despite the emergence of so many forms of investing money in the modern era , he continues to retain this hallowed position amid fierce competition.

In Nigeria, for example, there was a time when many scholarly colonies today lay fallow, deserted and looked like a wasteland. Of course, due to a lack of attractiveness, very little value was attached to land properties in these areas. A few decades later, investors who jumped to invest either due to lack of funds to pour into more promising options, or those who invested out of pure foresight, are now proud owners of land worth the ransom of ‘a king. Popular examples here include several parts of Lagos Island, Shelter Afrique (Uyo), among others.

Because real estate is significantly affected by location and factors such as employment rates, local economy, crime rates, transportation facilities, school quality, municipal services, taxes land and several other factors, property values ​​can sometimes be skewed in unpredictable ways, resulting in sharp appreciations in value as these indices change over time.

All that said, real estate as a business is not just about acquiring land. According to Investopedia, real estate is defined as land and any permanent structure, such as a house, or improvements attached to the land, whether natural or man-made. As such, real estate encompasses land, as well as all permanent man-made additions, such as houses and other buildings.

By this definition, it stands to reason that an investment in real estate, despite the obvious safeguards, comes with significant risk, and there is a plethora of historical antecedents to warn potential investors that if discretion is not employed, an investment in real estate estate may not go as well as expected.

Indeed, while real estate investing is not just about acquiring land, skills such as knowing the right location, understanding the dynamics of cities and desirable neighborhoods, mastering the types of property that can bring the most profit and cash flow and where the rate of renters and buyers is higher are all important aspects of real estate.

A real estate agent, Olamide Samuel, in his pitch on the factors that could make or hurt a real estate investor, said that several investments in the business had bottomed out due to a wide range of factors. Therefore, investing money in real estate does not prevent an investor from incurring monumental losses.

Olamide said: “Of course an investment in real estate can fail. Real estate is a business, and the same rules that apply to any other business apply, otherwise you will end up wasting a huge amount of money.

“Look at the building that collapsed in Ikoyi last year. It was someone’s business. It was someone’s investment, but he didn’t manage the business well. They decided to cut corners and avoid due process.

“We saw what happened at the end. They didn’t run the business well, and it failed. The amount of money lost due to this incident amounted to billions of naira.

According to him, real estate investing, like any other business, required a comprehensive understanding of market variables as well as the intuition to predict how events might unfold in the future for a given property. Therefore, as attractive as real estate investing may seem, it is not as simple as it seems. Many new investors enter the market hoping to make a quick buck, but many inevitably fail.

According to investment think tank Danbelinvestment, cash flow management is one of the many reasons why investors don’t stay in business for long, including real estate. Any mistakes, including paying too much for the wrong property, mismanaging your property, not selling at a profit, and mismanaging the business organization, could lead to negative cash flow and unprofitable investment properties. .

As a property management company, WeLease identifies lack of focus and commitment as a suspected reason why a property investor would likely botch an investment. The point here is that too many rental property investors treat it like a hobby or a part-time job. Instead, the investor should treat real estate investments as a “real business”. Indeed, it takes a lot of work for a successful investor, especially for real estate investments.

The president of the Nigeria Institution of Builders in Facility Management, Dr. Olufemi Akinsola, believes that mentorship and feasibility studies will be crucial for any real estate investor who wants to succeed.

The real estate veteran noted that many investors hastily invest in real estate investments without getting adequate professional advice about the potential risks or downsides of those investments.

Another possible benefit that could come from good consultations, according to Akinsola, would be a definitive determination regarding certain extenuating circumstances that might surround a property. In most cases, when due diligence is not performed, what was supposed to be a promising investment opportunity could end up leading to protracted legal wrangling which could harm the interests of the investor.

Olufemi said: “It is expected that before starting development, all the burdens on the ground have been resolved. However, by chance, if something arises that needs what seems to be liberated becomes unfree, it distorts the working process.

“If you buy land from a family who assume they own the property without knowing if there is a lawsuit about it and finally the opposition now wins the lawsuit and they want to take steps to recover, then it means either you go to this family to buy or you wait forever if the other family will come back to court to claim the right of ownership of this property.That is why the works would be stopped.

“Another thing is that if land to be used for property development is on a piece of land that has been ravaged by war, no one can develop on that land. If you notice now, development has been stopped for a while because most of the expats working on development projects have been kidnapped and ransoms should be paid so no one wants to go there.

He further pointed out that if an investor does not consult the services of real estate professionals before investing, he also risks buying landed property which may be unsuitable for development purposes. A clear example, he pointed out, would be wetlands with poor soil that makes it difficult or sometimes impossible to erect structures there.

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