It is common to hear real estate salesperson tell you that this investment is a good buy or that property is a good deal.

 

But what qualifies a real estate purchase as a good deal? 

 

There are numerous facts to be considered. Some of these facts are who the seller is, where the property is located and the value of similar properties in the area.

 

Furthermore, the type of real estate you want to buy into will determine what index you should use to make a huge financial decision such as this.

 

For example, when buying land, the factors vary to some degree from when buying off plan houses. Those also vary from when buying fully built up property.

 

Even when buying built up property, the considerations vary slightly between old houses and new houses.

 

Invariably, there is no one size that fits all.

 

What you want to buy will determine what will be important. 

 

However, there are certain parameters that apply loosely to most property transactions in Nigeria.

 

We shall discuss 4 of such parameters here.

 

Who owns the property? 

 

This factor is important irrespective of what kind of property you are buying. Even when buying into a real estate investment fund, you should concern yourself with the identity of your fund managers. 

 

Their credibility and general perception should catch your attention because these indicate what the likely fate of your money is.

 

Also, who your sellers are determines what kind of title they will give you in exchange for your money.

 

A government selling can give you a letter of allocation and/or a Certificate of Occupancy. A family selling can give you a contract of sale or a deed of assignment, depending on what kind of title they have. A mortgagee selling will give you a different document. So will the beneficiaries of a Will.

 

And sometimes the seller can’t give you anything because they don’t have any rights to transfer in the first place.

 

So it is important to find out the identity of who is selling to you. It is impossible to give what you don’t have. You know.

 

How much the property is being sold for.

 

It is very common these days to hear property developers tell you the price of their properties and tell you the price is going up in 2 months time.

 

In the tens of millions, with a small discount, the price begins to rise within a few months.

 

But have you ever asked who determines the price of the property? 

 

There is something called the market value of property. This figure is determined by some factors also, notable among which are the prices of such other properties in the vicinity, the developments around it, the kind of title the property has, the credibility of the seller and the kind of improvements on it.

 

Now here is the reason why this is important: If you buy property that is overpriced, you will have to wait for it to appreciate to your purchase price and, then add some value before you can dispose of it or transact with it for actual value. 

 

For example, you can’t take a mortgage on it with your purchase price. A mortgage will depend on the market value to be concluded. And the market value is not controlled by the seller. It will be determined by a professional called an Estate Valuer.

 

Moreso, why should you use more than is necessary to purchase one property if you can use what’s left to diversify your portfolio. 

 

The size of the property. It is common these days to find buyers who do not know the actual value of the size of what they want to buy. They hardly have a mental picture of what it looks like and what it can do for them especially if they are new investors. 

 

For example. Government plots usually come in hectares and a hectare is about two and a half times the size of an acre. 

 

One plot of land used to be measured on the average at 648sqm. These days, what is sold as one plot now is 600sqm or 500sqm. A half plot is now measured at 250/300 sqm.

 

The implication of this is that once you build a standard 3 bedroom on a 300 sqm property or you buy one of such,you will hardly have parking space for more than 1 car. 

 

If it is designed to have more parking space, it probably didn’t meet building approval standards. And that can portend future issues for you with the Government. 

 

But all in all, it is important to know the size of what you are buying and what that can do for you based on your investing needs. 

 

Whether it is a commercial plot, a residential plot or an industrial plot. 

 

Many people do not know that the designation of their plot has many implications for them.

 

Of Course commercial and industrial plots are larger than residential plots. However, unlike residential plots, the other area designations do not permit certain things.

 

For example, you cannot build residential property on a commercial or industrial plot. The building set back on these plots are also usually more than those for residential property. 

 

In like manner, your tenament and utility costs are higher for commercial and industrial plots than in residential plots.

 

Irrespective of who is selling the property to you, what the area is designated as by town planners and estate developers will determine what regulations you will be bound by and what liberties you will and will not have.

 

Now, all the above should be assessed against your investing needs and long term goals. 

 

These will help you avoid investment that does not meet your needs and that has a high likelihood of being a scam.

 

A comprehensive due diligence investigation on any property you want to buy can save you stories that touch.

 

But you may not have the time for all this. So let’s take the pressure off you and do comprehensive due diligence on any property of your choice.

 

We not only tell you the risks, we tell you the best way to mitigate them.

 

For more information, please send us a mail at bimpe@adebimpeshowunmi.com and we will be sure to get back to you.