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Wednesday, 16 May 2012 16:40
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Thinking About Property Investment Have You CountedThe Cost?
Real estate investments in Nigeria have overtime been described
as possessing good economic risk-hedging characteristics providing
an aggregate turn over performance
than most alternative investments. Initial perception paraded by
certain players in the property market in Nigeria, especially in
major cities was that property prices and
demand for properties will always be on the increase. However, t
he recent economic crunch has proven otherwise exposing a lot of
uninformed decisions which w ere
weighed and found wanting.
It is, therefore, a non-debatable fact t hat while housing
deficit is on t he geometric increase; this cannot be a singular
justification for committ ing borrowed funds, surplus
profit, hard-earned savings into property development and
investments. Caution has to be t aken in order not to be enlisted
among those w ho got their fingers burnt.
Case in po int, a drive around Lagos especially on the island
reveals abandoned building projects, long pe riod o f voids in new
development, incomplete schemes et cete ra.
So many investors have entered into pre-sale arrangements which
never saw the light of day while some developments we re already
functionally and economically
obsolete before getting into the market.
Considering the huge amount t hat is committed into real estate
investments and t he level of risks associated therew ith, the need
for an appreciable level of certainty
cannot be over-emphasised. This means you should never gamble
with your investment. To be a good investor, never tie emotions to
your investments. The two are
mutually exclusive. Premising your investment decisions on
seminars that are too good to be true, engaging non professionals
or professionals who lack integrity and
necessary expertise are few examples of w ays investors gamble w
ith the ir money. This means counting t he cost which leads to a
comprehensive feasibility and viability
studies.
This cost includes site cost, de sign cost, e conomic cost, t
echnology cost, legal cost, environmental/neighbourhood cost. T he
opportunity cost of the capital has to be
considered. In addition, it is highly imperative for you to ask
yourself if the proposed action will make any economic sense;
consider probable market interpretation and
responses. Every property investment idea must target a specific
need and not a generalised need .
Therefore, good hands-on experience not book experience cannot
be nego tiated to be able to interprete market trends. Having
information is one t hing, being able to
perfectly analyse and interprete same require experience.Some
investors (developers, finance houses, individuals) have ignored
the importance of comprehensively
counting the cost because they want to save money. We have heard
the adage; Penny Wise, Pound Foolish. Counting t he cost w ill
definitely expose t he risks associated
with t he proposed development and save you a whole lot of
sleepless nights by the right strategies to combat same.
Furthermore, due to a plethora of ever-evolving market dynamics
affecting property investment s, there is the need t o periodically
review (during the execut ion of the
project) employed parameters which have positively justified the
execution of t he proposed investment. This helps in sett ing up
response strategies in the case of any
likely variance due t o exte rnalities. Somet imes, the re might
be the need to adjust designs, slow down o r increase the rate of w
ork depending on events in the e conomy.
Considering the het erogeneity att ribute of property
investments, t here is the need to be guided into making right
investments dec isions. No amount of t ime can be
wasted making sure your decision is right. T he cost of making
an informed decision cannot be compared to the cost of making an
uninformed decision. Y ou would have
saved millions which would rather have been lost to un informed
decision. If you are thinking of any form of property investment,
count the cost and do not let yourself be
counted amongst those who got their fingers burnt. Dont w aste
that hard earned money by gambling rather invest by first count ing
the cost.
OSAGIE ALFRED, Advisory Group, Propertygate Development and
Investment Plc, [email protected]
Last modified on Sunday, 17 March 2013 22:21
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