Thinking About Property Investment – Have You Counted The Cost?

Written by Published in Editorial Wednesday, 16 May 2012 16:40
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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, the recent economic crunch has proven otherwise exposing a lot of uninformed decisions which were weighed and found wanting.

It is, therefore, a non-debatable fact that while housing deficit is on the geometric increase; this cannot be a singular justification for committing borrowed funds, surplus profit, hard-earned savings into property development and investments. Caution has to be taken in order not to be enlisted among those who got their fingers burnt. Case in point, a drive around Lagos especially on the island reveals abandoned building projects, long period of voids in new development, incomplete schemes et cetera. So many investors have entered into pre-sale arrangements which never saw the light of day while some developments were already functionally and economically obsolete before getting into the market.

Considering the huge amount that is committed into real estate investments and the level of risks associated therewith, 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 ways investors gamble with their money. This means counting the cost which leads to a comprehensive feasibility and viability studies.

This cost includes site cost, design cost, economic cost, technology cost, legal cost, environmental/neighbourhood cost. The 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 negotiated to be able to interprete market trends. Having information is one thing, 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 the cost will definitely expose the risks associated with the 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 investments, there is the need to periodically review (during the execution of the project) employed parameters which have positively justified the execution of the proposed investment. This helps in setting up response strategies in the case of any likely variance due to externalities. Sometimes, there might be the need to adjust designs, slow down or increase the rate of work depending on events in the economy.

Considering the heterogeneity attribute of property investments, there is the need to be guided into making right investments decisions. No amount of time can be wasted making sure your decision is right. The cost of making an informed decision cannot be compared to the cost of making an uninformed decision. You would have saved millions which would rather have been lost to uninformed 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. Don’t waste that hard earned money by gambling rather invest by first counting the cost.

OSAGIE ALFRED, Advisory Group, Propertygate Development and Investment Plc, This email address is being protected from spambots. You need JavaScript enabled to view it.

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