EXCLUSIVE: Advise on Buying Investment Properties

   A candid account from the front-line of the property market!

by Caroline Adeola Akinlotan

But before you buy, consider what is really involved. If you want to create an income stream immediately, you will need to rent out your property quickly. This information is not meant to discourage you from moving forward, but instead to show you that there are negatives as well as advantages to buying and managing rental property.
Startup Capital All potential landlords consider the cost of purchasing an investment property, but many overlook the costs possible redecorating works, In other words, don’t expect your start-up costs to end at the purchase. If you buy a partly finished property, you could spend a significant amount to make it “rentable.” Any damage to the foundation, plumbing, or wiring can cost a lot of money to repair. But even if you buy a property in good condition, you may still have to make changes to bring it up to date.

Making Repairs When it comes to being a landlord, two things in life are inevitable: death and repairs. Don’t even consider buying property for investment unless you’re sure that you can pay for repairs. The thing about repairs is they creep up on you suddenly and often cost a lot. For example, if your tenant calls at 11:30 pm at night to tell you the water pump is leaking and is flooding the house, you have to see that it is repaired immediately. Some tenants will call you for everything. Be prepared to spend your free time sorting out property issues.

Collecting Rent You will have some tenants who pay the rent on time. You will have good tenants who may not pay when due but always let you know ahead of time when to expect the rent. And then you will have the tenants that don’t pay and don’t answer their phone. Ask yourself if you are comfortable confronting your tenants before you start renting. Most tenants will pay the rent, treat the property like their own, and keep the neighbors happy. But at some point, you inevitably may have a problem tenant. If you are going to be a landlord, you’re going to have to handle tenants fighting with other tenants, tenants doing damage to your investment, and tenants who don’t pay. You will need to nave your Notices in place, know the eviction laws well, and be prepared to use them.

Managing Your Finances Landlords need to look at property management as a rotating door. Tenants come in, stay their lease, and then go. While some tenants will renew a lease, most will move on to the next place when the lease is through and leave you with an empty property To be a successful landlord, you will need to learn to manage your finances in times of feast and famine. Sometimes you will have full occupancy, rent paid on time, and no repairs. You will have to be dedicated enough to save and not spend during those periods because you will experience vacancies, late rent, and major repairs some times. A landlord’s finances do not stay constant. If you can learn to go with the flow, and plan for the unexpected, you just might succeed.

  SALES VS RENT: Properties below 10m...

DESCRIPTION	RENT PER ANNUM	SALES PRICE	RETURN ON INVESTMENT	% RETURN
Well Finished 2 Bedroom Flat Awoyaya	300,000	5Million	16 Years and 7 Months	6%
Well improved 2 bedroom flat @ Blk K, LSDPC Oko Oba, Agege	400,000	7.5Million	18 years + 9 Months	5.3%
floor 3 bedroom flat @ LSDPC Estate isolo	300,000	6Million	20 Years	5%
3 bedroom flat @ Jakande Estate, Isolo	200,000	4Million	20 years	5%
3 bedroom flat @ Abesan Estate Ipaja	200,000	5Million	25 Years	4%
Improved 2 Brm on Second floor @ Ojokoro Housing Estate, Ojokoro	200,000	5Million	25 Years	4%
3 bedroom luxury flat @ Ojokoro-Ijaiye	300,000	7.5Million	25 Years	4%
2 Bedroom Flats, Festac Town, Amuwo Odofin	300,000	9Million	30 Years	3.3 %

Analysis
Two bedrooms flat are cheaper and also it gives a good return compared with the three bedrooms flats in this price range. The exception here is the  Amuwo Odofin flat has a low return due to its high selling price.

PROPERTIES BETWEEN 11M-20M

DESCRIPTION	RENT PER YEAR	SALES PRICE	RETURN ON INVESTMENT	% RETURN
3b/r flat 2 toilet 2 bath vacant possession DOLPHIN ESTATE	1.2M	20M	16 Years+ 8 Months	6%
2br flat with toilet and bath DOLPHIN ESTATE	800,000	16M	20Years	5%
3 bedroom flat (upstairs) @ KIng's Court, Shasha -Egbeda	650,000	15M	23 Years + 1 Month	4.3%
3 bedroom set back in Taqwa Crescent Ogba	600,000	18M	30 Years	3.3%
3 bedroom flat @ LSDPC Ogba	500,000	15M	30 Years	3.3%
3 Bedrm Flats at Festac Town, Amuwo Odofin	350,000	11M	31 years + 5 Months	3.2%

Analysis
The higher priced properties enjoy much higher rents, even compared to their sales price and so enjoy a better return.

PROPERTIES BETWEEN 20M-50M

Description	RENT PER ANNUM	SALES PRICE	RETURN ON INVESTMENT	% RETURN
3 bedroom flat with bq in a well secured estate in Lekki. ROMAY GARDEN	3M	45M	15 years	6.7%
3 bedroom flats plus 1 room BQ at Prime Waterview Estate, Lekki	2.5	40M	16 years	6.25%
Brand new 4br flat with swimming pool, gym,elevator, 1rm bq @ Safe court, Lekki (by Nicon town)	3M	48M	16 Years	6.25%
2 bedroom flat at Prime Waterview Estate, Lekki	1.75	28M	16 years	6.25%
3 bedroom serviced flats in a mini-estate on Chevron Drive, Lekki	2.3	38M	16 years + 6 Months	6.1%
3 bedroom serviced penthouse flats in a mini-estate on Chevron Drive, Lekki	2.5	44M	17 Years + 6Months	5.6%
3 Bedroom flat @ Dolphin Estate (ground floor, vacant)	1.2M	22M	18 Years + 4 Months	5.5%
3 bedroom flat with 1 room bq newly completed @ Obanikoro	1.5M	28M	18 Years +4 Months	5.4%
3 Bedroom flat, 2 toilet and bath at MILVERTON COURT	1.5	35M	23 Years + 4 Months	4.3%

Analysis
There is a higher possibility of getting above 6% return from this price range

PROPERTIES BETWEEN 51M-100M

DESCRIPTION	RENTAL COST PER YEAR	SELLING PRICE	RETURN ON INVESTMENT	% RETURN
3 Brm serviced flat with swimming pool at Oniru Estate	5.5M	60M	10 years	9.1%
3 bedroom apartments fully serviced with Swimming pool & gym at Plot 3A, Block 26 Jeremiah Ogwu Street, Lekki I, Lagos State.	4M	65M	16 Years 4 Months	6.2%
3 bdrm flat at parkview with pool	4M	80M	20 years	5%
3br flat on Bourdillon road, Ikoyi	4M	85M	21 years 4 Months	4.7%

Final Word
Buying rental properties is a great way to make money. Just remember that being a landlord is not all fun and games. You will work hard for your money and may be faced with adversity from time to time. Buying investment property is not for everyone. It should be an investment option you consider only once you’ve achieved a certain level of financial independence yourself.