W.I.R.E Podcast: Recent Episodes
Victor Binitie
Wealth Is Real Estate Podcast focuses on wealth creation through income producing Real Estate in Africa's largest economy - Nigeria and across the African continent. Exploring the potential for investment and generating cash flow in Africa's real estate sector.
Episode 8 is mainly about land documents and the registration of land documents in Nigeria.
Acquisition and Registration of Land Documents
For the longest time, commercial real estate (or CRE) investing has been accessible only to more seasoned investors – those who have larger portfolios. Beginner investors would find this market difficult to get into. But that was before. Today, thanks to the internet and online marketplaces, anyone can be an investor in real estate.
So on this episode of Wealth is Real Estate, we are going to talk about what CRE investment means and the unique benefits of owning commercial real estate and I will crucial areas to consider when making a CRE investment.
Let’s get started.
What is commercial real estate?
First and foremost, what precisely is commercial real estate? It is, at its most basic level, any property that is intended to generate revenue. It can comprise everything from retail stores to office buildings to industrial warehouses to restaurants, as well as more specialised properties such as storage spaces, hotels, casinos, and even healthcare facilities.
So why invest in commercial real estate?
Whether you’re coming from a long career in residential property or you’ve never invested in real estate at all, CRE can be a smart place to put your money. But why commercial real estate? Here are some reasons you might want to consider it for your real estate portfolio.
Unique benefits of owning commercial real estate
1. High income potential
The biggest reason to invest in commercial real estate is simply its potential. Commercial buildings come with higher rents and price tags, and thus higher potential for returns, too. Instead of making a few hundred dollars on a rental home every month, you could make thousands, tens of thousands, or even more if you choose the right properties. These increased margins could even help you grow your portfolio faster.
2. Less turnover
Unlike residential real estate, commercial real estate doesn’t typically operate on one-year lease agreements. Instead, most tenants sign three-year agreements at a minimum. This reduces turnover (and the hassle and cost associated with it) and also helps ensure stable cash flow for your business.
3. Less risk
Another reason for investing in CRE is that it is less volatile. You can secure long-term lease contracts from clients for as long as 3 – 5 years, sometimes even longer than that. By doing so, you are already ensuring your profit for the next half a decade or so, regardless of what economic swings the future might bring.
4. Less competition
Another thing that we don’t appreciate in residential property investment is that it is incredibly competitive. Due to their large structures, expect your competitors to be less in commercial real estate. What’s more, is that CRE offers a great variety of different establishments. Think of them as niches. The more specific your niche is the less competition and more clients you’ll have.
5. Fewer problematic tenants
Tired of dealing with residential tenants who just won’t pay up or will leave the place in shambles after their lease is up? Sick of tenant disputes and renter complaints? With commercial real estate, things are usually a bit more professional. Since you’re working with business owners – ones with reputations to protect and dollars on the line – they’re typically more careful in both working with landlords and following the rules. This results in a lot less hassle for the investor/ property owner.
6. Increased value over time
Finally, one of the secrets of success in real estate is making sure that your property appreciates its value over time. That can be difficult to do with residences, especially if you don’t have much space to work with. Commercial real estate, though, is another thing entirely. There’ll always be a new amenity that you can add or a feature that you can install. Plus, if you have secured a prime location wher
I think it is important that we understand why real estate investment as a means of securing your retirement is a good idea. I believe that a lot of people who are nearing retirement age and nearing the end of their career - or even in retirement want to understand better. I want to say the answers I will give are based in my research and from speaking to professionals.
Please remember that property, like any investment or like any other asset, carries risk. It is not a perfect solution for every, single scenario. There are downsides that need to be considered, as well. Please, always consult with a licenced professional before you make any investment decisions.
So, let's try to understand the specifics around what to consider, why might real estate investment be a fit for you and what you should look for.
There are particular reasons, why people consider property - rental property and investment property - as a retirement option.
The first is because it can fit nicely, into a current pension plan. So, if you already have a pension pot and you are in discussion with your financial adviser or your accountant, about ways to use it or different ways to invest it, then property can be an efficient way to invest those funds.
It's worth speaking to your accountant about that, if you've not done so, already. So, often, it can be a very efficient and very solid, tax-efficient way, to approach your pension plan.
The second route is looking at what property can give you, over a longer-term plan.
If you are looking into retirement, it's unlikely to be a six-month or a one-year plan. It is more-typically going to be over a five-year, ten-year or twenty-year timeframe. And usually, investors consider property because of the potential for recurring income.
So, two ways that you can generate money from a property, over the longer-term is with recurring rental income - if you buy in the right location and you have the right tenants and the right management company and if everything fits, then you should be getting consistent, rental income, on an annual basis - and the second thing, is the potential for capital growth.
There are, certainly, variables to that and it's not a guaranteed situation, where you will always get yearly growth on a property. But over the longer term, especially, if you are looking over a five ten or twenty-year timeframe - you'll see changes to prices.
And if you are buying in a solid location, hopefully, the plan would be that it either maintains its price or goes up in price, over that length of time.
And certainly, when you compare it to other, alternate strategies or alternative investments, property, typically, performs quite well, in like-for-like comparisons. That's one of the reasons.
So, that's the second reason why people consider property investing; this consistency for regular rental income and the potential for capital growth.
And then third is because it is a tangible asset.
Most people understand property. Most people have either been a homeowner and/or maybe they've invested in property, previously. Or they certainly know people that have been in one of those two positions; they understand it. They understand the need to provide housing; they understand the dynamics-at-play.
It is easier and more tangible to consider, than stocks and other things that people look at or other investment strategies, that are harder to plan or predict or that are, perhaps, less certain. Whereas property, people typically understand the fundamentals that are at-play with it.
So, that's usually why investors gravitate towards real estate as a potential retirement option.
Like I said before, the first reason is it might be more efficient, as-in it plays, directly and nicely, into your pension plan, already, at the moment and it provides diversity.
The second is that it can provide you with a consist
Myth #9: Buying new property is better than buying old property
Newly built or off-the-plan properties are appealing and can give you many benefits as a property investor including securing the property at today's prices and maximising the available depreciation which can help you save tax.
But there are risks however which you need to be aware of, including a falling property market between you paying the initial deposit and settling in the future. And when buying off-the-plan you will not know exactly how the property will look when construction is complete. Sometimes, unscrupulous developers can vanish with your deposit, and they may even abandon the project. That is why I always advice that you do your research on the company, the title documents, and their track record in delivering past projects. Past performance is not a guarantee but an indicator of the company’s ability to deliver.
(There are certain steps to follow which will help you pick the right off-plan properties to invest in which will be discussed in future episodes)
Myth #10: Purchasing below market value guarantees profit
It depends on how the market value was defined at the time and that value may not hold up in the future. For example, if the property is purchased below market value at the height of the boom it can still be a poor investment in the short term if the property cycle shifts into a decline and your property drops in value.
During a booming market, it will generally be more difficult to achieve higher discounts because of the number of buyers in the market and the high levels of demand.
Conversely, during a bust market, there will tend to be less buyers and an abundance of properties for sale, so it can be easier to achieve larger discounts.
Myth #11: Inflation and Naira Devaluation makes RE investing in Nigeria a waste of time
Nigeria can be a tricky place to do business or invest in. That’s a fact. But every emerging market has its challenges. And emerging markets give the highest ROI’s because they are emerging opportunities for wealth creation. There is huge potential to earn a good return on your investment if you get your investment strategy right. What you need to do prior to investing is get the right guidance and make sure you do your research.
I’m going to read snippets from an article by Victor Gbonegun writing for The Guardian Newspaper in December 2021, where he cited a new report by Octo5 Holdings limited which is a real estate firm based in Lagos. The report has revealed that the fundamentals of the Nigerian economy remain good for real estate investment despite increased insecurity and lack of effective management of fiscal systems. The report, looked at how inflation, naira devaluation and high exchange rate has impacted the real estate sector and concluded that real estate investments remain the most effective hedge against devaluation of naira on personal income and wealth.
The report further states that volatility in the foreign exchange regime means that with smaller dollar sums, you can buy significant assets below value, especially in the middle market sector with massive unmet demand. Inflation increased by 4.23% between May 20 and October 21, 2021, while the value of a two-bedroom apartment in Heron’s Beak, a real estate project increased by 80 per cent during the same period.”
According to the report, investors can take advantage of foreign exchange fluctuations to invest with a long-term focus in assets around the Lagos and Abuja axes.
Chief Executive Officer, Octo5 Holdings Limited, Mr. Jide Odusolu, said true economic freedom comes from making smart investment decisions and real estate investment could help more Nigerians unlock wealth creation. Citing its soon-to-be completed Heron’s Beak apartments as an example, he said early investors who had
Misconception number 4 IS THAT Being a landlord is hard work.”
Some people choose not to invest in RE because they feel that once they become a landlord, they’ll have no time to do anything else. They feel they will have to deal with all the tenant issues that arise, and life will become more stressful.
It is true that being a landlord can take up a lot of time, but it doesn’t have to. The truth is you don’t have to do everything on your own, and many landlords find that outsourcing allows them to grow their portfolio far beyond what would have been possible if they were overseeing everything on their own.
A good property manager can handle the day-to-day ins and outs of your property while you focus on the aspects of investing that excite you the most. For landlords today, there are options that allow you to be as hands-on (or hands-off) as you’d like.
So don’t run away from investing in RE because you don’t want stress. Find a way to ensure that the stress is someone else’s responsibility. That’s why you pay them. To take on the responsibility on your behalf. Nigeria has really good property management companies and solicitors who can help you handle the day-to-day running of your properties and ensure rent is collected on time and deal with any tenant issues that arise.
Misconception number 5 Real Estate investing in Nigeria is very risky.”
Some people will say that investing in stocks is a safer option, that investing in real estate is risky. After all, you don’t know how the market will fluctuate or if you will be guaranteed tenants 100% off the time. Or what if a tenant doesn’t pay? What if they destroy the property etc etc
Now, It is important to realize that no investment is 100% risk-free. However, there’s a lot that you can do ahead of time to mitigate problems and lower your risk, allowing you to ensure that you’re investing in something that will produce a good rate of return. An example is ensuring you are in the right location and the demand outweighs supply for the property you are investing in.
It is true that investing in real estate has risks, but it also has advantages that those other investments do not have, such as the security of having a place to live or a tangible investment.
Investing in real estate offers you the unique advantages of having an annual income, even during times of economic downturn, when many stock-based investments would stop paying dividends. There are also insurance options for rent guarantee. So, you can take up insurance if your tenant defaults and doesn’t pay you, your insurance will kick in and cover you to reduce your losses and you can extend your insurance for property damage as well. In effect you are reducing the overall risk of your investment.
As former US President Franklin Roosevelt reportedly said: “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”
So RE is a tangible and safe investment if done wisely.
Misconception number #6 “Cities are the best places to invest.”
To increase your chances of success, some people will advise you to only invest in fully developed communities or well-established neighbourhoods that is close to central business districts. This will give you a clearer picture of what you are investing in, and help you understand what you are getting into before you sink your teeth into it.
While there is some truth to this, it is important to remember that investing in an emerging community; an area that’s projected to see growth can offer better returns. Investing in major cities can be expensive, and even though your revenue might be higher, your returns could easily be lower due to increased costs. Cost of land is higher in a developed area as opposed to emerging locations. Often, city renta
So, the first misconception is you will Get Rich Quick as a Real Estate investor in Nigeria
Now, while there are huge profits to be made and you can be very successful as a real estate investor, it isn’t a ‘get rich quick’ process. Real estate investing in any country, regardless of the strategy you follow requires a careful and calculated approach and it will take time to build up your wealth. it’s important to ensure that you’ve run the numbers and they’ll work in your favour before investing.
For example, if your strategy is to invest in rental property, you’ll be investing for the long-term, so temporary fluctuations in the market will not affect you, like a developer who is building to sell. You’ll also be able to generate cash flow each year as the rental income rolls in. Additionally, you won’t have to time the market perfectly when selling to make a profit. Instead, you’ll have options, and can wait until the market recovers to sell.
So, at the end of the day, while real estate can be a great way to generate long-term returns and grow your wealth, it’s not a scheme that you can use to “get rich quick.” You need a clear-cut strategy that you will follow and implement diligently over a period to build your wealth.
Misconception Number 2 is that you require A Huge Amount of Capital to Start Investing in Real Estate in Nigeria
This is one of the most misleading perceptions about being a real estate investor in Nigeria. People assume that a substantial amount of capital is required to invest in a property.
In truth, investors don’t need a substantial amount of wealth to get started. Although it helps to have money, it’s certainly not a requirement.
Believe it or not, there are plenty of options for hopeful real estate investors.
Let me give you some options:
One possibility is to purchase RE with an investment partner who possesses greater financial resources. Listen, there are people out there who have the money but do not have the time. You can do a Joint Venture with such people via a legally binding document, and you can get a share of the returns on the investment. At this point you must have built up a level of trust for this to work. The person with the funds must trust you enough for them to be willing to make the investment.
Another solution to making your very first investment in RE is the National Housing Fund (NHF). This is a Federal Government scheme, which entitles all Nigerians above the age of 21years in paid employment to a low interest, government funded loan. Members of the scheme contribute 2.5% of their monthly salary to the fund through the Federal Mortgage Bank of Nigeria. The maximum amount obtainable under the NHF is now N15 million that’s over $36,000 USD as at today’s official rate. The borrowed capital is repayable over a maximum of 30 years at the rate of 6% interest.
This solution lets you own your first home and removes the issue of paying rent, or you can purchase this property and rent it out to generate annual income and in the long term enjoy asset appreciation. You can get more information about this from the Mortgage Bankers Association of Nigeria website or just Google NHF loan in Nigeria and you will see all the requirements for getting access to the loan. I know some people listening will say but I am not in paid employment. I am self-employed!
If you go onto the Mortgage Bankers Association website, you will see all the options. If you earn an income and can show proof of earning and a track record with your bank, you are eligible for this loan.
Please do your research.
Hello and Welcome to the show. Thank you for tuning in.
On this episode, I will talk about the huge opportunities that exist in the RE sector in Africa. We will spotlight on the Nigerian Real Estate sector and discuss the numbers, so stay tuned for an exciting episode.
Before I get into the meat of this episode, let me tell you a bit about myself and why RE investing especially on the African continent is so important to me.
For close to two decades, I’ve worked in England running my own construction support services business. I have multiple businesses, but this has been my main one. I have had the opportunity to provide our services to some of the UK’s biggest house builders and construction companies. The process of creating new structures from concept to reality has always been fascinating to me and helping these companies achieve this has been a blessing in experience and financially.
But I didn’t feel happy. I felt in my spirit that we should be able to do the same thing in Africa. We should build with speed, use technology and precision engineering to ensure our structures are solid. We should use construction and infrastructure development to boost our economies and plug the huge housing gap especially in our urban cities. We should encourage everyone in the diaspora to use the expertise they have gained to improve our continent.
Everyone I spoke to told me not to bother.
They said I was wasting my time. That there are too many issues, and I can’t have an impact.
This made me feel very sad because I grew up in Liberia and Nigeria and I know we are not perfect but there is huge potential for wealth creation all over the African continent. We just need the courage and the right leadership to take advantage of the huge opportunities that can make Africa a great continent!
So, a few years ago, I took a leap of faith and made my first investment in Nigeria. I bought Real estate. The asset appreciated by 100% within 2 years! One hundred percent!
When I saw the returns as opposed to what I could get in the real estate sector in England, I decided to invest more. So, what I did was I registered a Limited company and started my first project which is the construction of multiple single family homes. I did this by putting together a team of architects, civil and structural engineers and used all the knowledge in project and construction management I’ve gained over the years. I even went as far as implementing Building Information Modelling which is a process for creating and managing information on a construction project throughout its whole life cycle. This is standard practice for construction projects in the United Kingdom.
Now, It’s not been without its ups and downs but ultimately, I feel I’m adding value to the African continent through this investment, which will create homes for families and the use of technology in our construction process means we are building very solid structures and this will ultimately lead to trust and a great return on investment.
Then I thought to myself, there must be many others like me who want to invest but are sceptical because of the negative way Africa is portrayed in the mainstream media and they don’t have the right guidance.
I know there are people all over the world who would like to own a piece of real estate in Africa. But they don’t know how to do it or where to invest to get the best return on their money.
If every single black person owns an income producing real estate on the African continent, things will improve massively in the countries where these investments are made, and the value of the real estate will appreciate over time, and we can truly begin to build generational wealth.