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Category Archives: Real Estate

Property Valuation

Property valuation, real estate appraisal, or land valuation is the process of developing an estimated value for real estate properties. In simple terms, it is a well-detailed report of a property’s value in the market. The process can be very complex, ranging from knowing what your residential property is worth, to knowing how to invest in real estate, it is important to have knowledge on how property valuation works, and how it can vary based on the type of the property involved (residential or commercial), and how it will be used.

Knowing the value of a real estate property can be very difficult because no property is the same. Each has different and unique features such as the number of bedrooms, bathrooms, square footage, rentable units, location, etc. A key determinant in knowing the value of a property is the real estate market itself; it is the reason why a duplex in Ajah can be millions of naira less than the same property type in Banana Island, so the real estate market matters. For example, areas with high supply and low demand will be lesser in value compared to areas with high demand and low supply.

In this article, we’ll be touching on two important things as regards property valuation, they are:

  • Conditions that affect property valuation
  • 3 Methods of property valuation

Conditions that affect property valuation

There are 4 conditions that affect property valuation. Hence, to make an estimate of a property’s value, economic and social trends, governmental regulations and environmental conditions must be taken into consideration. These conditions are:

Transferability: How easy it is to transfer ownership rights from buyer to seller

Demand: The desire of a person to be a property owner, and having the financial means to fulfill this desire

Scarcity: The limited amount of competitive properties that are supplied

Utility: Being able to satisfy the desires and needs of a prospect or intending buyer.

3 Methods of property valuation

The primary method of carrying out property valuation is referred to as a real estate appraisal. Engaging in appraisal can be a very complicated method, and it includes some of the methods or processes that are preferable for determining the value of such property. Whatever method will be applied in an appraisal is solely dependent on the type of property involved, and the reason for the appraisal. Real estate professionals or appraisers, use 3 major methods of appraisal or property valuation to determine the value of such property. The 3 most used methods of property valuation are:

  1. The Sales Comparison Process

This method is one of the popularly known and most used methods known to real estate professionals and appraisers. This method is solely used for appraising properties, mostly for the reason of wanting to apply for a mortgage. As the name states, the sales comparison process makes use of information or data from the real estate market, the sale prices in particular, so it can be used to estimate the value of a property.

It involves the appraiser or real estate agent making use of the sales price of a property in a certain area to compare to a similar property that is about to be appraised, the property with which another property is being compared is referred to as comparable or comps. Here’s an example, you’re looking to purchase a residential property and it has 2 bedrooms and 3 bathrooms, then the comparable should have the same thing, and the location of both properties must be close.

“Should” because, as earlier stated no property can be the exact same thing, so in a situation when there are differences, adjustments are usually needed in order to account for these differences. Appraisers must be skilled in identifying the differences between the comparable, and how to value these differences in order to make the right adjustments to the property that is to be appraised.

2. The Income Approach Method

The income approach method is a method of property valuation that specifically common to rental properties and commercial real estate, the overall process revolves around the ROI (Return on Investment) value of the property, and this ROI value is usually estimated by how much the said property can generate.

This method involves the appraiser or real estate agent calculating the gross potential income, and then subtracting the expenditure and vacancy period, in order to figure out the total income that is gotten from such property. After this is gotten, the appraiser then applies a capitalization rate in order to get an estimate of the total value of that property.

 A capitalization rate is defined by investopedia.com as “the rate of return that is expected to be generated on a real estate investment property”.

3 Cost Approach Method

The cost approach method involves considering the value of a property as the cost of that property plus the cost of replacing that property (costs of construction) and subtracting the functional and physical depreciation. It deals with different estimates of value for the property, and taking depreciation into consideration, these estimates are then added together to get the value of the entire enhanced property. This method is commonly used for specialized and unique properties that are not easily sold like government buildings, hospitals, and schools.

8 Tips for Home Sellers in Nigeria

Having read our previous article titled 4 Essential Tips for First-Time Home Buyers in Nigeria, it will be easy to deduce that whoever is out to buy a house, already has the image of the type of house they want to buy in mind while searching. They most likely have written out the features they want it to have, the location of the house, and its size – all of which are dependent on the buyer’s preference.

What these mean for you as the seller is that, the property you’re about to sell has to be very similar to the image your potential buyer has in his/her mind. Hence, to see to it that your property is sold, a list has been compiled, to give you expert advice on how to turn that no-longer-needed property to cash.

Ask yourself, “What Next?”

It may seem funny that “what next?” is coming as the number one advice or tip, instead of coming as maybe the second, third, or last point. Well, think about it, you’ve decided that you no longer need the house and so you want to sell it. What next? After deciding that you want to sell a property, the next thing to do is to carry out research.

Research on what exactly? Research on the real estate industry: commercial properties. Except you bought the house just now, or yesterday, things have changed, like mortgage rate. So study the market to know what to expect, or you can just have a professional do a property evaluation for you.

Fix up the house

You sure don’t want to sell a “worn out” house to a buyer, do you? No one will even buy it, it has been stated earlier that your potential buyer already has a mental image of the kind of house they want, and if your house is lacking in those details, you are not closing that deal. So, if need be, the house should be renovated, the walls should be taken care of, the pipes and storage should be fixed, the doors, nets, and windows should be repaired, the house should be well furnished by an interior decorator for the best experience, and the surrounding should be conducive – see to these things.

Know the persona of your potential buyer

Knowing the personality of your potential buyer will be dependent on the location of the house, the state, the neighborhood, the size and features of the house. Say, for example, your house is a bungalow in Ajah, you can already have a rough idea as to what type of buyer to expect, and if it is a 3 bedroom flat in Surulere, you also know what type of buyers to expect. Knowing the persona of your potential buyer will assist in how you renovate the house and how you add any new features you might want to add.

Get a real estate agent/agency

This is as important as any other point above, or that will appear below. If need be, conduct an interview for selecting the best fit – the real estate agent/agency. This will form a basis for a relationship as you start/proceed on your home selling journey. Picking the right real estate agent/agency will ensure that you get good sales. This agent will help in valuing your house based on certain details like the texture of the soil, the materials used in constructing the house, etc.

List the property as available and market it

Once the necessary repairs have been made to the house, and you have gotten a good agent/agency, the next thing is to market it. Before marketing your property, timing is important. You don’t just sell anytime or any day, your agent/agency will know when best properties sell and when they really don’t. When the time is known, time your marketing with this period; take the necessary steps to make your potential buyer know that such property is available for sale.

Give room for creativity; let your real estate agent/agency play a major role in how the marketing/advertising goes as it will play a key role in how the sales will go. Agree with your agent on how the marketing should go – offline or online, and what platform will be utilized – online platforms like social media, real estate agents, or one-on-one approach.

Have an open house

This means showcasing your house to a potential buyer or buyers. Based on the agreement between you and your real estate agent/agency, the person or people who will be eligible for an open house can be based on those who state good offers after having seen your advert. When they come around, take them through each compartment, one after the other, and have them imagine how wonderful or amazing it will be if they started their lives there.

Negotiate the price with anyone that shows interest

When you already have a lead on who is interested in purchasing the property, have a sit down with them to negotiate the price. During negotiations show genuine interest by listening attentively to them while they speak, ask questions, or while expressing certain fears or concerns. Answer their questions and make it simple, when they ask for time to think about it give them time, don’t disturb or pester them, they will get irritated and never come back. Don’t force the decision on them, allow them to think things through, be warm and friendly.

Close the deal

Only those who apply the above tips can get to this stage. This is where you and the buyer get to shake hands on an already agreed deal, they sign paperwork and the property is sold – it is an official process to show a transfer of ownership.  

7 PROPERTY DOCUMENTS YOU SHOULD BE AWARE OF

Hey there, in this article, we’ll be discussing 7 property documents you should be aware of. As a property purchaser or as one who is seeking real estate investments, you need to be in the know of property documents and what they or are saying about the property you’re about to purchase. In a previous article “How do I start investing in real estate? Part 1” we discussed the necessary and important things needed before one takes a deep dive into real estate investment.

Life is not hard; you just need to know your way around things so you won’t be caught “unfresh”. Property documents can also be referred to as land titles, so what exactly is a land title? A land title can be referred to as the legal right or ownership one has over a property. These documents govern property transactions or dealings, it is worthy of note to know that all lands belong to the government of that state. So, what then, are the property documents, or land titles (as they are commonly referred to)? Let’s get to it!

We’ll be discussing only 7 land titles one needs to know when it comes to properties in Nigeria as they are more than that. The 7 are; Certificate of Occupancy, Gazette, Deed of Assignment/Conveyance, Deed of Mortgage, Deed of Sub-Lease, Deed of Lease, and Survey Plan.

1. CERTIFICATE OF OCCUPANCY (C of O)

A certificate of occupancy, commonly referred to as a C of O is the document of a property given to you by the government and it attests to the fact that you have right to that property or land. The document is an official lease given by the government and as the owner of such property; you’re eligible to the property for 99 years after which you can apply for renewal.

2. GAZETTE

A gazette refers to the official record book where the activity of a government is written in detail and then recorded. This document shows towns, communities or villages that have been granted excision and whatever amount of land, either in acres or hectares that the government of the state has given them. So, if anyone decides that he wants to sell his portion, it has to be within the area of the excised land.

3. DEED OF ASSIGNMENT/CONVEYANCE

This is a legal document that is used to transfer a property from one person to the other. It is an important document and it should always be at the front of your mind to request for it whenever a property transaction has occurred. The document contains relevant information for a real estate deal. For example, it contains the specific date when the possession of the property is transferred from the owner to the current owner. The document also gives a detailed description of the property that has been included in the conveyance of ownership.

4. DEED OF MORTGAGE

This is a legally binding document that allows you to use your property as collateral for loans. It allows the lender to place a lien on such property until you complete the payment of the loan. So when people say something like “mortgage” or “mortgage payment”, they are in fact, referring to loan or loan payment while the document keeps the property safe for the lender.

5. DEED OF LEASE/GOVERNOR’S CONSENT

Deed of Lease or Governor’s Consent is a document that you obtain whenever you purchase a land/property that has C of O. This is the land document that informs the Governor and every other person that the land/property involved has changed owner. It is the document that permits the rights of occupancy to that property by the new owner.

6. DEED OF SUB-LEASE

This land title document is issued by anyone who has a C of O who decides to give out a part of his/her property to a new owner or third party. This sub-lease is valid till the C of O expires, and the contract can be renewed upon the renewal of the C of O.

7. SURVEY PLAN

This property document is important as it shows that such property truly belongs to you and that it is not under government acquisition. This title document shows the boundary measures of a piece of land so that a precise measurement and detailed description of that land is given. If the property you’re about to purchase is without buildings on it, make sure you do a detailed inquiry on the land to be on the safe side.

How Do I Start Investing in Real Estate? Part 1

How do I start investing in real estate you mean? Calm down! Your blood is probably hot right now seeing the title of this article and just wanting to dive right in. But to fully understand what you’ll read in this article, you need to be patient and read through this process so you can fully understand how investments and investing work and not end up being scammed of your precious, hard earned money.

You probably hear it all the time, that investing in real estate is an amazing way to make money, that you don’t need to stress, that this and that, yen yen yen yen. After all these talk they end up not telling you nada about real estate, talk more investing in it or how to go about investments. There are various ways to safely invest in real estate and you’ll be showed that soon, let’s walk together. In this article, you’ll be learning about the following things:

  1. What is Real Estate and Why is it Important?
  2. Why should you invest in Real Estate?
  3. Things to do before investing in Real Estate
  4. Types of Real Estate Investments

 What is Real Estate and Why is it Important?

According to www.investopedia.com, real estate is property made up of land and the buildings on it, as well as the natural resources of the land including uncultivated flora and fauna, farmed crops and livestock, water, and any additional mineral deposits. So, as opposed to the general school of thought, real estate isn’t made up of just lands.

Our core focus in this article is land and landed properties, how you can invest in them and make money. You may ask, “Why all the fuss about it, what makes it so important?” Well, for one, it’s about a basic amenity – shelter. It is not a lie that the value of lands increase annually, because according to Federal Mortgage Bank Of Nigeria, the housing deficit is estimated at 17 to 20 million housing units and will be increasing by 900 thousand annually. This is huge and will definitely be worth your investment.

Why should you invest in Real Estate?

This is the part where everybody wants to look away, better look back here. The reason for which you involve yourself in anything must be clear to you, the intent, the WHY. The common reason is money, you know, because of the money involved; some are doing it because their friends or every other person they know is doing it, some do it because properties appreciate, others do it because of the inflation hedge. So, you need to ask yourself “why do I want to invest in real estate?” this is an important question. Another thing to question is your motive behind the investment. That is, what’s causing you to invest in real estate? Debts? The need for a side income? What exactly is causing you to invest? Are you investing for the long term or you want to cash out ASAP?

Things to do before investing in Real Estate

Before taking a deep dive into the deep ocean of real estate investments, you need to be informed on some necessary things that would ensure that you’re in the right hands and not in the deceptive process of being duped. A few things to consider are:

  1. Confirm if the land/house (investment) is genuine and know the true owner of the property. How can you do this? You vet the property by taking it’s coordinates to the land bureau of that state in order to be in safe hands.
  2. Know the title document of the property. Title document simply refers to the rights to the property you want to purchase or being rented to you for whatever use. The rights are then passed on from the seller to the buyer after the transaction and it gives the buyer legal rights to the property when they come to an agreement. There are different types of land/property documents and they are: Certificate of Occupancy, Deed of Assignment/Conveyance, Deed of Lease, Deed of Sub-Lease, Land Certificate, Deed of Mortgage and Survey Plan. So check the necessary details and know which you’re going for.
  3. This is a very important point, let it always be on your mind; make sure your property is free from government’s acquisition. Refer to point 1 in order to be sure of this too. I don’t think you want to have spent millions on properties only to have it demolished or something.

Moving on, there are different types of real estate investment you can invest in, and below are a few:

REITs (Real Estate Investment Trusts)

There are a lot of companies that create a platform where people can bring money to invest with them; they have lots of properties that they manage. So you invest and they, at an agreed time give you return on investments. It is basically investing in the shares of whatever property you find on the platform provided for you, and so the risk involved is quite lesser than that associated with owning a land or property directly.

Residential

As the name suggests, residential refers to any place where people live or stay such as houses, apartments, townhouses and vacation houses where an individual or a family pays you to live in any of the properties as available. How long they stay, depends on the agreement between both parties. Investors in residential real estate make their money through collection of rents from the tenants.

Commercial

This is the leasing or renting out of a land or space to a business, company, a petrol station, a shopping mall, SMEs and any business that needs a building that you can think of. Money can be made from this by collection of rents.

Industrial

The industrial real estate ranges from car washes to storage units of an industry, warehouses to factories, industrial real estate refers to where goods are made or kept. Money can be made from this by rents, requesting down payments, maintenance fees, etc. This is more advantageous as agreement is usually longer and that means a steady income for the owner of the property being leased out.

Real Estate Agency

This is a person that connects property owners and possible tenants together. Money is made from this by earning commission on every deal you successfully close for a property owner and from the tenant.

Real Estate Whole selling

This is acting as a middle man, by searching for properties that are for sale, then having a sit down with the owner of that property to negotiate with them and then signing a contract. Once this is done, you then bring buyers.

Land Flipping

Land flipping is quite common, probably the most popular form of real estate investment in Lagos and other parts of Nigeria. This is buying land for the purpose of reselling it once the land or property has appreciated. Meaning you purchase a property, hold on to it for a few months or years, and then reselling it when the value of such property has appreciated. It involves scouting for properties with cheap offers in places with promising developments, so you can buy and resell within a short period of time.

So, before you hurriedly jump on any one that seems attracting, make sure to be sure of the niche you want, the risks and effort involved and the profit to be made.