“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 the safest investment in the world” -Franklin D. Roosevelt (FDR)
Experiences from Western Economies particularly the United States and the recent recession in Nigeria demonstrates that Real Estate Investments compared to other types of investment are more resilient and less prone to erosion of value which is a key downside in a major market downturn.
Most wealth managers acknowledge that smart real estate investing is a key edging tool to preserve and conserve wealth. The series of devaluations of the Nigerian Naira further lays credence to this fact. Due to the huge demand and supply gaps in the Nigerian Housing Sector, real estate as an essential hedge against inflation and value erosion becomes valuable insurance. In the peculiar case of Nigeria, despite the massive and acute value erosion caused by currency devaluation, reduction in purchasing power, and high-interest rates, Real Estate has proven to be vital in protecting capital against huge losses and depreciation, while generating revenue through rental yield (typical break-even period for real estate investments in Nigeria is an average of seven to ten years). Most investors tend to hold and use real estate as collateral or were absolutely essential offload to unlock capital gains (by selling the asset otherwise called flipping).
To illustrate this point, if you had purchased a 3-Bed Bungalow at Heritage Place in the greater Lekki Area of Lagos, Nigeria in 2009 when we sold them for N9M, the same 3bed bungalow is now worth N45M. If you had rented it out during that period, factoring rental yields and capital appreciation, despite the heavy devaluation and inflation, your cumulative yield would have mitigated the same loss impact experience by any who simultaneously invested in the money market or bonds and held it for the same time period.
Similarly, if you had purchased a 4-bed semi-detached duplex at Ocean Bay, Chevron area of Lekki of Lagos in 2009, when we sold at N18m / the same 4bed detached duplex is now worth N80m.
“OUR BUSINESS PHILOSOPHY IS SUMMED UP BY THE CONVICTION THAT: “A SMART INVESTMENT MADE AT THE RIGHT TIME WILL ALWAYS APPRECIATE IN VALUE.”
IF you had invested the same sum of N9M in a fixed deposit account or Treasury Bills for the same eleven-year period, you would have fared worse and suffered the full effect of value erosion! N9,000,000.00 naira invested in T-bills or Fixed deposit at an ANNUALIZED interest rate of 10% annually for a 11 YEAR PERIOD, (2009-2021), would have earned N16,678,050.35 in interest and total investment value would amount to N25,678,050.35.
“Buy real estate on the fringe and wait. Buy land near a growing city”! Buy real estate when others want to sell. How what you buy”- John Jacob Astor
It is important to note that during this ELEVEN-YEAR PERIOD, Nigeria suffered two recessions, weathered the global meltdown, and endured severe currency devaluation (the Naira fell from N100 / $1 as of 2009 and is now N480 / $1 in 2021). Smart real estate investing as a portfolio edge would have protected your capital of N9M and during the intervening years, despite the devaluation, you would earn a minimum of 65%-100% annualized rental yield over the 11-year period. Please note that this analysis is relevant to VIABLE REAL ESTATE INVESTMENT that is put to work NOT mere acquisition of land banks.
We believe that building wealth is a product of smart thinking and efficient deployment of resources. Investing in VIABLE Real Estate guarantees access to good rates of returns, secured protection of net asset values, and greater resistance to value erosion.
In offering this assessment, please note that we ONLY RECOMMEND real estate with good title ; developed by credible developers; located in urban/peri-urban neighborhoods with positive demographic profiles, AND managed by a professional firm that would help protect and secure it against being turned into a slum or uncontrolled development. A speculative acquisition that is either not based on quality research or meets the above criteria is dangerous and it is effectively gambling with your valuable resource
To assist career professionals and aspiring investors, we created the STOW Home Purchase App which is available for download on both IOS and Play Store and will make real estate projects that meet these criteria available for you to invest and commence your journey towards your homeownership goals.
Next week, we shall be exploring neighborhoods that we believe to be the emerging viable locations for Real Estate Investment in Nigeria.