Get To Know What Counts When You Choose Where To Invest In Property
Culled from www.smartnigerianinvestor.com
You’ve probably heard this creed before. The three things that count most when you choose where to invest in real estate are: location; location; location. Location is said to be everything, on the score that if location is right, you probably just need time to profit from the deal, unless you had an awfully unfair bargain. This simply says that you must carefully choose your location when you invest, if you hope to reap bountiful returns.
So how do you choose the right location, if it is so important? What really counts and what are the pointers. If you are agitated about this, we’ve got a set of rules here, developed by the pros, to help you decide which locations hold good prospects for investment.
Rule 1. Look Out For Bubbling Commercial Activity
You are looking at the fundamentals that drive housing demand and commercial activity comes tops. Reason: it is a major basis of employment, a strong driver of population migration and a key provider of disposable income. Simply don’t throw your money into a dead spot, where business is at low ebb and lacks steam. Commercial growth rate is as important as its current scale. I mean that a reasonable rate of annual growth is important, one, to recoup the natural attrition from loss of jobs, relocations, death of businesses, etc and two, to build momentum to drive the market. A rapidly growing area is certainly the dream spot. In Nigeria, Lagos readily fits this bill and has good property performance to show for it. Within a city, this evaluation must be extended to neighbourhoods. There are dead spots in Lagos which will underperform others by up to 80%. The same property in Lekki will generate substantially higher returns than its counterpart in Idimu.
Rule 2. Pay Attention To Key Administrative Centers
Some cities or parts of a city are dominantly government administration zones. If they hold important offices and institutions, they become hot locations too, for property. The fundamentals are similar to those of bubbling commercial centers: employment growth, population influx and disposable income. Abuja will be an obvious case, with the Central Business District as a star attraction. But leave Abuja and take, say, Uyo, capital Akwa Ibom State. Not much of a city before acquiring state capital status, but property values have continued to shoot up since it did. The pace of growth of commerce and other activities in Uyo is, expectedly, soaring in tandem. Such locations will therefore assure good returns.
Rule 3. Monitor Population Drift
This has been alluded to, but it’s important to stress the impact of population drift. Shelter is a basic need of the populace. If the population of an area is trending upwards, there will be a corresponding pressure on the property stock, leading to a rise in property value and earnings. A decline will produce the opposite result. The social and economic profile of the population is also critical. If more people of the high income bracket are attracted to an area because of its attributes or profile, property value will trend up. Population growth or decline could result from several factors. Knowing that official statistics on population trends may not be readily available here, you need to device your system of judging population trends of cities and sections of a city that you are interested in. Watch out for those drifts and trends: they point to where money will be made or lost.
Rule 4. Don’t Overlook Critical Environmental Factors
Ecological changes may cause serious environmental challenges for an area, like the massive gully erosion now confronting some parts of Imo, Abia, Edo and Anambra states. In Lagos, heavy flooding during the rainy season literally makes some areas inaccessible. These factors immediately affect property value in the affected areas. A effective solution to an existing problem will similarly see property value in the affected area suddenly going up. A new road link to an area that lacked good access road will invariably boost property value. If you are serious about real estate investments, you won’t overlook such changes when they begin to occur because they represent important opportunities.
Rule 5. Keep An Eye On Emerging Tastes
Can market preferences of property owners and users change in a discernable way? The answer is yes. Preferences for locations change. Tastes for designs change. The import is that if you can read the market in good time and know where preferences are shifting to, you can move early to position for better future returns. People who read the drift to Lekki, Lagos in good time, have indisputably earned good money from their early investments.
Rule 6. Watch Out For Major Housing Development Projects
Major housing developments can uplift an area. Redevelopment of run-down areas also impacts on their neighbourhoods. What that does to the adjoining areas is to uplift their profile and consequently property value. This is also true of other big projects of economic value. If Tinapa succeeds in Calabar, property prices should ultimately receive a big boost in the city, in particular, in the adjoining areas. What this says to the investor is to monitor and respond to these developments, before their impact is obvious to all and sundry.
Rule 7. Check For Property Vacancy Ratio
Don’t throw money into an area without ascertaining the vacancy ratio of property in the area. What ratio of vacancies do you have in the area? If the ratio is significant, this implies that demand is falling below supply. Obviously not good for property value. The best returns will come when there is pressure on supply and in such situation, property will be snapped up as soon as it’s vacant. How do you find out the vacancy ratio? Here again, you won’t get official statistics. So interact with property agents and ask people in an area you have interest in.
Rule 8. Look Out For Supply Gaps
Ultimately, your success will hinge on your ability to identify supply gaps which pile pressure on property price. Whenever and wherever a shortfall exits or is imminent, property values should be expected to remain strong and returns on property investment satisfactory.
Rule 9. Check For Availability Of Key Infrastructure
Key utilities are critical to good property value. Power and water supply, access roads and security services could be a big problem to an area if they are lacking. Property value will suffer and property will fail to command its proper value. Returns on your investment will likely suffer.
Rule 10. Invest Time And Effort
If you really want to make money investing in property, you need to commit some time and effort. You need to seek out property that meet your buy criteria. You need to stay abreast of the property market and developments that have implications for property value. If you stay focused on your goal, you will be able to evaluate locations critically to see when the offer good prospect for profitable property investment.
If you are guided by these rules and can act before their impact on property value in an area is felt by all and sundry, you will be buying property in locations that will yield good returns.
