MAKING MONEY FROM HOUSE FLIPPING: A CASE STUDY OF ABRAHAM ADESANYA ESTATE, AJAH, LAGOS
by Patrick O. Ogungbola, MD/CEO, BLUEHEDGE REALTORS
House flipping involves the purchase, renovation and sale of a property for a profit. The object of house flipping is to buy, renovate and sell a property in the shortest amount of time possible with the greatest profit possible. Investors buy, rent and hold, while those who flip buy, renovate and sell.
Abraham Adesanya Estate (hereinafter referred to as ‘the estate’) is perhaps the only organized estate along the Lekki corridor where one can still buy affordable properties within the range of N10 to N15million.
Basically, the estate is divided by the main entrance road (June 12 Boulevard) into two parts: Left hand side and Right hand side. 95% of the houses on the left hand side are fully tarred with well connected drainage and infrastructure; hence this part of the estate is not prone to flooding. However, the same is not so for the right part. Even, Road 4 (the first road by the right entering from the main gate) that was recently tarred has started to develop serious potholes; hence, we cannot be totally wrong if we say none of the roads on the right side is tarred.
Following the above reason, the toast of residents, investors and developers is the left (fully tarred) part of the estate.
Having said this, let us throw light into how the estate was established. The estate is a State-promoted mixed housing scheme developed in December 1999 by Lagos State Government. The housing estate has 1,300 units consisting of 374 blocks of semi-detached bungalows and 60 blocks of terrace bungalows of 5 units)1. The estate is categorized under ‘Low Cost Housing Scheme’ as a contribution of the state government towards reducing the housing deficit in the state and as a social responsibility.
As it would be expected after 14 years of completion, most of the houses in the estate have fallen into deprecated state, due to various reasons such as age of building, lack of proper maintenance, use of poor building materials, poor workmanship/ supervision during construction, natural effects causing rising damp in almost all the houses in the estate, amongst others.
The above state of the houses in the estate has created job for some developers who buys run-down properties in the estate at give-away price, and then refurbish/remodel/renovate or even demolish existing structure to build a completely new structure; they then resell, rent out or live there by themselves. The finished products (houses) usually come out much better with higher market value than the original development.
Generally, the value of the new development will be dependent on the amount of capital expended on the property. To maximize profit as a developer, the following may need to be changed in a typical Abraham Adesanya estate bungalow: the mass concrete flooring to ceramic tile, or PVC tile or even marble tile; Plaster of Paris (POP) should be applied to the wall to make it smooth and good quality paints should thereafter be applied; the asbestos ceiling should be
changed to POP ceiling or at worst PVC ceiling, the kitchen top can be changed to marble with quality sink and cabinet, all sanitary fittings should be changed to what is contemporarily in vogue such as shower cubicles, bathtubs, Jacuzzi, etc. Doors may be changed to panel ones, while windows may be changed to casement/ sliding. There may also be the need to re-roof the house. The structural change may entail making all the room ensuite, and ensuring the master bedroom is bigger while other room(s) should be of standard size. The essence of the above is to ensure that the house is fully modernized and irresistible to the would-be purchasers or renters (tenants).
It is paramount that the developer/ investor must know what he/ she intends to do, estimate the cost involved, and his anticipated resale price. If proper due diligence is carried out from the purchase of the old property to the reproduction of same, good profit will be made at the end of the process.
It should be noted here that the technique of property rehabilitation can be applied to properties in any location, but the grand rule is that such properties must have latent (hidden) value which can be released upon expenditure of capital (money). The case of Abraham Adesanya Housing Estate becomes quite fascinating because it falls under the classification of ‘affordable’ properties because more people can readily afford them, compared to other highly priced properties. It should be noted that this technique of property rehab is a contribution to urban renewal.
The photographs below show recent 3 bedroom bungalow directly on June 12 Boulevard, Abraham Adesanya Estate, Ajah that was bought for N12million. It was refurbished for N2.5million within a month, and eventually sold for N20million NET. This is a profit of N5.5million with return on investment (ROI) of 45%, and the interesting thing is that you can even get the house sold before it is completed. Remember, to achieve quick sale, especially in the estate, focus on the tarred part.
OLD PROPERTY
RENOVATED PROPERTY
