Abiodun Doherty |
By Abiodun Doherty
(abiodundoherty@yahoo.com)
(abiodundoherty@yahoo.com)
We have gone
through several principles on real estate investments and answered several
questions and enquiries from ardent readers of this column. But it may be even
more instructive to share one of several conversations that I have had with a
real estate millionaire that has helped me tremendously.
I have discovered
the truth of the saying that an ounce of example is worth a pound of precepts.
Permit me to extract the basic principles of this particular conversation and
to protect the privacy of this individual who would also prefer his name not to
be mentioned.
Rule 1: Have a good
source of income. This particular real estate investor started several years
ago just a few years after the independence of Nigeria by exporting certain
agricultural produce. He poured himself into building this business and was
later joined by a few other partners. The business flourished and provided him
with the regular stream of income with which he started investing in real
estate.
This real estate
millionaire believes in hard work and entrepreneurship. He believes that many
of the youths of today will do better if they learn to walk before attempting
to fly. He believes that if you are willing to serve others faithfully in their
business, you’ll do wonderfully well in yours when you eventually start.
The lesson for us
all in this is that real estate investment requires seed capital and to have
those initial seed capital you must have earning power, you must have a means
of income. You cannot put up a solid structure without a solid foundation. So, for
all would be investors, first learn a skill or profession that will get you a
job or start a business that you can grow and that will provide you with
regular income.
Rule 2: Start
saving and start investing in real estate in your own little way. Our real
estate millionaire started by buying land in an area that was then a “jungle’’
but is now one of the commercial nerve centres of Lagos. He stated that it was
not easy buying some of those properties then. He said he made buying real
estate one of his pastimes.
He did not start
buying properties in the high brow areas of the time because he could not
afford them. According to him, start where you are and with what you have. If
all you can afford is a parcel of land in the outskirt of town by all means
start there rather than not starting at all.
Rule 3: Its good to
build and rent. This real estate millionaire began to build some of his
properties with the aim of letting them. Fortunately for him, as time went on, he
began to acquire knowledge of construction and building development. This
accelerated his building projects and his ability to interact with builders and
workmen saved him significant costs. He also began to let the buildings to
tenants to generate income. As at today, his annual rental income is in
millions of naira.
The lesson for
aspiring real estate investors is to focus on income-generating assets. Once
you have sorted out the issue of where you live, you should continue building
for others to rent from you and pay to you. Some real estate investors have a
goal to build a certain number of houses in certain areas over a period of time
using current and projected rent as a basis for planning.
This strategy is
also a form of retirement planning since rental income from such properties
provide passive cash flow. Like our real estate millionaire, who is now an
elderly man, but does not need to work in order to pay for his cost of living.
Rule 4: If you
can’t develop some properties on your own, give them to reliable developers. This
real estate millionaire had some properties that he could not afford to develop
on his own because of multiple projects that he was involved in. He gave some
of such properties to carefully selected developers that he gave long leases
to. Many of such properties have since reverted to his control and are now
giving him fantastic returns.
In his thinking, it was better to add value to
the land or allow someone else to add value to the land. As long as the
properties are not sold they would eventually revert back to him or his
beneficiaries.
Rule 5: when you do
sell, reinvest all or part of the income in real estate. This real estate
investor rarely sells his properties but when he does, he sometimes buys
another property or uses the income to add value to another property. He
is comfortable and modest at the same time. He often has the next project
or investment in sight before concluding the deal to sell.
He believes in
moving his funds to better and better real estate locations that will bring in
better rental income. As at today, a conservative estimate of his property
assets is over N2 billion. He started small, built his estate gradually but
strategically and now he is reaping the reward.
Some locations
suddenly became prime locations and transformed the value of his investment.
His life proves that if you cast your bread on many waters you’ll find it and
more someday or somewhere you least expect.
Source: Punch
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