Real Estate investing is one of the most solid and lucrative investment in the world. Then it is therefore no surprise that 90% of millionaires became so through investing in real estate. “Owning a home is a key stone of wealth… Both financial affluence and emotional security”- Suze Orman
So, as you begin to explore it, I want to first congratulate you on taking that big step to become a land/house owner/real estate investor. It’s the greatest asset you can ever own that will continue to appreciate in value both for you and your generations to come.
As lucrative as it is, there’s little doubt that property/land purchase can be a challenging task and for a first time buyer however, it can be downright overwhelming and tasking. From illegal and fake land documents to relentless omo oniles (indigenous land owners) looking for the next swindle, there are a several pitfalls that could befall an unsuspecting first time property/land buyer. Before buying any property or parcel of land, therefore, it is important to conduct several checks before parting ways with your money.
There’s also the not-so-small matter of location and budget. While we may not all be able to afford ocean front property at Banana island, Lagos, there’s always something appropriate for everyone provided you conduct the right checks and make adequate plans and enquiries. Below are some points that should be considered before purchasing property/land:
This is a key factor to be considered before purchasing any parcel of land or property as it determines several things including the size and location of the purchase. If you’re buying already developed property, then you should also decide whether it’s a bungalow, duplex or block of flats you want and work it into your budget. While several hundred millions could fetch you a duplex in Ikoyi, Lagos, for instance, the same amount could fetch you an entire community in some parts of Ibeju Lekki. It is therefore necessary to determine how much you have and are willing to spend. Most importantly, however, is ensuring you stick to your budget. The greatest mistake of most intending property buyers is not having a budget before they set out to buy a land. Always take the time to research the other fees that are usually associated with buying a land and they usually come in these forms.
Legal fees- 5% of the cost of the land
Agency Fees- 5% of the cost of the land ( a and b are usually not applicable when buying from some companies e.g. Pwan Homes. It’s already factored into the price of the property. Except you’re bringing in your lawyer whom you’ll have to pay)
Survey Plan- (usually above N100,000-N300,000) Depending on the location of the land and state.
Cost of signing the documents/ Documentation
Cost of putting up a fence to secure your land immediately you purchase it (you may not have to do this immediately if you’re buying within a gated estate)
Cost of perfecting your documents with the Government at the Land Registry such as a C of O, Governors Consent, Ratification fees, Survey Land information etc. (Also, if you’re buying from an estate manged by a reputable company, they take on this responsibility)
Cost of renovations if you’re buying an already developed property or cost of completion if you’re buying a shell
Once you have done the maths to know all these hidden fees that are associated with buying a land, it will adequately guide you on the location and type of land that would suit your pocket.
This is another crucial factor you should decide on before making any purchase. Depending on personal choice, factors such as proximity to workplace and school should be seriously considered. Safety, water/power supply, good road and transport network are also some other factors that should be considered before deciding to buy any property. While we are not really susceptible to weather hazards in Nigeria, it is still important to ensure that the area is not prone to flooding or is not close to dams that need to be opened every now and then. You could talk to people in the neighborhood and sample their general opinion of the area concerning safety, availability of power and water, amongst other things.
If you are purchasing a block of flats for rent, you must research and find out how much rent is reasonable to expect considering the area and quality of the property. It is further advisable to purchase property for rent or eventual sale in a school or commercial district as property there is likely to yield higher profit and appreciate when it is time to sell; should the need arise.
As an Investor, you want to get the best value for your money. And this often translates to the best return on your investment. With this in mind, you want to evaluate the potential growth in investment in a particular area before you throw your hard earned money at it. Why get less when you can get more? Choose your investment location wisely.
KNOW THE TRUE OWNER OF THE PROPERTY
Always keep the following questions in mind: “Who is the owner of the property?” “Who is selling the property? Is it the owner, the owner’s wife, son, daughter, or someone else?” “Whose name appears on the documents? Is it the current owner or the previous owner?” “What liabilities currently exist on the property?”. If you are buying from a company, you need to know if they are duly registered by CAC and who their Director/Chairman is. Be sure they are a reputable company. If possible, meet with buyers who have bought from them before.
VERIFYING THE DOCUMENTS
Before you buy a plot of land or a completed building, be sure to conduct what is called a “search” on the property. This is the process of verifying from the state government if the property in question is within government acquired properties or not and whether there are any pending litigation or other issues on the property. The bureau of lands of Lagos state is responsible for all land related matters in Lagos state. It has its office in Government Secretariat, Alausa Ikeja, Lagos, Nigeria. A lot of people are confused here and depend on the information given to them by the agents, if you have an honest agent good for you. But I strongly recommend you get your lawyers involved, it would cost you some money but trust me its money wisely spent. Don’t be a penny wise, pound foolish
ALWAYS PHYSICALLY INSPECT THE PROPERTY
Never buy a property you haven’t seen physically or sent someone you trust to inspect. There is a lot of information you can pick up on when you’re there. It is very important to check the status of the land to know whether it is a swampy land that would cost you millions of Naira to sand fill. Don’t buy lands from the comfort of your office or what someone has told you. Visit it yourself and confirm it is something suitable for you and your family.
No matter how beautiful or attractive the land being advertised appears please go there and look at it. Don’t rely on just pictures and sweet words because there are so many other important things the picture or advert won’t tell you such as the neighborhood, light and water issues, the road leading to that place, amenities such schools or hospitals, transportation ease to and fro, market etc. Make sure you check all these things before you finally commit yourself to buy a land.
Always trust your own instinct and 95% of the time, it’s right. The moment you visit a land, follow whatever your gut tells you. If your mind is shaky about the land, don’t push it; walk away, the land isn’t meant for you.
If you see things that makes you suspicious, please walk away. If you see things like fenced lands that cannot be justified by the owner or no proof of ownership, no survey plan, you hear the land is a relocation land or there is a minor dispute that was just solved, so many family owners or sellers etc. please walk away and move on to the next property. You may have just dodged a bullet. Don’t let anyone pressurize you into buying it. The signs that you see now might seem so small and irrelevant but 5 years down the line it may begin to manifest seriously.
IF EVERYTHING LOOKS GOOD, SAY A PRAYER AND MAKE YOUR PAYMENT
Few things to note when paying
- Never pay in cash. Cheques, bank transfers or bank draft are better to document the payment
- Never pay into the agent’s account. Pay directly to the owner. Though you’ll pay the agent’s fee into his own account
- All your Land Transactions must be documented to save yourself from unwarranted issues in the future. There are so many documents you need to make sure the title of that land is properly transferred to you such as a deed of assignment, contract of sale, letter of allocation, affidavits, purchase receipt, deed of gifts, letters of administration, survey plan etc. Not having some of these documents could lead you to lose the land to someone else who has done his documents to claim ownership of the property. Please ALWAYS consult a property lawyer experienced in real estate to guide you on the documents you need to prove ownership of that land
Never buy a property without proper documentation of the sale no matter how close you are to the seller, a lot of things could go wrong. He could die, how do you prove to his family or community that you bought the land validly from him? What if another person lays claim to that same land, how do you prove ownership?
The 4 basic things a Buyer must have when they pay for a land is a Receipt, Deed of Assignment, a contract of sale and a Survey Plan. Without these 4 things you have a very slim chance of proving ownership if anything goes wrong in future. If you’re buying from an estate, you still have some time to get the survey while the survey of the entire estate still covers you. In this case you could be given a provisional allocation letter.
As soon as you buy it, try to take possession of it by constructing a small fence around it. You don’t have to do 9 coaches, just 2 or 3 is enough to demarcate your land so that any prospective buyer of the land knows that it has already being bought and should stay clear of it. Pour gravel or sand there, do a well on the site and visit if frequently. Hire a mai guard to come on the land to watch over it till you have money to build something tangible. If you have a friend or relative living in the area, you could ask them to visit the property frequently on your behalf too.
Don’t just leave it fallow and expect it to wait there for you when you are ready. Somebody else could end up encroaching on your land to steal it. If you’re buying an estate land with a reputable company they could give you up to one year to build a fence and your property is still secured. If it’s a developing area, you may have up to 2 years to put together money to start something.
Congratulations and welcome to real estate
Originally posted 2016-08-15 16:52:49.