What is a bad investment in property
A bad investment in property is defined when either land or a house purchased turns out to be significantly less than what you paid for and doesn’t bring the expected returns. Worst case is when you shockingly discover that you purchased property that you cannot rent out or sell, something you were looking forward to as you purchased it.
Surprisingly, this is a tale told by many Nigerian property investors. They fall prey of marketing gimmicks by flashy fraudsters masquerading as real estate agents, who throw around words like guaranteed rental returns,bidding wars from potential clients, imminent booms in the real estate industry, among others. The most common tale is where a potential buyer is duped into sending half of the required amount before investigating the property as a show of commitment and seriousness.
According to a report, Nigeria’s population was nearing 170 million in 2013, with the number of middle-class urbanites going up by the day. This has consequently put pressure on supporting amenities, with land and housing in the urban taking the brunt. It has also, inadvertently, resulted in an increase of property fraud cases and many hapless property investors have paid the price of investment decisions gone awry.
Examples of bad property investment in Nigeria
Property that is currently or will be in the near future be under government acquisition: Such property is usually repossessed and used to further government projects. There have been cases of demolitions across Nigeria by government authorities with the owners receiving no compensation. An example of such a scenario is Bagadry, where over 500 houses were demolished by the police because they were built on land that belonged to the police force. Building owners claimed that land speculators had sold them the land in question. Whether this is true or not, the gaping reality here is that the building owners were the ones at a loss.
Fake proof of ownership: Most fraudulent property in Nigeria professedly changes ownership via the use of faked documents presented to unsuspecting investors. Potential investors quickly part with their hard-earned cash under incontestable pressure from the fraudsters based on a seemingly high demand for the property in question. Ultimately, a group of buyers realise that they all paid for the same property and the sellers they bought from aren’t even the legitimate owners. This is also prevalent in land For instance local touts commonly know as Omoniles are known to forge documents e.g title deeds and dupe prospective property buyers.
Overpriced low-value property: This includes property built on contaminated land, land prone to flooding and other environmental issues. You might also invest in a rental property situated in an area with an under supply of rental homes. A sudden boom of properties for rent in the area could incomparably affect your cash flow and result in a negative equity for you. You then realise that you paid for more than you are likely to make with the investment.
Mistakes That Result in Purchasing Bad Property
Poor Planning
Most investors in Nigeria get into real estate with no clear strategy. They scour the internet looking for property, then begin making plans on acquisition after settling on house or land they decide on. They buy property guided by the fact that they think it is a ‘good deal’ without thinking the whole process through. After the purchase is complete, they then begin to ponder what to do with it. This is not the way it should be. As an investor, you should think hard about the investment strategy you want to go with and one that will guarantee you maximum returns. You should first identify your goals for investing in property, plan around your finances, get advice and input from professionals, do your research then look around for the property that matches your goals best. Planning and strategizing on the go is the reason why many Nigerians find themselves with a bad property that no one wants.
Not doing your homework
Property ownership is never a cheap affair. The fact that you are likely to invest a good chunk of your savings, or that you will have to give up a prized possession as collateral to a financial institution; should make you want to know everything there is about property investment .
Do not be one of those wannabe property investors in Nigeria who their financial lives in jeopardy by thinking they know it all. Before you risk your family’s livelihood, do your research. Read books, follow property trends closely and engage professionals who have actually seen it all. Understand how property fraudsters work and keep up with the dynamic orientation of the property markets. Do not be coerced into making rash decisions that you will bitterly regret later.
Buying a house just because the value will appreciate isn’t reason enough conduct due diligence possible hidden costs like repairs and ascertain ownership. If you catch the slightest whiff of trouble, hold off any further steps into the purchase.
Expecting to be rich overnight
The typical Nigerian is bombarded with well-positioned and misleading infomercials on how their debut into the real estate industry will turn their lives around in an instant. Due to the appreciating in value nature of property investments, new investors think that they will start cashing in revenue once they sign the papers. This notion is a major contributor to rash decisions, poor planning and the eventual purchase of bad property.
Keep a level head while purchasing property to sell or rent. Remember that the value of a property is affected by various variables and you should take all these into considerations. Have an exit strategy if it doesn’t work out as you had envisioned.
Going at it alone
Even after doing your research and constantly keeping abreast with the newest information on Nigeria’s property industry. You still need the support of seasoned industry experts to help you make the best investment.
So what do you do if you have already invested in a bad property?
If you have already made the unfortunate decision of investing in a bad property, you can still try and alleviate the situation by following these steps;
- Evaluate your loss. Take stock of how much you have lost in the process and plan on a recovery strategy.
- Report to the relevant authorities. This is especially helpful in fraud cases. Involve the police and see the counsel of a lawyer. Unfortunately, there is very little you can do when you are swindled in a property deal.
- Where you purchased a house whose value is lesser than you initially thought and you are having a problem renting it out or selling it, improving it might help. Conduct some cosmetic renovations and additions to make it more attractive to potential tenants or buyers
- Be cautious when reviewing the value of a property after purchasing it as this has the potential of attracting repercussions , especially from financial institutions who may come after you demanding you pay extra cash now that the value has changed.
To avoid the headache and inevitable heartache associated with investing in bad property, we advise that you stick to industry experts whose prowess in real estate matters has been proven over time.
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