Every family desires to ‘live in their own house’. Aside from the fact that it is a basic need, it also gives a good sense of achievement, self-actualization as houses are assets. An asset is a useful or valuable thing that mostly appreciates in value. It can also be an income earner.
Before you buy any land or house, there are a couple of things you need to be sure of.
- Understand the soil type: There are different soil types. Some are hard, some water-logged, some mildly swampy, some are sloppy e.t.c. You need to get a professional to help assess the soil type and if the land supports your dream building. Most times, a soil test is needed to assess this. In case the land needs reinforcement because of water content, you need to be sure of the type of reinforcement needed and what this will cost you. This costs needs to be factored into the cost of purchase. Example the cost of piling or rafting may end up higher than the cost of the land itself. Don’t be penny wise, pound foolish.
- Be sure how genuine the land is: Engage an experienced professional lawyer to help you understand the source of the land, the ownership, the title. In nigeria, we have ‘omo-oniles’, be sure that the land has minimal ‘Omo-onile palava’. If the land is a family land, be sure the all the right stakeholders are in agreement to sell the land.
- Do the Maths! Maximize your investments.
On the average, GOOD buildings generate rental income that pays back the purchase value/ capital within 8-12 years. Some buildings take even longer J. Example, if you buy a house for N100, and you collect rent of N10 per year, it means the building has paid- back its capital in 10 years.
On top, Good buildings appreciate in value based on certain factors .e.g development in area, road construction, demand and so on.
For land, it’s all about buying at the right time. This is when the land still has the potential to give minimum 12% capital appreciation yearly. I use 12% as this is average returns from other investments. Example, Treasury bills currently give about 12%, fixed deposit account with banks give about 10%. At a minimum, your land should give you these returns too.
If your investment is being funded by loans, the appreciation must at least cover the interest rate which is about 18% right now.
- Do your research; Lastly, do enough inspections to make an informed decision. Look at a lot of opportunities, compare prices, compare locations and make the best decision.