Three reasons why those who invest in property are looking for a newer strategy of investing are due to the economic situation of the country. Now, everything is costly, and that affects building materials such as cement bags and blocks, roofing sheets, and other materials. On the other side, Naira is lower now when compared to other currencies.
Page Contents:
What these factors mean is that building a new home in Nigeria is a very expensive endeavor. If you plan to invest in the real estate market at this time, you surely want to look for ways of reducing cost without putting a strain on the quality of the building that the contractor will deliver to you. The off-plan strategy is proving useful as the best type of investment in buying property cheap in Nigeria today.
Off-Plan Strategy – What is It?
The Off-Plan property investment strategy is very simple, yet very effective. It is a low-cost payment option that developers are now making use of to sell apartments to investors before the construction work is done in its entirety.
Buying the property at this stage allows the real estate investor to buy it cheaper than as usual if the property has been fully built. For it to work, the investor will pay a reservation fee and make an advance payment. This deposit could be a certain percentage of the total payment. In some cases, business dealers agree to 20 percent but in other cases, that percentage could go up higher than that. There are those who pay upward of 20 or 30 percent deposit. This depends on the developer and the investor.
The off-plan investment is relative a growing trend in major Nigerian cities such as places like Abuja, Ibadan, Port Harcourt, and Lagos. Lagos state is a place where massive construction works and development plans are taking off, as old structures are giving way to new ones. On the island, skyscrapers are also springing up all the time, showing that the real estate market is a boon in such areas.
In Lagos, there are more developers and investors who constantly are on the lookout to cash in on real estate profits. So, you may look toward that direction if you start the off-plan investment strategy.
Property BuyingHow It Works
The strategy starts as soon as the construction plan is put to paper. It goes through the review and analysis process first. An investor who sees the plan could be interested because he or she values the nature of the investment. All things equal, both the developer and the investor agree to do business.
The earlier an investor decides to do business during the building construction process, the better because costs are usually lower at the earlier stage of construction than at the later stage when the process is close to the finish line. Therefore, those who purchase at the earlier stage stand to gain in the long run than those who don’t buy early. Once the initial deposit is paid, investors have the opportunity to also direct how the project proceeds. The major concern of an investor is how to save costs.
Off-Plan Investment Benefits for the Investor
Of course, there are two sides to every story, so there is actually the good and the bad to the process of jumping into the off-plan investment strategy. One obvious reason why most people make use of the strategy is to save some money while they continue the construction strategy. Also attached to that is the convenience and lower risks involved in the process.
This business strategy allows both parties to benefit equally financially in any way, but there are negative sides to the processes as well.
Further benefits show that the investor also has a say in what kind of materials should be used in building the house. He may decide what type of tiles or blocks to be used, or he could have a say in planning how big or small the rooms will be, what type of layout the rooms will be and how other structures should be erected.
Disadvantages to the Investor
The disadvantages can be overlooked depending on the situation of the investor. Some parts of the agreement may not favor the investor. One source of frustration is that some investors may want to move in at a time that the agreement doesn’t support. The investor will be denied such rights according to what had been written in the off-plan agreement. It calls for patience on the part of the investor on occasions such as this.
How to Maximize Profit in Off-Plan Investment
It is beneficial for a prospective investor to learn about the method properly before embarking on the off-plan investment. This usually results in making more profit from the endeavor. On the part of the investor, there are basically two popular methods to profit from this business dealing. They are called the buy and hold method and the installment method. Let’s take a look at these separately below.
Buy & Hold Method
This method means that the investor has to exercise patience for some time in order to earn profits or bonuses from the investment. This is usually the better investment method in the off-plan strategy because it is less risky and it guarantees good profits. The buy and hold method is good for helping the investor to save up to fifty percent off the cost of buying the house. Little wonder, this method is popular in metropolitan areas in Nigeria.
Installment Method
This method is as it sounds. The investor pays in installments. He or she gives a deposit or a down payment. As the construction project continues, and at strategic moments, the investor has to pay certain amounts that depend on the terms and conditions already laid out in the agreement. There are different phases to the installment method. Each partner must abide by the rules to ensure that everything turns fine during those stages.
Bottom Line
As with every business deal, one has to exercise due diligence. Off-plan strategy is the way to go now in Nigeria if one doesn’t want to face the scary cases of high costs involved with building a house in Nigeria. Investors often comment on how when done properly, this method is better than the traditional one-time payment strategy that was once the popular method in real estate investment.
