Life is all about investment. There is always a return for every investment you make no matter how insignificant. You’d agree with me that people have varying desires for investments. Regardless of your investment plan, what is of utmost importance to you is the return on your investment. As a rational investor, I am sure you’d most likely prefer an investment that can produce the optimal return you desire.
“The wise young man or wage earner of today invests his money in real estate” – Andrew Carnegie
“The best investment on earth is earth” – Louis Glickman
Wait a minute! Imagine you stumble on these “dollar buildings” and quotes at a time when you’re stuck in the middle of deciding on what to invest your hard-earned or borrowed fund in. What if you learn that 90% of the world’s millionaires earned their millions by investing in real estate?
You’d be like wow!, this is great, isn’t it? Trust me, hearing you sound that way wouldn’t be surprising to me. Do you know why? I felt the same too the first time I read them.
In Nigeria, a successful real estate investment can earn a capital return as high as 30-35%, and a rental income yields of around 10%, especially in Lagos and Abuja. If I may guess what’s going on in your mind right now. I would say you are like I’m investing that money now. I mean right now. I can’t wait to tell that buddy I just received rent in the sum of N100 Million. Indeed, it’s a prestige to have real estate. However, I want to believe you are not unaware real estate development is capital intensive. And like other real estate investors, you may have to source for mortgage financing from a financial institution. But I doubt you would wish to see your capital go down the drain even after every requirement for real estate development has been met. In this article, I would be sharing with you why returns on real estate investment aren’t realized and what you need to do to prevent that in your case. I urge you to relax and make sure you read through to the end.
Why is my real estate investment not doing well?
The question asked by many real estate investors today is why their investments in real estate aren’t doing well. As motivating as the quotes we read earlier are, they don’t guarantee the realization of investment return. To some people, once a proposed development is physically, financially, economically, and legally feasible, investment return is guaranteed. Let’s reason together. If this were true, why do many real estate development around us fail soon after they are handed over to the investor? Could you take a minute to ponder this question? Do you think you’ve gotten an answer? That’s good if you think you have. Nonetheless, I’m about to tell you something that would help you to make a difference in the real estate business.
The reason real estate investments fail is they fail to seek the advice of an estate surveyor and valuer. I’m sure you won’t like the consequence. But believe me, that’s inevitable if the needful isn’t done. If you’re one of those who believe the role of an estate surveyor and valuer is limited to finding a suitable site for the development and the management of the property after the handing-over stage, you’re mistaken. Do you know why?
It is not untrue we cannot rule out the importance of professional advice in the real estate development process. Different professionals in the built environment work together before a completed project is finally handed over. These professionals include, but not limited to, land surveyors, architects, engineers
(civil, electrical & mechanical), estate surveyor and valuer, quantity surveyor. Engaging an architect to produce the architectural design of your project is not just enough. Although an architect gives your project its aesthetic value, he isn’t trained to study the property market and predict the level of demand for it. He is also not in the position to determine if the market wouldn’t be saturated with similar projects by the time your project is completed.
What juncture did you get to and you start feeling it is best you know the future of your real estate development now? Do you find it interesting to know the success of your real estate development is guaranteed by a proper market feasibility study? It is not unusual to see an estate surveyor and valuer is consulted to do conduct feasibility and viability study of a proposed development, which includes its technical, financial, economic, legal, and market feasibility. Of this list, the focus in this article is market feasibility. This is because the study of feasibility isn’t complete without the knowledge of the market.
What is market feasibility study and why is it so important?
Under no circumstance should market feasibility be confused with economic feasibility. While economic feasibility relates to the possibility of a project based on its ability to produce economic benefits, market feasibility is concerned with the analysis of market-related indicators such as demand, supply, and cost and sale/letting projections of the project within its primary market area.
In the market feasibility study of a project, the potential influence of market demand, competitive activities (local, regional, national and international) and available market share are the integral factors considered by an estate surveyor and valuer. A good market feasibility study tells you the story of what type of property is demanded (demand-side) and competitive (supply side) within the primary market area. It also provides you with valuable insight regarding the competitive position of your project.
Ultimately, the study of market feasibility helps to know, from the onset, if the proposed project will be successful in terms of meeting the demands of the population targeted.
Not always will a demanded real estate development project be competitive, and a competitive real estate development project isn’t always demanded.