DO NOT BUY THAT CHEAP PROPERTY
Determining the genuine value of any sort of Real Estate, whether it’s a house, land, or commercial property, may be a difficult endeavor. Many aspects are taken into account, and if the buyer is unaware of the correct property assessment, the consequences could be disastrous.
Clients are frequently misled by incredibly low-cost cheap properties that appear to be bargains, but these properties may end up causing a slew of issues. It should be noted that cheap does not always imply a property priced below N1 million, but rather properties that are selling for less than the area’s average price.’
For example, a plot of land near Ajah may be advertised for N2 million, and investors would rush at the chance because of its location. That land, on the other hand, could have a number of issues that even thorough inquiries cannot reveal.
To avoid this, you must first determine the property’s genuine value. Though it’s best to leave this to an estate surveyor and valuer, there are some basic measures you may take to determine the genuine value of a property.
Without getting into the intricacies, here are a few basic facts that anyone interested in real estate should be aware of:
Cost of construction should always be considered: When determining the value of a real estate property, one of the first factors considered is the cost of construction. Construction costs have a significant part in determining the monetary value of a property in a stable economy (You can read our post on how to determine the Cost breakdown for a three-bedrooom bungalow in Nigeria to understand how to get the cost of construction) Though the cost of building materials vary, you can still get a proper estimation if you can carry out proper research.
Investment properties have a higher value: Unlike residential real estate, which is heavily impacted by the cost of similar properties in the area, valuation methodologies for investment properties are more varied. The following are the approaches for valuing investment properties:
The Income Strategy: This method assigns a value to a property based on its ability to generate income. The higher the returns they produce, the more money they are worth.
The Cost Approach: As the name implies, this method assesses qualities based on the costs of acquiring land and constructing the structure to its current state. This strategy is typically used on difficult-to-sell structures (hospitals, schools, and government buildings).
The Sales Comparison Approach: This method estimates the value of a real estate property by comparing it to the sales price of similar properties in the same area. Before a comparison can be valid, the properties being compared must have a lot of similarities.
Government policies are very important
A single government policy can cause property prices to skyrocket or plummet. The Lagos state government, for example, has ordered developers with estates in Ibeju Lekki who do not have proper titles to commence the process of acquiring titles for their estates. When this is fully implemented, plots of land that were previously valued at roughly N1 million will be worth between N4 and N5 million (or even more).
When you put these factors into consideration amongst other factors, you will understand how to determine the value of a real estate property.