The current economic uncertainty in the country has significantly depleted the value of money saved in the bank. In this report, OLASUNKANMI AKINLOTAN discusses how real estate can be used to safeguard your money against inflationary pressure
The current economic challenge in the country has been taking its toll on businesses. Many of them are struggling to cope with the country’s foreign exchange volatility and the accelerating inflation, which have eroded their capitals.
The free fall of the naira against the dollar has gripped headlines and dominated media coverage in recent times as this is said to be the major indicator of why Nigeria is almost on its knees.
As the value of Nigeria’s currency plunges to new lows nearly every week, it has become the most discussed economic issue across public discourse in the country.
Many investors have closed shops due to the current economic situation, which made the business environment very tough.
To secure the value of your bank savings money, experts have advised that you should invest it in real estate land banking, which is said to be one of the surest ways to secure the available funds.
A real estate expert and founder of Wardiere Oakmount, Diamond Ilori, appealed to Nigerians to invest in real estate to secure financial independence after the economic crisis currently rattling Nigerians.
Ilori described the real estate business as the playing ground for smart investors when businesses are shaky.
“You need assets that don’t just hold value but multiply it,” he maintained.
According to Ilori, real estate, especially when one is leveraging land banking and strategic parcelling, is a golden ticket.
“The power moves, unlike those paper stocks that can evaporate overnight, real estate is real. Land is finite, and its value tends to rise, especially when you know where to buy. It’s a solid hedge against inflation and economic storms.
“Land banking is not just about buying land; it is about seeing the future. Grab large tracts of undeveloped land on the outskirts of growing cities. As development catches up, your land’s value skyrockets. This is not just a long-term play; it is a smart-term play. Whether it is rental income or leasing out your undeveloped land, real estate can generate cash flow while you wait for appreciation. Multiple streams of income,” he enthused.
How to leverage real estate
The realtor also encouraged prospective investors to rather buy in bulk to earn lower buying costs.
“You maximise and multiply when you buy land in bulk, you are not just getting a discount; you are gaining leverage. Large parcels mean lower costs per unit area and higher potential returns. Think big to win big. Slice that big land into smaller, more marketable pieces. Smaller parcels are hotter commodities, easier to sell, and quicker to move. This strategy turns your big investment into a series of quick wins.
“Team up with real estate professionals who know the market. They have the sales force, marketing muscle, and expertise to move those parcels fast. Partnering with the right people can shrink your sales and boost your bottom line.
“By parcelling and selling quickly, you realise gains sooner. That means you can reinvest or pocket the profit before inflation eats into your returns. Speed is the name of the game. Smaller parcels are in high demand, especially as urban sprawl continues. This demand drives up prices, ensuring your investment keeps pace with, or beats, inflation. Don’t put all your money in one spot,” Ilori explained.
According to the Wardiere Oakmount boss, diversifying across multiple smaller parcels reduces risk and increases stability, noting that if one market dips, others can keep you afloat.”
He stated that, however, while some may invest on a small scale to safeguard their small business funds, others may want to invest on a larger scale depending on the amount involved and the size of the business requiring to be saved or protected.
Giving a step-by-step guide into how a new entrant into the real estate business can navigate, the Executive Director of Omoluabi Empire Holdings Limited, Josphine Amadi, listed some steps;
Hire a professional property manager
Managing a commercial property can be a complex and time-consuming task that requires a lot of skills and expertise. If you are not experienced or equipped to handle the day-to-day operations and maintenance of your property, you may want to hire a professional property manager.
A property manager can help you with tasks such as marketing, leasing, collecting rent, handling repairs, maintaining records, and complying with laws and regulations.
A property manager can also help you increase your property’s value and performance by implementing best practices and industry standards
Manage your cash flow
Cash flow is the lifeblood of any commercial real estate investment. It is the amount of money that you receive from your property’s income after deducting all the expenses and debt payments. To protect your cash flow, you need to manage your income and expenses effectively and plan for contingencies.
Some of the strategies to boost your income include increasing rents, reducing vacancies, adding value-added services, and improving tenant retention.
Some of the ways to lower your expenses include negotiating with vendors, refinancing your debt, and implementing energy-efficient measures.
Insure your property
Another essential tip to protect your commercial real estate investments is to insure your property against various risks and damages. Insurance can cover you from losses caused by fire, flood, earthquake, vandalism, theft, liability, and business interruption. Depending on the type and location of your property, you may need different types of insurance policies and coverage levels.
You should consult with a professional insurance agent or broker to assess your risks and find the best insurance options for your property.
Diversify your portfolio
One of the best ways to protect your commercial real estate investments is to diversify your portfolio across different property types, locations, and tenants. Diversification reduces your exposure to specific market segments or regions that may experience downturns, vacancies, or rent declines.
It also allows you to take advantage of different growth opportunities and demand drivers in various sectors and markets.
For example, you can invest in office, retail, industrial, multifamily, and hospitality properties in different cities and states.
Conduct thorough due diligence
Before you buy or sell any commercial property, you need to conduct a comprehensive due diligence process that covers the financial, legal, physical, and operational aspects of the deal.
Due diligence helps you verify the information provided by the seller, identify any hidden liabilities or defects, and negotiate the best terms and price.
Some of the key steps in due diligence include reviewing the property’s title, leases, income and expenses, environmental reports, zoning regulations, and inspection reports.
Stay updated on market trends
The last tip to protect your commercial real estate investments is to stay updated on the market trends and conditions that affect your property’s performance and value.
You should monitor the supply and demand, vacancy and occupancy rates, rent levels and growth, sales activity and prices, and economic and demographic factors of your property’s market.
You should also keep an eye on the emerging opportunities and challenges in your sector and region, such as new developments, competitors, regulations, and technologies.
By staying informed and proactive, you can make better decisions and adapt to changing circumstances.