Real Estate Investment: To buy or build: Which is better?

Are you planning to invest in Real Estate and you are probably thinking of buying or building a property for your home or business use, this article by Abiodun Doherty gives an insight into the advantages and disadvantages of each decision.

To buy or build: Which is better?

BY ABIODUN DOHERTY 

Abiodun Doherty

Everyone can be a homeowner; if you have the necessary information, will and the resources to start with. As important as having the resources is, several people are not home owners or investors today not because they do not have the resources but because they lack the necessary information and the will to put that knowledge into action. Information is power.

I believe you might have come across individuals who have lots of money but end up with properties badly located or poorly constructed because of ignorance and inexperience. You also have Managers in an organisation earning so much and who end up not having a property of their own or by the time they are celebrating their first home dedication a more junior officer with more articulate strategy and less resources has achieved much more than that.

But when you begin to consider owning your property, you may need to decide on the ideal model for you. One of the common considerations is whether it is better to buy a plot of land and build your own house or to search for an already built property and buy. Both options have their own pros and cons but ultimately you’ll need to consider both options and work with whichever goes well with you in the light of your present circumstances.

Buying a property is certainly less stressful. Basically, what you need to do is to decide on the type of property, location and price that will be good for you. You can also be very specific on the title to the property. If you are planning on using a mortgage facility to purchase the property you will need to ensure that the property has a Certificate of Occupancy, Land Certificate, Governors’ Consent or a Registered Conveyance which are the titles normally preferred by lenders in Nigeria.

As part of your options, you may chose to buy a new building or an old building. Whichever option you choose however, always remember that the strength of a building is not determined by its beauty or the years of construction but the integrity of the construction work done. We have seen individuals who bought a new building only to discover that it was poorly built and the cost of amending the defects run into several millions. We have also seen individuals who purchased old buildings that was so solidly or professionally built that with little renovation they assumed new values. The wisdom is in engaging professionals that will examine the structures and give you honest guidance.

One of the reasons why it may be cheaper and wiser to buy a building is that generally the value of an empty land and a built land are really not too far from each other. What you are buying more often than not is land and the location of the land. Thus, if a person bought a parcel of land for N10m and then built a property valued at N100m on it he may not be able to sell that property for N100M.But consider a person who built a property of N10m on a land of N100m.The latter may be able to sell the property for N150m.The difference is determined by the value of the land.

Sometimes the value of land may be so out of reach for many that the best they can get if they want to live in certain prime areas is to buy a flat. In an area where an empty parcel of land sells for N300m, for instance, several middle class investors who desire to live in such areas may have to settle for buying a flat or an apartment rather than building from scratch. The cost of acquiring land is simply too steep for them.  And by the way, flats in such prime locations may be as high as N100m or more. This amount is enough to acquire land and build a property on the same land in certain areas although not with the advantages of the prime locations.

This is one of the reasons why some investors prefer to buy a parcel of land and build it: it could be cheaper. I use the word ‘could’ because it is not necessarily cheaper or better. If you have the technical know-how of building a property, the time and trusted workmen, by all means build the house yourself or under your direct or indirect supervision. As many will attest to, we have a dearth of professional and reliable workmen in the land. Most of our workmen need to be seriously supervised before you can get an average work out of them. And you cannot compare yourself with professional property developers who have paid their dues in trial and error before having a team to work with. In summary, weigh the options and your circumstances .Whether you build or buy, by all means invest in real estate.

Source: Punchng.com