The current economic uncertainty in Nigeria has significantly diminished the value of savings in financial institutions. OLASUNKANMI AKINLOTAN explores the advantages of real estate investment as a hedge against inflation.
Many businesses in Nigeria are struggling to navigate the economic challenges caused by fluctuating foreign exchange rates and rising inflation.
The ongoing depreciation of the naira against the dollar has dominated media coverage, highlighting the severe impact on Nigeria’s economy.
As the value of the naira continues to drop, discussions about this issue have become commonplace across the country. Many investors have been forced to close their businesses due to the challenging economic environment.
To protect the value of your savings, experts recommend investing in real estate, particularly land banking, which is considered one of the most reliable ways to safeguard your funds.
Real Estate as a Safe Haven
Diamond Ilori, a real estate expert and founder of Wardiere Oakmount, urges Nigerians to invest in real estate to achieve financial stability amid the ongoing economic crisis.
Ilori describes the real estate sector as a haven for smart investors during times of economic uncertainty.
“You need assets that don’t just hold value but multiply it,” he advises.
According to Ilori, real estate, especially through land banking and strategic parcelling, offers a solid investment opportunity.
“Real estate is a tangible asset, unlike stocks that can lose value overnight. Land is finite, and its value tends to appreciate, especially when purchased in the right locations. It’s a strong hedge against inflation and economic turbulence,” he explains.
Ilori emphasizes that land banking is about foresight—acquiring large tracts of undeveloped land on the outskirts of expanding cities. As development progresses, the value of the land increases significantly. This strategy offers not just long-term gains but also smart, timely returns.
“Whether through rental income or leasing out undeveloped land, real estate can provide cash flow while you wait for appreciation. This creates multiple income streams,” he notes.
How to Leverage Real Estate Investments
Ilori encourages potential investors to consider bulk purchases to benefit from lower buying costs.
“Buying land in bulk not only reduces costs per unit area but also increases potential returns. Larger parcels offer greater leverage. Think big to win big,” he advises.
He also suggests subdividing large parcels into smaller, more marketable pieces, which are easier to sell and move quickly. This strategy can turn a significant investment into a series of quick, profitable sales.
“Collaborate with real estate professionals who understand the market. They bring the necessary sales force, marketing expertise, and knowledge to expedite parcel sales, enhancing your bottom line,” Ilori adds.
By selling smaller parcels quickly, investors can realize gains sooner, allowing them to reinvest or pocket profits before inflation erodes returns. Speed is crucial in this strategy, as smaller parcels are in high demand, particularly with the ongoing urban sprawl.
“Diversifying across multiple smaller parcels reduces risk and increases stability. If one market declines, others can sustain you,” Ilori concludes.
He also acknowledges that while some may invest on a small scale to protect their business funds, others may opt for larger investments, depending on the amount of capital available and the size of the business.
Step-by-Step Guide for New Investors
Josephine Amadi, Executive Director of Omoluabi Empire Holdings Limited, provides a step-by-step guide for new entrants into the real estate market:
- Hire a Professional Property Manager: Managing commercial property can be complex and time-consuming. If you lack experience, consider hiring a professional property manager. They can assist with marketing, leasing, rent collection, repairs, record maintenance, and legal compliance, ultimately increasing your property’s value and performance.
- Manage Your Cash Flow: Cash flow is vital for any real estate investment. Protect it by managing income and expenses effectively. Strategies include increasing rents, reducing vacancies, adding value-added services, and improving tenant retention. Lowering expenses can be achieved through vendor negotiations, debt refinancing, and implementing energy-efficient measures.
- Insure Your Property: Protect your investment by insuring your property against risks such as fire, flood, and theft. Consult with a professional insurance agent to determine the best coverage for your property.
- Diversify Your Portfolio: Diversify across different property types, locations, and tenants to reduce exposure to market downturns and take advantage of growth opportunities. Investing in a mix of office, retail, industrial, multifamily, and hospitality properties across various regions can enhance stability.
- Conduct Thorough Due Diligence: Before buying or selling commercial property, conduct comprehensive due diligence. This process includes reviewing the property’s title, leases, income, expenses, environmental reports, zoning regulations, and inspection reports.
- Stay Updated on Market Trends: Monitor market trends that affect your property’s performance and value. Stay informed about supply and demand, vacancy rates, rent levels, and economic factors in your market. Being proactive allows you to make informed decisions and adapt to changing circumstances.
By following these strategies, you can protect your savings from inflation and secure your financial future through real estate investment.
