Recently, I had a meeting with a prospective client, who told me her ordeal how she lost 12 plots of land at Lakowe, Ibeju lekki Lagos. She told me emphatically that the property is supposed to have delivered a 900% returns on investment, but instead, she is still counting her losses and it’s over 4 years now. Therefore she have decided never to invest in Lagos or anywhere far from her home town ever again.
Another narrated his experience of how he lost 3 plots of land in Abuja and the third person narrated how he is yet to get access to the five plots of land he bought at Ikorodu Lagos state simply because he lost the documents that was issued to him during the purchase and the so called real estate company have denied him access to his property.
All these are common pitfalls associated with investing but My detailed discussion with each of them revealed that they all made similar mistakes which could have been avoided if my meeting with them was prior to those transactions.
The right information, if applied properly can secure all your deals and make your real estate adventure a profitable venture.
The following are the seven common mistakes most people make while investing in real estate and how to avoid them:
1. Lack of due diligence —
Due Diligence is the full investigation of product and transaction process before transaction takes place. This confirms that all details are correct and no important information is left out.
It can also be explained as a detailed investigation by a buyer, to make sure that a seller can complete a transaction as promised. It is a very important action to be taken by investors to guarantee the safety of their investments and whether you are investing in stocks, bunds, mutual fund or real estate, due diligence is very important and necessary.
In real estate investing, Due diligence includes running a detailed background check on the property you wish to purchase and making sure the property can serve the purpose of your investment without “stories that touch the heart”– Making sure your agents or real estate Companies can deliver their promises and ensuring your money is not payed to the wrong person. A lot of investors overlook this because their siblings, relatives and best friends are involved in the transaction and this have cost many their hard earned money.
Lack of due diligence is the reason people end up buying properties from fraudulent companies, falling victim to a single property been sold and resold to multiple individuals, buying properties with fake titles and documents etc. Always resolve to do your due diligence before signing that cheque. An expert can help you get every useful information concerning the property you want to buy and the company or family you want to buy from. Always treat the advice of an expert as important
see this article also — PROS AND CONS ASSOCIATED WITH BUYING AN OMONILE LAND VS REAL ESTATE
2. Hiring/Consulting The Wrong People —
Hiring wrong people is very close to lack of due diligence. The fatal error here is the fact that the investor actually thinks that he is following due diligence but forgetting that when the blind leads the blind, that both falls into a ditch
Never underestimate the value or the guidance of a real estate expert while investing or buying a real estate portfolio. But if you think knowledge is unimportant, then you can try ignorance and be ready to live by the consequences. If you really value your hard earned money and wants to make the best of every real estate investment opportunity, verify the expert you might want to work with using social proof and track record.
3. Rushing The Deal —
it’s better to miss a deal than to loose your hard earned money. One very popular error when it comes to real estate is jumping the gun. Take a deep breath, study the documents properly, do your background check before signing that agreement or issuing out that Cheque. Above all, pay attention to details. It’s best to have an expert look at the contract before signing them. Never sign a deal you don’t understand because you might be signing a financial death warrant and never be afraid to ask questions. Ask questions until you are sure you understand.
Find the 5 most important questions you must ask before Investing in real estate here and never forget to always have a private discussion with your expert concerning terms of contract on every real estate deal you want to venture into because experts see things that you cannot see. Allow them to use their skills, knowledge and experience to your advantage .
4. Underestimating Costs —
The main purpose of investing in real estate is to make profit. This profit can be realized in two major ways which are – Cash Flow and Capital Gain. Cash flow is the steady income generated by the property mostly through rent or lease while Capital Gain is derived through appreciation of property over a period of time.
Understanding cost implications helps in speeding up returns on investment. Majority of Real estate Investors buy properties without analyzing this and the carelessness have turned many investors to losers. The only thing most people see is the surface of a deal as it looks enticing and appealing. They never study the cost relating to development, documentation, community entitlements, government taxes, receptiveness of locals and possible problems that might be associated with the property. They usually end up spending a 3x of the property value on other cost implications to secure the property because the first deposit have been made, it becomes a case of pay more to secure it or lose it all.
Before making an initial deposit on that property, make sure you understand everything including how the management company is going to run the property. If after studying everything and there are still things you don’t understand, then look for another property and most importantly, get the service of an expert and take his advice seriously.
5. Blindly Trusting Others —
One of the dumbest mistakes I have seen people make which results in massive lost of money or paying almost double for a deal is blindly trusting people just because they share family ties, or because they are very good friends or colleagues at the office. Blindly trusting a third party while investing can be extremely stupid, because people are bound to do things in their best interest. Blind faith can lead you to buying a property above market value or purchasing real estate which doesn’t suit your requirements. Hiring an expert is not just enough. Make sure you are asking them the right questions in order to get a clear picture of what you are investing on. Always be sure your expert have a proven record of delivering good deals
6. Mistiming The Deal —
Timing is key to everything in life and a real estate deal is no different. Whether you are investing for CASHFLOW or CAPITAL GAIN, the importance of timing can never be over emphasized. Just like in any other investment, real estate market is controlled by those two elements of human behavior and emotions — “fear and greed”, however real experts understand how to use this key human emotions to their advantage in striking best deals at best times. Smart real estate investors have utilized this COVID19 era to invest in great deals while the inexperienced have also incurred great loses.
I actually came across some prospects recently who told me of how they have invested in certain areas even the popular Ibeju Lekki for over two years and have no tangible returns on their investment. This is primarily because they don’t understand how to combine timing and Location in picking great deals with maximum potentials, Location might be good but location without timing is very stupid. Old Ikoyi and Dolphin Estate might have developed first but right now Bourdilion, Gerald and Banana Island are the big shots while some parts of old Ikoyi and Dolphin appears to be losing value. Smart Investors made good money from Ikoyi while others came in when the market have been fully drained. Currently Ikoyi is on of the most costly place to live in the world
Do you think Ikoyi is still a smart choice for Cash Flow or Capital Gain investors today? You might need to read this ➡️ HOW TO MAXIMIZE PROFIT USING CASHFLOW AND CAPITAL GAIN INVESTING
7. Having an emotional attachment to a company —
Don’t get it twisted, love is a beautiful thing but attachment is bad for business. The goal of real estate investing is to make profit and sentiment is the biggest enemy of business growth. Sentiments and emotions such as fear, greed and attachment destroys our sense of reasoning and judgement, Sometimes we fell to realize that we have been taken over by these strong enemy of sound reasoning and critical analysis and hence end up signing wrong deals or running away from great deals and opportunities.
As a Smart investor, never let sentiments and emotions—Fear, greed or attachment disguised as love to an agent or company land you into signing wrong deals or missing great deals
Whether you are a first time investor or a seasoned investor, understanding this mistakes and taking proper precautions will not only save you time and money, but will also fetch you the best deals that guarantees fastest returns on investment and you will realize that it’s so easy to achieve financial freedom and creating generational wealth using real estate. The easiest way to go about any real estate investing is to get a seasoned expert with proven record.
Looking for a real estate expert to guide you on making great investment decisions or to handle the task of managing your existing property to speed up returns on investment and maximize profit –
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