I hope you know that there are a lot of real estate investment types available? If you don’t, I guess that must be why I am writing this article particularly because the new year offers an opportunity to start on a clean slate.

The idea of real estate and property is much more than just finding a home. There are categories of homes and business properties as well as divisions in the types of real estate that are available to others. If you want to make a different type of investment in something that you know you can make a profit out of, then knowing the different types of real estate investments can help.

Real estate investments begin with two major types; business and residential.

Each of these has specific guidelines set with them which will make a difference in the functions of the real estate. After you have determined what type of real estate you will be looking at, you can divide up what is available to you.

If you are looking at pure residential areas, then the real estate will be divided by the size of the home.

Typically, this will be known as a single family or multi-family home. If you are looking at a multi-family unit, you can expect to have neighbors sharing the same wall as you, such as block of flats or Terrace apartments.

A single family home will be completely independent and will usually be shaped differently because the neighbors can’t cross the yard.

Business real estate is also divided into several categories. These will also often be referred to as commercial properties, and will range from office buildings to manufacturing sites.

The difference between a business building and a residential building is that it will change the approach towards regulations. Most likely, there will be zoning rules and the lease will have different divisions for things such as taxes and insurance.

If you are in the right area, you might have the opportunity to have both a commercial and residential area in one. Things such as land investments or areas that have been zoned for commercial purposes may have these types of regulations. The bulk of the major streets on Victoria Island were just converted to commercial.

With this, you can also consider renting a property. If you want to have a business from home or want to expand into a business, this might be something to consider.

The investment that you decide to make can be more than your home. It can also be something that will bring you back profit for the investment.

If you are interested in finding a space that is much more than cozy, than knowing the different types of real estate to invest in is the place to begin.

There are different types of real estate, and different ways to invest in them. Which way is best is for you to decide, according to your particular needs. Here are a few ways to consider, with their advantages and disadvantages.

1. Rental houses. Advantages: One of the easier ways to get started, and good long term return on investment. Disadvantages: Being a landlord isn’t much fun, and you typically wait a long time for the big pay-off (sales).

2. Rent-to-own houses. Advantages: When you buy, then sell on a rent-to-own arrangement, you get higher rent, and the buyer is usually responsible for maintenance. Disadvantages: The bookkeeping is tricky, and most tenants don’t complete the purchase (this can be an advantage too, but it does mean more work for you). Although this is not common yet in Nigeria, it is worth the effort to know it exist because it could be one of the possibilities for 2009.

3. Low income rentals. Advantages: The same as with any rentals, but with lower positive cash flow. Disadvantages: The same as with other rentals, but with more repairs and tenant problems.

4. Buy-Renovate-Sell. This is what the Americans call Fixer-uppers. Advantages: A quick return on your investment and it can be more creative work. Disadvantages: Higher risk (many unpredictables).

5. Buy for cash, sell for terms. Advantages: You get a high rate of return by paying cash to get a good price, and selling on easy terms to get a high price AND high interest. Disadvantages: You tie up your capital for a long time.

6. Buy land, split it and sell it. Advantages: It is simpler than most real estate investments, with the possibility of great profits. Disadvantages: It can take a long time, and you have expenses. Also, if it’s not well structured there may be no cash flow while you wait.

7. Boarding houses. Advantages: You can get a lot more cash flow renting a house by the room, especially in a tertiary institution town. Disadvantages: Property management is very demanding, you can get a lot more headaches renting a house by the room, especially with student tenants.

8. Commercial real estate. Advantages: Long term triple-net leases mean little management and high returns. Disadvantages: Tough market to break into, and you can lose income on vacant storefronts for a year at a time.

9. Buy, live in it, and sell. Advantages: The new tax law means you can fix it up, and sell for a big tax-free profit after two years, then start the process again. Disadvantages: You have to move a lot.

10. Speculation. Advantages: Buying in the path of growth and holding until values rise can yield large profits, especially if you buy low to start. Disadvantages: Prices aren’t that predictable, you have expenses with no income while you’re waiting, and transaction costs can eat much of the profits.

The list above is not exhaustive but a fair representation of the types of real estate investments you can look out for in 2009.

I wish you the very best. Happy New Year!

I salute the courage of the Governor of the Central Bank of Nigeria, Professor Chukwuma Soludo in times like this. A few days ago he was quoted as saying that despite the global financial crisis rocking major economies of the world, the Nigerian economy is adequately insulated from the crisis and would not suffer any recession. Honestly, I wanted to stop reading that piece at that point but for the second paragraph where in an attempt to elaborate, he said “the worst that could happen to the nation’s economy as a result of the meltdown was a reduction in the growth rate.

Well, at least the man appreciates the fact that the economy may slow down. I have my doubt as per the reasons he proffered for his optimistic view on the economy. Reasons such as the fact that we have a liberalised economic system, with flexible prices; easier adjustment processes and robust external reserves that could be tapped into as well as sound banking and financial system that now had the capacity to fund the private sector. 

Even if the rest are okay, I know of a fact that the banking system may have better capacity to fund the private sector then it existed pre-consolidation but there are a lot of bankable private initiatives languishing in  the custody of the promoters for lack of funding after several attempt at securing such support from the banks have met with failures.

Further probe into the speech of the well read gentleman at the helm of affairs in CBN during the 2008 Bankers’ Dinner in Lagos reveals that he is only been technical to say we won’t experience recession in 2009. Hear him “The global system is in a recession and from all indications, the Nigerian economy will not be in a recession. What could happen is that the rate of growth could be reduced, but this will not make us slide into a negative growth rate for three consecutive quarters that would officially lead the economy into recession” It is clear from here that what Mr. Soludo is talking about is the definition of recession not that our economy may not suffer a slow down or even negative growth. Also, I seem to have the backing of World Bank in my belief that things may not be as rosy in 2009 as Mr. Soludo would have us believe. As reported in one of the national dailies, although the Federal Government targets a growth rate of 7.5 per cent in the coming year, the Wolrd Bank said the nation’s GDP might shrink to 5.8 per cent.

Agreed that African economies are less integrated into the international financial system and relied relatively less on international capital and bond markets to finance investment, weaker external demand and resultant fall in commodity prices will take a toll on exports and the contribution of trade to GDP growth is likely to be negative in 2009. The falling old price is already causing a problem for the 2009 budget and the necessity of the deficit for infrastructural development.

To drive these home, what I have being trying to say is that all these will affect your investment in real estate such that if you maintain properties in certain places for something other than a long term view, you may lose out seriously. The reason is simple; in the frenzy of the events that preceded the present economic glum, money flowed so freely and certain decisions by the powers helped certain places in my opinion appreciate beyond the bounds of reasonable profitability for a would-be investors.

The underlisted reasons and other are impacting on property markets in the concerned five areas:

• More people were able to buy properties because more money was circulating within the economy, good places where getting depleted very fast.

• Government resulted to selling some properties to the highest bidder and others to current Civil Servant occupiers whose benefits have been monetised. That was a policy switch by the Obasanjo regime. The likes of 1004 flats, other blocks of flats and single family units in Victoria Island, Ikoyi, Ikeja, Surulere, e.t.c fell under this category.   They were all sold and what happened in most cases was that the civil servants who had the first right of refusal did not have the funds required to buy the places and they then went into all kinds of arrangement to have a share of the cake. Mostly, they bought with loans and resold to investors or property speculators or just fronted for one. Now, the properties have passed through 2 to 3 generations of buyers attaining record breaking value computations at every turn.

• Banks started the branch expansion “competition” after recapitalisation buying up any property that catches their fancy in the process. To hear that a bank wants to open over hundred branches in the nation within a financial year became a common place. Every major street became a target and the highest bidder takes all. The dynamics of bank property purchases drove the “value” of such properties to high heavens.  There were cases of properties that would have gone for N10million going for about N25million.

The aforementioned and a lot of others contributed to what the places listed below have come to be. If you must buy properties in these places now, ensure that you can almost rise four times the purchase price in putting up whatever you what to do on the land and that the venture will pay for it. Otherwise, forget it. What that does is that you now find out that there are only very few things you can achieve profitable on the properties given the present value. This reduces the attractive or marketability of such a property making these places almost no go areas for property speculators.

For reasons above adduced, I will like to advise that you should be extra careful buying properties in the following places until after this economic hullabaloo except if the prices properties currently command here come crashing significantly. 

Ikeja G. R.A – probably only multiple units high class luxury apartments and five star hotels can turn you profit on the landed properties available here.

Magodo, Shangisha – mostly built up with only very few landed properties left in good locations. Other landed properties at the edges are mostly within disabled land or swamp.

Banana Island – What will you put o the land here to command billions in rent? That’s the question you should be ready to proffer answer to when shopping for landed property on this Island in 2009.

Osborne Road -Victoria Island – because of the fact that it is now commercialised, property prices here have reached the roof and you may need to erect sky scrappers to break even.

Old Ikoyi – The situation here is very similar to the Ikeja G. R. A experience.

Check one of the most current postings on my blog (www.deboadejana.com) for an idea of the places you can look up to for good returns in 2009.

I wish you happy New Year and the very best in 2009.