Stories by Maduka Nweke,
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Everyone who builds a house is a house owner but not all house owners are landlords. This may not be far from the truth because for one to become a landlord or landlady, he must have a house where there are tenants who pay rents to the owner. This may not be different from the fact that one who owns an estate is the owner just like one who owns a bungalow of four rooms or one who owns a room and parlour self-contained. But be that as it may, you can make a good landlord or landlady if you know what is involved. If you can manage a four-room apartment well, it invariably suggests that you can also manage an estate well. The only difference is that you will have to develop or open more books to accommodate transactions from the larger space estate.
Being a landlord is not for everybody, but in today’s rental market, it can be a smart way to grow your wealth. That is because demand for rental units continues to be strong and it is driven by the failure of wages to keep up with the rising cost of housing. However, you can still buy rental property and actually make income from it. It should not, therefore, be mistaken for a way to get rich quick. This is a long-term investment that needs to be approached carefully. But if you are still itching to tap your inner real estate baron, you have seven smart moves to help you get started.
These include:
Ability to recognise business side of landlordism
Being a landlord is different from being a private homeowner. It is a business, and you need to treat it like one but people make mistakes because they don’t have a good business plan, according to Roberts, a real estate investor. He noted that this type of investment is not hands-off and not just a passive revenue stream but one that requires involvement. It requires your time. It requires certain skills. Any property you buy has to make sense from a business perspective, not because it is a house you would like to live in. That means it should be a reasonably priced home likely to appeal to the kind of tenants you are looking for.
Start small
Roberts suggests that starting with a single house or smaller multiple-dwelling unit, perhaps with a partner, to see if the business really suits you, would make good sense. “Single-family residences are the easiest properties to buy when you are looking for investment property,”
Merrill another expert in property matters says, “condominiums usually require a larger down payment and monthly association fees. Starting with a single home will allow you to get a feel for the maintenance, bookkeeping and other works required. Roberts and Merrill both recommend choosing an initial property without high-maintenance features such as elaborate landscaping. They argued that starting small will teach you some strategies through which you gather some level of experiences.
Invest in familiar terrain
An old joke is that the three keys to a successful business are “location, location, location.” That is especially true for rental property. A home that seems to be a steal might be priced lower because it is in a neighbourhood most people would not want to live in, with higher crime or poor schools, for example. For that reason, investing in out-of-state property is a gamble. Buying in neighbourhoods you know well or have carefully researched is the smart move.
Figure out the right rent
Rents differ widely around Lagos State. Those at 99 Property Nigeria Limited can give you an idea of what rents are where you are buying. Then you need to determine if that rent will be enough to cover your costs. Too often, people take a look at their loan and think if they cover that, they are doing fine. They advise their clients to put aside 5 per cent of gross rental income to regular maintenance and another 5 per cent to pay for the downtime and repairs that come with vacancies. Not budgeting enough for maintenance is a common mistake. Things break in that way. You are going to need money in a bank account to deal with those expenses.
You will also want to know the rate of return you are getting on your investment. There are formulas such as the “capitalisation rate” to help with this, but you might want to turn to a professional. A good accountant can make sure the purchase makes sense.
Be ready to get your hands dirty
If starting with a single home, you will find it to your financial advantage if you can manage the property yourself. That requires those “certain skills” Roberts mentioned earlier. The better you are with tools, the easier it is to maintain rental property without having to call in costly plumbers or electricians every time something breaks. This will save you some costs that would have denied you some other investments. If you are the kind of person who has put off fixing your own leaky faucet for a month, this probably is not the business for you. Likewise, if you are uncomfortable at the thought of calling tenants to ask where their rent cheque is, you need to look elsewhere or hire a property management company, which will add to your expenses.
Get professional help when you need it
If you decide to manage your property, you will probably want to consult a real estate lawyer to get a solid lease and learn the rights of tenants. You may want an accountant, and you will need to know some good plumbers, electricians and other tradespeople. Turning to a property management company is another approach advised. They bear the burden of sleepless nights of thinking on how to write letter of renewal of rents, rents review and generally, managing the property in a good way for you. Though all of them come with a cost you must bear.
Roberts who is experienced in real estate development noted that, “once I had more than two or three addresses, it made sense for me to hire a property manager, just because my wife and I also have careers. It is worth it for us to pay 7 per cent to 10 per cent of our rental income to a manager.”
Also, Buzz Farlow, owner of Pioneer Properties, a property management company in Tucson, says vetting and dealing with tenants is one of the most valuable services a good management company provides. According to him, “it’s a very different dynamic exercise when a tenant is dealing directly with the owner as some argue but there is a tendency for the tenant to think they are your friend, and that can complicate things. With a manager, it is clear it’s a business.”
Keep your tenants happy
“Of all the costs associated with being a landlord, the biggest one is vacancy,” Roberts says. “Every time a tenant moves out, you are going to spend money, probably quite a bit of it. That means finding and keeping good tenants is the heart of successfully investing long-term in real estate. Happy tenants are critically important. They are your customers. And the way you keep them happy is by keeping the property in good shape and treating them with respect. Do that and you will be building wealth with an investment you can feel good about,” he concluded.
Amuwo-Odofin residents lament as govt demolishes shops
Amidst the hardships caused by the current economic recession, the demolition of shops by the Lagos State government at Amuwo-Odofin has been seen by residents as an action intended to impoverish them.
The residents, mostly shop owners, who lamented that the state government did not consider the consequences of its action before embarking on it, argued that if there was any illegal structure, the authorities should mark them and give the owners a minimum of two months to either evacuate or get them demolished.
They reasoned that the state Ministry of Physical Planning and Urban Development did not follow due process but merely issued a three-day notice to the occupants of the structures to vacate as it would embark on the demolition. But the residents felt the notice was too short as most of them could not get an alternative just within three days.
Another version of the story had it that the authorities had earlier reached an agreement with residents of Jakande (Mile 2) Estate that in three months the so-called illegal structures would be pulled down. This, unknown to residents of Festac Extension, was an agreement that included them.
According to Mrs. Olawumi Fatokunbi, it was surprising that last Thursday and Friday heavy duty machines were moved to the area under the supervision of the Lagos State Task Force on Environmental and Special Offences Unit to demolish the structures with the argument that the time frame had elapsed.
Speaking on the development, the Secretary of the Jakande Landlords Association, Mr. Toba Johnson, disclosed that the demolition had rendered about 12,000 shop owners jobless and another 3,000 homeless. He said the traders had been displaced and there was no provision by the government to resettle them elsewhere. Johnson further disclosed that 12,000 shops were demolished with about 20,000 traders displaced.
Sources said that the state government commenced the demolition exercise on February 1, more than one week after the warning issued to the occupants of the structures had expired. Daily Sun learnt that the state government, through the Ministry of Physical Planning and Urban Development, issued a seven-day ultimatum on January 19, 2017, to owners of structures erected on drainages and walkways within the estate to remove them.
The government had argued that the structures were distorting the estate’s master plan and should be removed to restore the original master plan of the estate drawn over 20 years ago. Initially, the structures to be demolished by the government were shops and other structures used by residents for business activities along the popular Fatgbem- Durbar Road axis but when the real action commenced, it touched all the nooks and crannies of both Mile 2 Estate and the Festac Extension multiplying the hardships of the residents.
It was learned that a larger percentage of the affected traders survive through the business activities carried out in the demolished shops. One of the affected traders, Mrs. Chinwendu Okeke, said since she lost her husband, she has been managing to fend for her family of five from the proceeds of the shop. She said that she received the notice on Monday and the government commenced demolition two days after.
In his comment, Chief B.U. Chime, said if the government is saying the initial design has been mutilated, it ought to bring the design so that those structures within the design should be allowed to stay while those against the design should be marked for demolition. “But what is happening is that there was no notice in writing given to those whose structures would be demolished. Another thing is that they are doing this when the economy is very bad.
“They too did not make provision for alternatives. It is a mark of wickedness. Government is set up to alleviate the sufferings of the people, but the current government seems to be compounding the problems. They should have waited for the economy to improve a little before implementing this policy. Everybody likes a decent environment, but government policy should be made with a human face because such policy is made for the people,” he said.