First let’s lay a foundation, then we look at some introductory stuff. You see, we keep coming back to real estates because one of the keys to long lasting wealth is real estates. Someone described it as the only real investment and when you think about it, there is no one who does not have a daily romance with real estates.
For instance, the moment you were conceived, you rented your first apartment which was your mother’s womb. That was your first rental and you occupied for 9months then moved to a larger property. You are right now reading this from a piece of property, the road you ply daily is a piece of property.
Whether North Korea starts a nuclear war with the United States will largely be defined by which one of them is mad enough to invade the real estate (air space, water space or land mass) of the other with an ICBM (intercontinental ballistic missile). Nigeria is a piece of real estate, the herdsmen battle boils down to real estate.
And here is a secret of wealth which I want you to keep at heart. He who controls the real estate of any society controls the wealth of that society. Those with the land and property make the rules, others follow. So, the landlords in an area will determine when the gates will be closed for instance and the tenants comply
Even online (in the tech) world, we talk of real estate. That is an entire business area on its own but that is not what we are here for today. And when you finally exit, unless you are cremated, you still take up a piece of land. And whatever you have now becomes a legacy that others can point to, so real estate is an important subject. To confirm, please check out any rich man you know in Nigeria and ask yourself a simple question, why do they all acquire property?
As we go ahead in this series on small properties, I will from time to time use terminologies
Please note I am in no way a real estate pro. I see myself as an investor just like you so I will largely just use plain English and what you will consider as lay man speak to explain things. So, for the pros, kindly do not flay me for being so unprofessional. That said, let start looking at some of the terms and things you will start hearing as we progress in the course
Appreciation – An increase in the value of a property. So, if you bought for N350k and the property becomes N700k then you have an appreciation in value
Capital gains/appreciation – After you have sold an asset (a land or house for instance), the profit you make is the capital gains on that property
Caveat – Caveat is a notification on the title of a property declaring that a party other than the owner may have interests in the property. It is usually a pointer that there is more to the property which needs checking out
Caveat emptor -Latin for ‘buyer beware’
In property transaction, the purchaser usually carries the risks, so when you see a caveat of any kind, it is usually an indication to ‘shine your eyes’ for me, once I start seeing caveats in any form, I start pissing in my pants. It is a pointer for a bad market
Appurtenance – Fittings or accessories which is attached to a property, say for instance you lease a hall with concrete floor and bare roof. To meet your standards, you add wooden panels to the wall, change the doors, tile the floor, all those are appurtenances
In your lease agreement a smart lawyer who is worth his weight in gold or a real estate agent who knows what he is doing (most don’t) will put in a clause (a caveat) that ensures you cannot take out any appurtenance. So, you have increased the value of the property for the owner on your own dime.
Real estate agent – In advanced countries, there are certifications before you can become an agent. In Nigeria, an agent is anyone who connects buyer with seller so to speak, so if you wanted to rent a 3bed apartment, an agent links the owner with you and gets a cut
Broker – An agent is supposed to work under a broker but here in Nigeria it is a blur, no clear distinction of duties. So, you can use the terms freely
An offer – When you are invited to take up a piece of property, that is an offer, and usually your offer should come with the terms under which an acceptance is made
Acceptance – The agreement to the terms of the offer. Once the contract is signed, neither parties can back out without facing consequences. Usually in the buyer’s case you will lose your deposit and in the seller’s case, it could end in a lawsuit. An offer and acceptance of an offer are 2 very important areas of real estate deals you must always pay attention to
Bank Valuation – Usually applicable if you need to take a loan on your property or want to finance a property by a bank. The bank valuation is an estimate of the value of the property. In my opinion, bank valuations are usually way lower and more conservative than the actual market value and for good reasons too.
Appraisals – Estimated property value. Usually done by professionals
Down payment – Amount you put down as your equity contribution toward acquiring a piece of property.
Inspection – Physical sighting and moving around a property
Lien – A legal claim on a property in order to receive payment for a debt. So, if you have borrowed money and a lien is on your property, the holder of the lien can legally sell off your property to recover the money you owe
Title – The legal term that identifies a piece of property and shows the owner is in lawful possession of that property. There several kinds. If time permits, we will touch on some
Counteroffer – A new offer, made after a previous offer has been rejected by the owner.
Depreciation – A reduction in the value of an asset over time.
Zoning – This is important because a lot of people have run into trouble based on this and a lot more are ‘sitting on a keg of gun powder’. In town planning, they have a way of allocating different portions of a land mass for different purposes. For instance, the recently proposed grazing zone is a form of land zoning, so the govt. can for instance zone a section of land for agriculture and another section for a city mall etc. The fact that you have checked a land physically does not mean you can’t run into troubles; you can still run into big zoning problems. Unfortunately, there are no clear-cut documents to guide us in Nigeria except in few states like Lagos and maybe Abuja
I think a master plan for Lekki has been released, I think the mainland is now zoned in Lagos and something is coming up for Ikorodu. So, before you ‘put neck’ in any property, you need to pay attention to zoning. This is just one of the many checks we do in our real estate outfit.
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