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Investment
Analysis

If you’re new to the world of real estate investment, the idea of choosing your own real estate investment plan and investing your hard-earned money can be quite daunting.Before you even start to research the different products and underlying funds, you need to ask yourself a few questions.

1. What is your goal and when would you need the money again?
2. Are you a taxpayer and could benefit from choosing a tax-free product?
3. How much price volatility are you comfortable with?
With these factors in mind, you can now start weighing up your options and plotting your real estate investment journey.

How to choose a real estate investment product that is right for you?

Every person has their own unique dreams. In order to choose a real estate product that suits your needs, it is very important to identify your financial goal.

What To Consider When Choosing A Real Estate Investment Plan?

Choosing a real investment product is already halfway through the process. Every product has its different goals and needs, it’s important for some introspection to determine what type of investor you are.

1. What is the tenor of your investment?
2. Are you investing towards a short term or long term goal?

target market: (nigeria’s middle class)

The middle class accounts for about 23% of Nigeria’s population, according to National Bureau of Statistics (NIS) and corroborated by the African Development Bank (AFDB) data, with the majority living in urban centers, particularly Lagos, which is estimated to be about 35million people. This segment of the population is responsible for a huge proportion of the increased spending on consumer goods, therefore improving the state of the economy. These 50million people are far more important than a few billionaires in our midst.

Africa’s fastest growing middle class is the Nigeria middle class. Sectors like banking, telecommunication and service industry have grown more than it used to be, all thanks to the empowerment of the middle class.

It has been projected by the USA that by the year 2050, the Nigerian middle class would have overtaken the West African country, as far as becoming a global economic power and population. In line with the above, the consumer banking arms of banks are now helping their clients (Investors/Middle class) to navigate to other sectors that would yield optimum return on investment.

A typical middle class investor would look at the portfolio from a risk and return perspective, to ensure that they are generating the highest yields possible. Hence the motivation/drive of Beyond Building Investment Limited.

comparative analysis with other investment options

Capital Market – Equities

 Major concerns on investing in equities include:

1.     You could lose your entire investment: If a company does poorly, investors will sell, sending the stock price plummeting.

 

2.     Stockholders are paid last if the company goes broke.

 

3.     It requires a lot of time:  You have got to research each and every company, to determine how profitable you think it will be before you buy stock. You have got to learn how to read financial statements and annual reports, and follow your company’s developments in the news. You have also got to monitor the stock market itself, as even the best company’s price will fall in a market correction, a market crash or bear market.

  1. It can be an emotional rollercoaster: Stock prices rise and fall every second. Individuals have the tendency to buy high, out of greed, and sell low, out of fear.

 

  1. You compete against professionals: Institutional investors and traders have more time and knowledge to invest. Find out how to gain an advantage as an individual investor.

A very ambitious review of the earnings of stockholders with portfolio of choice equities using the total share index approach shows an average earning of a maximum of 15% across the basket of equities held.

treasury bills

Treasury bills (T-bills) are short-term (usually less than one year, typically three months) maturity promissory note, issued by a national (Federal) government as a primary instrument for raising funds (mostly for recurrent expenditure) and regulating money supply.

T-bills however also have the following Demerits

  1. Low returns – In normal economic situations, T-bills typically attract low returns. Except in abnormal situations where a government is economically stressed or macro-economic fundamentals are in disarray.
  2. Limited access
  3. Reinvestment risk.

In the last three months, T-bills rate has been experiencing a downward movement and currently average 11%.

fixed deposits

Fixed deposit rates fluctuate with the movements of key macro-economic indices. Some drawbacks with fixed deposits include; it is taxable and penal charges will be applied if required by the owner before the agreed maturity date. The health and strength of the bank in which the deposit is fixed plays a huge role in the safety of the investment.

Currently, amongst the commercial banks, fixed deposits below N10million attract a maximum of N6% per annum whereas fixed deposits above N10million but below N50million attract a maximum of 8-9% p.a.

why investing in a real estate portfolio is your best investment option:

synopsis of the industry

Since 2000, the real estate sector has grown rapidly, at an average growth rate of 11.4% between 2010 and 2015. The real estate and construction sector contributed 3.9% of real GDP in 2015, employed nearly 1 million formal workers and has been one of the fastest growing sectors of the Nigerian economy.

Following negative growth in 2016, owing to the economic recession the country went through, the sector is forecast to grow at an average rate of 5.39% between 2017- 2020, with the support of private and public investment. In 2017, we anticipate a modest recovery from the sector’s decline in 2016.

Nigeria’s population, currently over 180 million and growing at an average annual rate of 3%, remains a major driver of growth for the real estate industry. Other major growth drivers are rising urbanization, a growing middle class, increasing investment from local participants, including Pension funds and Mutual funds; the growing number of High Net Worth Individuals (HNWIs) investing in real estate, and targeted intervention by the Federal Government in the housing finance sector.

One of the secrets of the most successful Real Estate Investment is to buy land on the fringe of development, at an Incredibly low price and exercise a little patience for capital appreciation as a reason of the development.

Increased foreign and domestic investment is another significant driver of growth for the real estate industry. In the long term, we expect the industry to experience an increasing entry of foreign developers, investors, service firms and increased joint venture. As a matter of fact, there would also be a 100% guaranteed capital gain by 2019 as the below listed development would have been concluded:

Dangote Refinery and Petrochemical industry, Lekki Free Trade Zone, Lekki Deep Seaport, Dangote Fertilizer Plant, International (Cargo) Airport, Lekki International Golf Course, Eleganza Industries, Coscharis Headquarters, New Computer Village and many more.

Why You Should Invest in Africa?

Africa is a large and diverse continent: It comprises 54 countries, 49 of which constitute Sub-Saharan Africa.

Africa’s growth rates are expected to remain high: It is one of the fastest growing regions in the world, with GDP growth estimated to be > 4% in 2016 and average net FDI inflows amounting to $40B per annum over the last 5 years. It had 4 of the world’s 10 fastest growing economies. In 2015, It is expected to have 9 of the top 10 fastest growing economies to 2024.

Africa is experiencing accelerating urbanization: It has a population of 1.2 billion people, approximately 80% of which reside in SSA3. The region currently has only 2 megacities (Lagos and Kinshasa) Its urban population is expected to grow to 1.26b by 2050.

  • Africans are embracing technology: For the past five years, SSA has been the world’s fastest-growing mobile Market with Subscriber growth rates > X2 the global average, enabling mobile online platforms and marketplaces.
  • Africa’s consumer expenditure is expanding rapidly: 53% of income earners in Africa are between 16 and 34 years old. Household consumption is expected to grow at 3.8% a year to total US$2.1 trillion by 2025.
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