Buying Rental Properties Lagos Nigeria - Free Tips For Buying Rental Property
However, for you to earn six figure income from real estate investing, you must have invested in buying rental properties that falls into one of the following categories:
1. You have bought a number of houses that generate sizable rental income the sum of which translates into a 6 figure income or even a seven or eight figure income or
But then there are also those who could have bought two or three houses during their active years but who stopped at one.
Simple answer . . . they did not understand the power of real estate investing.
Now the big question: "How do you generate the funds to invest in buying rental properties in the first case?"
There is a simple solution.
Bargain with your bank.
Buying Rental Property Again And Again By Bargaining With Your Bank
There is a key difference between buying rental property and buying land.
When you invest in rental property, you're investing in a property that can begin to generate income almost immediately without spending huge sums in construction work, especially if the house you bought is vacant at the time of purchase.
On the other hand, when you buy a land, you have to spend substantial amounts in building construction before you can get tenants to occupy the house and earn income from the rent paid by tenants.
This key difference can also be used in your favour when seeking home mortgage from commercial banks.
By demonstrating to your account officer how the property you wish to buy will pay for itself or almost pay for itself via the rent paid by tenants.
How will this work?
Let's take a case study.
Bargaining With Your Bank - A Case Study
Suppose Adamu is interested in buying rental property at Omole phase 1 estate in the Ojodu area of Lagos Nigeria.
The property price is 50 million Naira and it is an apartment building consisting of four units of 3 bedroom flats. The rent price per flat is 800,000 Naira per annum. Therefore the expected revenue is 3.2 million Naira per annum.
The agency commission and legal fee is each 10 percent of the sale value. So, the total cost of the purchase is 55 million Naira.
Adamu's bank requires a 30 percent equity contribution from him as part of the pre-requisite for obtaining the home mortgage. This means Adamu will pay 15 million Naira to the bank as his equity contribution. In return, the bank will give him a loan of 50 million Naira.
The principal to be paid back to the bank will be 35 million Naira plus the interest spread over 10 years . . . the life of the housing loan.
Since the house was vacant, Adamu estimated that it would take about 3 months to get tenants for the house. In addition, since the tenants were new, they were required to pay two years rent up-front. This amounted to 6.4 million Naira.
He bargained with the bank to let him offset part of the loan with this first rent from the house. The bank agreed.
Consequently, his monthly repayment amount was substantially reduced by his up front payment . . . the 6.4 million Naira rent generated by the apartment building.
The strategy looked promising.
More money was coming.
The tenants were to pay 10 percent of two years rent as agency commission and another 10 percent as attorney fees for the landlord tenant agreement (the lease agreement).
However, Adamu negotiated with his real estate attorney to accept 5 percent for the lease agreement since he was the same attorney that worked on the purchase documents and got a nice attorney fee of 5 percent of 50 million Naira (2.5 million Naira).
Adamu's attorney agreed.
Consequently, Adamu got another 320,000 Naira from the deal with his attorney. This he paid again to the bank.
Adamu was passionate about paying off the bank mortgage and securing another mortgage facility to buy another house.
Therefore, he channeled every rent that came from the house into paying off the loan year after year even after the first payment of 6.4 million and the additional 320,000 Naira.
While Adamu's friends were still wondering how to buy a house, Adamu was through paying off the mortgage on the house and gearing up for another mortgage to be again invested in buying rental properties.
Since Adamu was dedicated to paying off his mortgages, getting a second mortgage was less stressful. And paying it off was even more fun as the payment amount was now being generated by two houses.
Partner With Your Bank
Whether you're an average guy, a medium income earner, or a high income earner, take advantage of bank loans to invest in buying rental properties in abundance.
Yes, don't be satisfied with just buying one rental property.
Build a good relationship with your bank and secure housing loans to invest in buying rental property.
The advantage of this is that the rent from the property will provide part of the funds needed to pay back the loan. And therefore, you will have less burden paying it back.
In the process, you're securing your retirement . . . your future.
Share Your Experience. Share Tips For Buying Rental Properties.
Know something about buying rental properties in Lagos Nigeria or anywhere in Nigeria?