A strong ROI on a commercial property investment is the hallmark of that real estate investment it took you years to build. This article talks about ‘how a real estate investor can achieve a strong ROI on a commercial property investment.
In as much as there is an avalanche of residential property investors in Nigeria compared to their commercial property counterparts, it doesn’t change the fact that the latter is a goldmine that can make you and your generations unborn rich till the end of time.
Return On Investment (ROI) takes the front burner when investment decision are to be made. In fact it is the main driver of a commercial property investors’ investment decision.
Therefore, it is highly consequential that a commercial property owner is able to identify and attain a strong ROI on a commercial property.
Attaining a strong ROI on a commercial property doesn’t happen by traveling on a wizard’s broom stick, it takes a smart and proactive real estate investor who has foresight. Someone who can identify opportunities miles away, does due diligence even when all is fine and dandy and above all a risk-taker. With the economic recession in Nigeria taking full toll on the citizenry, commercial property investors are more concerned about security and capital preservation
So, is it possible you eat your cake and have it in this present times?
Though it’s important for a commercial property investor to tick every appropriate box in relation to commercial investment strength – from location to yield and tenant and lease terms, if return alone is your focus, you may need to think outside the box.
“In many respects, return on investment is a barometer of risk – the greater the risk, the greater the return required.”
Less than perfect can be… perfect
For many commercial property investors, a high profile tenant on a long-term lease with terms that are favourable to the investor and possibly fixed yearly rental increase, is the ultimate deal. It even becomes perfect when the tenant has no knack for trouble.
Look beyond your own backyard
It is common knowledge that commercial properties in major urban cities tend to come with a higher price tag, albeit that doesn’t mean that strong returns can’t be achieved in places like Osogbo, Ife, Ikare, Umuahia, Ughelli, Auchi, Abakaliki, Jalingo, or even Damaturu.
Regardless, it will be difficult for the aforementioned places to rub shoulders with the likes of Abuja, Ibadan, Kano, Benin, Aba, Port Harcourt, Enugu, Calabar, uyo and Lagos. Commercial property in these places are more likely to achieve a stronger Return On Investment (ROI)
That notwithstanding, it’s still all about doing your homework and understanding the market you’re buying into. So, for a commercial property investor who migrates from Ughelli to Port Harcourt to achieve or attain a strong ROI, it is really not enough or a guarantee. You can be in Ughelli and get stronger Returns On Investment than the investor in Port Harcourt.
Invariably, location is entirely not the yardstick. It all still boils down to identifying and utilizing the opportunities available to you, doing your due diligence and taking risks when you can without looking back.
Consider your choice of asset
Different types of commercial properties fall in and out of favour with the market. Having the courage to go against the grain can generate significant returns for the cool-headed commercial investor.
In recent times, property investors have been turning their searchlights on childcare or day care centres. The number of day care centres in the country have been on the increase especially in Lagos and Abuja, yet a few years ago, many persons did not give a hoot about such. Same goes with the high demand for filling stations.
“If you can spot an asset class that others are not so keen on, but which has the potential to perform strongly, you can achieve above-average returns. Obviously, there is a degree of risk in this type of approach, but if it pays off, the rewards are there.”
Extended vacancy is a sure-fire road to cash flow depletion, reduced (or negated) ROI and capital erosion – not to mention sleepless nights. You have a better chance of avoiding vacancy if your comparative market analysis is top notch.
The manner of tenants you admit into your commercial property too is crucial. It is advisable you adopt a method that ensures you admit high quality tenants to your property. If you can’t effectively carry out such task, you can employ the services of a property manager.