Real Estate Investment in Nigeria: Nigerians in the Diaspora, Nostalgia and the Dilemma of Trust: One Way Forward!

“Odo to ba gbagbe orisun re ma gbe” Yoruba Proverb

The meaning of the above saying is that a river that “forgets” its source is bound to dry up. For a large percentage of Nigerians in the diaspora, although they are physically abroad, they are yet to find a practical and effective way to untie or cut their metaphorical umbilical cord from Nigeria. This fact is majorly true irrespective of how long a Nigerian might have lived and worked abroad. They are unable to forget home or their source. “The Naija blood and water strong abeg” So why do Nigerians leave Nigeria in the first place?

Why Do Nigerians Leave? A Rhetorical Question

“Chọọ ewu ojii ka chi dị” Igbo Proverb

Unemployment; insecurity; lost hope or hopelessness; massive infrastructural deficit, systemic and systematic murder of dreams, goals and ambitions; incorrigible and extensive corruption; fear of avoidable sickness and death; depression; search for greener pasture; escape from suburbia or suburban life; money; education; escape from poverty; anger and frustration; etc. The list is endless. There is always a reason to escape from the danger of poverty, lack, deprivation and death from the constant struggle to just survive each and every day in Nigeria! This is how the majority of Nigerians who have fled, are fleeing or attempting to flee Nigeria currently feel about Nigeria. They escape Nigeria to make hay while the sun shines as the above Igbo proverb captures it.

The Challenge of Forgetting Home and Moving On

“There is no place like home” English Saying.

Despite the bleakness of the above scenario, which often is the justification for emigrating from Nigeria, it has been discovered that a majority of Nigerians that have escaped from the above “reality” to a better place are not totally disconnected from mother land. The spirit of love for the motherland seems to have possessed these ones and there is no effective exorcism for it yet. This may not be unconnected with the fact that their nuclear or extended family members or friends or special persons are still within the so called “evil system”.

Another major factor for not forgetting home in a hurry is racism. Often, Nigerians in the diaspora are treated with disdain and are also subject to systematic or systemic 2nd class citizen treatment by the citizens of those foreign countries they have escaped to. This inevitably leads to the deep longing for home where there is unbridled freedom from any sort of racism.

Also present as a factor is the fact that despite all of the negatives in Nigeria, some die hard Nigerians, quite a number, still manage to somehow achieve astounding success in Nigeria. Nigeria is the land of dreams where you can move across many social strata, from the lowest rung to the highest level within more or less a decade. Diasporans are somehow worried that they may miss out on the probability of making a profitable kill too. Although they are not here physically, they want to have something physical here. Something real like a house or a land or some form of real estate.

One other major reason which makes it a bit hard for diasporans to easily forget home is rooted in the Yoruba proverb “Ile la bo simi oko” meaning a farmer always comes back home to rest. This is the case, irrespective of how far away from home the farm is or how profitable the farming venture is, a farmer always comes home to rest. This is also the case with quite a number of diasporans. Even if they do not come home physically to rest, they always want to have a home in Nigeria, whether as investment or a place to stay anytime they visit Naija.

This brings us directly to the next point, which is the acquisition of real estate units in Nigeria by diasporans and the challenges encountered in the process.

Real Estate Investment, Nostalgia and the Dilemma of Trust

“Caught between a rock and a hard place” American Saying

When a diasporan wants to invest in real estate, the first point of call usually is to ask a known person, usually a family member or a trusted friend or a property agent or a relative (used together as relative(s) in this write-up) to help search for a suitable property, land or house, to buy. When their relatives have done a search and found a suitable option, they inform the diasporan who then asks for a video or pictures of the place. After the pictures and videos have been sent the relative then proceed to close the purchase transaction. The diasporan sends money to the relative(s) or the seller of the property and all transfer documentation are sorted out by the relative(s). Using this method, many diasporans have suffered not a few heartbreaks. The relatives, in some cases would have used the money meant to buy the property supposedly paid to the seller, often arranged between the “seller” and the relative, to attend to some personal expenses. This is even easier for the relative where the diasporan trusts the relative to do the right thing and did not carry out any checks at all on the supposed purchase. The purchase money transferred to the relative is conveniently applied to other purposes by the relative. The conversion of the purchase money ranges from outrightly not buying or building any property to buying or building a smaller or sometimes unsuitable property different from what is expected by the diasporan. In this case, the relative has abused or raped the trust of the diasporan in them.

Another popular method through which a diasporan buys land or houses in Nigeria is by searching extensively online for suitable option. Still depending on a relative to go and check the physical property and get pictures and videos. The Diasporan may deal directly with the seller or have their lawyer do the transaction on their behalf. When this second method is used, the risk is lesser because a third neutral party, a lawyer is involved. To enhance a positive outcome from this second method, the lawyer, ideally, should not be involved in sourcing the property. The lawyer should be invited only to do due diligence and confirm the title status of the property and the authenticity of the transaction. This limitation on the role of the lawyer will reduce the likelihood of conflict on the part of the lawyer. The reason is that, as experience has shown, once a lawyer leaves the realms of due diligence and begin to advice on the suitability for purpose, the lawyer may be conflicted. Once conflict is allowed to creep in, the lawyer falls into the same position as the relatives. Not a good idea. However, if conflict is not permitted to creep in, a lawyer as an additional gate keeper in terms of title check and transactional closure increases the integrity of the transaction.

The third common and the most reliable method used by a diasporan to acquire a real estate asset in Nigeria is to physically visit Nigeria, visit the exact property and meet the seller for physical due diligence, and thereafter employ the services of a lawyer to carry out legal due diligence, and thereafter proceed to closure. This is the best and most effective method because the diasporan puts himself in the same shoes as a Nigerian resident in Nigeria engaging in a property purchase transaction.

However, this third method is the hardest to implement as it involves suspending everything including the jobs or businesses that the diasporan may be doing in the diaspora to travel to Nigeria for the due diligence and closure of a property transaction. It is the most inefficient but the most effective method. It is very inconvenient and where a diasporan is left with no alternative than to use the method, the diasporan holds back on closing and misses out on great property deals, which, on its own, is a lesser evil than missing out or losing the capital or funds intended to be used to purchase the property.

This brings us to the next point. How is the risk of buying property without being on ground physically to be effectively managed while closing out on fantastic deals?

How to Manage Risk: The Way Forward

“Ona kan o woja” Yoruba Proverb

This literally means that a physical market place would often have more than one access point. How this applies is that there are a number of ways a diasporan can solve the problem of trust and the consequential dilemma when acquiring real estate in Nigeria.

The first step is to ascertain the identity of the exact owner/seller of the property and the fact that he truly wants to sell the property. Verification of the exact identity of the owner/seller  and the fact that the property is up for sale is usually and better done through a lawyer with experience in real estate due diligence. Not all lawyers have the required experience to do this successfully. Rookie or inexperienced lawyers sometimes end up being a hindrance to the transaction rather than a solution due to their lack of required experience and exposure needed for property transactions and due diligence. It is also important to verify the actual price that the seller wants to sell.  There is always the asking price and the net price. Generally properties are advertised at the asking price. It is only upon negotiation with the seller that the net price is determined. However in some cases, properties are advertised at their net prices and there is no flexibility whatsoever.

The second step is to reduce the number of intermediaries between the owner/seller of the property and the diasporan who wants to buy it. The key here is to establish as quickly as possible a direct communication line between the verified seller of the property and the diasporan interested in buying it.  The more the number of relatives/agents/lawyers between the diasporan and the seller, the more complicated the transaction becomes and the more difficult it is to conclude. Complications lead to loop holes and crevices through which conflicts and fraud sometimes creep in.

The third step to reduce the incidences of “stories that touch the heart” is to ensure that all documentation concerning the sales of the property are prepared by an experienced lawyer in the name of the diasporan or the name of the entity or person they are purchasing the property for. Documents reflecting the buyer’s name is easily established where and when needed than documents bearing the name of somebody buying on behalf of the real buyer.

After the identity of the actual owner/seller has been confirmed and all necessary transfer documentation prepared, ready for execution, contemporaneous with the execution of the transfer documents, if possible, the diasporan should also pay directly, if possible, to the account of the seller through either a bank draft or cheque raised in the name of the owner/seller so that the receipt thereof could be acknowledged by the seller.

The apparent next step is to take possession of the property, and begin to exercise rights of ownership on same. Because the diasporan is often not on ground, this stage of the transaction is often done through relatives.

Of course, after necessary documents have been signed and payment made directly to the seller, and possession has been delivered, the diasporan should perfect their title. What does this mean? It means they should register their title with the State authority or land registry in charge of the registration of title so that any person who needs information on who the current owner of the property is, can verify from the land registry that the diasporan owns the property.

The above steps could contribute greatly to giving the diasporan a measure of increased comfort that the purchase of either land or house is genuine and authentic.

The steps highlighted above are not necessarily 100% foolproof and is not the only way to guarantee authenticity and certainty in the genuineness of the property purchase transaction. There are other methods that are equally reliable once they can be verified.

However, after a diasporan acquires a real estate asset, if not well managed, it could actually end up becoming a liability. How? If it is a rental asset, it may not be capable of generating enough cash flow to cover the expenses incurred in running it and returning the anticipated returns on investment, if not well managed. Usually, a rental asset generates between 5% to 10% of the capital used to acquire it. At this rate, if the rental asset is a premium asset in a fantastic location, and generates about 10% of its acquisition cost, and the annual cost of running and maintaining it is 3% of its acquisition cost, the net returns is about 7% per annum. If it is not a premium asset, it probably generates between 3% and 6% of its acquisition cost per annum. If it costs about 3% of the same cost to maintain it per annum, the net return is just about 3% per annum. This is a very poor return on investment. The above estimates assumes full occupancy rate of the rental asset. Where risk factors such as low occupancy rate and rental defaults are factored in, the rates are even worse.

How is this problem solved? This brings us to the solutions proposed by Digital Nanos Limited. The various solutions are briefly discussed below.

The DNL Solutions: Profitable, Trustworthy, Reliable and Dependable

“Follow person wey sabi road” Naija Saying

Digital Nanos Limited (DNL) is a property developer and investor based in Lagos State Nigeria and currently focuses on the development and sales of premium but affordable real estate assets in Lagos State. Of course, the goal is to extend to other States in Nigeria and other countries in Africa.

How is DNL relevant to the acquisition of genuine and authentic properties by diasporans? The answer is simple. DNL can do the following to partner with diasporans to grow their real estate assets and investments in Nigeria in the following ways:

1. Partnership and Target Asset Growth:

This is one of the most profitable ways through which a Nigerian in the diaspora can invest in real assets in Nigeria. When a diasporan reaches out to DNL directly and expresses interest to partner with DNL to develop and sell properties, he has made the best real estate investment decision. DNL can generate for the diasporan, a guaranteed return on investment per annum on real estate development and sale. This is particularly well suited for diasporans who are interested in growing the value of their real estate assets in Nigeria, especially in Lagos. How does this work? We are constantly looking to develop and will be developing properties for sale in different prime locations in Lagos. As a partner with a definite capital sum to inject into our projects, you can set a specific rate of return annually and a definite exit date for the specific sum. We will work out a schedule that works with our projects lifecycles that could generate the expected return and then diligently execute the schedule. For example, rather than have your N50m lying idle in a bank or in some unproductive real estate assets, you could set a target of N100m in 5 years. This is equivalent to returning 20% every year on the initial principal invested. Comparing it with FGN bond, at its best, you only could get about 17% per annum. It is currently about 9% per annum. If you partner with DNL instead, you do not have to do anything after injecting the initial capital, and yet you will earn more than double the rate of FGN bond when you partner with us and inject your fund into our projects. Talk to us today and let’s get this started.

2. Acquisition of Authentic Units in DNL’s Development.

If partnering with us to jointly develop properties is not your thing, then you can buy units in our developments as an investor. As an investor, it is ideal that you buy units in our project at the earliest stage of the project when we discount the price of the unit up to 50% or more. This is when we first advertise new projects at off-plan stage. We will be selling our project on off-plan basis but at gradually incrementing prices until it is fully delivered. The earlier you get in, the better, but anytime you get in at our off-plan stage or even after completion, is better than missing out entirely on any of our projects. Read more here on what buying an off-plan project entails and why buying our project at off-plan could be the most profitable investment in real estate as a diasporan. Reach out to us here and learn more about our off-plan projects.

3. Advisories and Designs on Suitable and Sustainable Developments

Do you want to get your feet wet in the design and construction of suitable and sustainable real estate projects? We are your best point of call. We are a one-stop-shop for everything real estate development. From concept to full delivery, we have in-depth experience and expertise that would help you to effectively, profitable and safely navigate the risky terrain of real estate development and construction. Using our services could be the single most important decision you will make and your surest and assured way to a desired outcome and a profitable real estate investment in Nigeria.

4. Development and Construction of Real Estate Assets

So you have that project in mind already. You have all your drawings (architectural, structural, mechanical and electrical) in place and you are wondering what the next step could be. Worry no more. Reach out to us, let’s bring your drawings to life in a cost effective manner while delivering a durable and solid construction that would weather the storms and stand the test of time.

Read more about our real estate services here.

It needs not matter that you are in the diaspora when you do real estate with us. We are trustworthy, reliable, and dependable. Your real estate business or partnership with us will always be profitable. Reach out to us today and let us talk about how you can effectively tap into the real estate market in Nigeria.

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