Andrew Carnegie, (the American billionaire) was quoted to have said: “Ninety percent of all millionaires grow their wealth by owning real estate’’. He also said “The wise young man or wage earner of today invests his money in real estate.”
FOOD FOR THOUGHT: “Considering the impact of the COVID-19 pandemic, if you were to invest today, where can you safely invest with assurance of safety?”
Experiences from the American depression and the last recession in Nigeria indicate that Real Estate Investments compared to other types of investment have proven to be more resilient and resistant to erosion of value. In the peculiar case of Nigeria, with acute exposure to currency devaluation and high interest rates, Real Estate has proven to be the best means of securing wealth and protecting capital against losses, while generating revenue through rental yield (typical break-even is over a seven-ten year period in Nigeria) or capital gains (by selling the asset otherwise called flipping).
To illustrate this point, if you had purchased a 3-Bed Bungalow at Heritage Place in the greater Lekki Area of Lagos, Nigeria in 2009 when we sold them for N9m / $90k (exchange rate N100/$1) the same 3bed bungalow is now worth N45m / $118k (exchange rate N380 /$1). If you had rented it out during that period, factoring rental yields and capital appreciation, despite devaluation and inflation, your cumulative yield would have beaten the stock market handsomely.
Similarly, if you had purchased a 4-bed semi-detached duplex at Ocean Bay, Chevron area of Lekki of Lagos in 2009, when we sold at N18m / $180k (exchange rate N100/$1; the same 4bed detached duplex is now worth N75m / $184K (exchange rate N380 /$1). Notice that the more affordable units also prove to be the more amenable to capital gains increase. This is attributable to the lower supply and higher demand.