Scenerio 1 - The Starter.
A starter who is able to save from his monthly salary goes to buy a land for N800,000 for example, and he begins to feel 'wow, I am now a landlord, I can't wait to get out of this rent race, let me build my house' so he goes and start building.
Things to note:
- His income and cash flow is limited.
- Building is capital intensive,
- Within the next 3 - 5 years, this starter will likely have been able to complete his building
- Within the next 3 - 5 years, this starter will likely not buy another investment.
- After completion of building, it is likely that he will take another 1 - 2 years to recover since his cash flow is limited.
- He might end up been an unhappy man with an unhappy family because where the land is situated is in an undeveloped area.
My opinion; I do not feel that the first is to go and build. Yes he is now a landlord, but he is not happy.
Scenario 2 - The Rich
A rich man with multiple streams of income goes to buy a land for N800,000 with intentions to put up a structure. He doesn't stop at 1 plot/investment, he goes on to invest in more than 2 properties at the same price. Three years later, he sells off 3 of his acquired 5 investments (for a higher return investment of course) buys a land in the heart of Lagos and builds there.
Things to note:
- He has multiple streams of income
- Building is capital intensive
- He delayed residential: his first investment in land was not to build.
- He waited for the lands to appreciate, for him to re-sell and acquire one close to him
- Arguably, he would still put up the house he built on rent.
- He is happy: there is more cash flow channel(s).
My opinion, He understands the process of "timing" in real estate investment. He knows that real estate is a sure source of income revenue.
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