You Can Co-Own a Piece of Real Estate Today
You must have noticed that discussions about inflation seems to have emerged as the topmost economic issue in recent weeks. This is not unexpected as everyone across the globe is feeling the bite. In Nigeria , we just recorded inflation rate of 19.64% , the highest in nineteen years . The same pattern is occurring in the United Kingdom, Unite States and the entire Eurozone where inflation rates are at the highest levels in about forty years.
However, there are a number of ways we can rise above the impact of inflation on our purse. One of the investments vehicles that perform best during inflationary period is real estate. They give regular cash inflow in form of rent and also appreciate in value as prices rise generally in the economy.
The major challenge with real estate investment has always been about the huge capital outlay it requires, which puts it beyond the reach of most people. Especially in a place like Nigeria where mortgage is not available at cheap interest rates.
However, this need not be a show stopper, as we take advantage of various collective investment schemes to benefit from real estate investments. These schemes essentially work by aggregating investments by many subscribers into a common pool to make big ticket investments and share profits based on the agreed terms and conditions. Such schemes include Mutual Funds, Real Estate Co-Owner (RECO), Real Estate Investment Trust (REIT) and many more arrangements.
Talking about REITs, they are structured like shares of listed companies, whereby each investor own a slice of all the properties owned by the REIT . In Nigeria we have three REITs listed on the Nigerian Exchange , which include Union Homes REIT (UHOMREIT), UAC Property Development Company REIT (UPDREIT) and Skye Financial Services REIT (SFSREIT).
Looking at SFSREIT for instance, the current price is N77 and you can buy at anytime through your local stock trading app. They currently have properties that costed N1.82bn in the following locations:
Harold Sodipo- GRA Ikeja
Victory Park Estate -Lekki
Saphire Garden- Awoyaya
Bourdillion Court – Lekki
Milverton – Lekki
These same properties were valued at N2.285bn in 2020 by Ubosi Eleh & Co. Meaning that the value must have risen far above this level, since property prices rise with inflation. SFSREIT paid N7.25 as dividend for each unit held for the profit they made in 2021. That translates to about 9.4% yield when compared to the N77 that it will cost to buy one unit of SFSREIT.
REITS essentially distributes about 90% of their profits , therefore their unit prices usually do not rise. However, all investors get regular income from their share of profit on property sales and rent income. It also has the advantage of being liquid, since you can always sell your investment on the stock exchange in a matter of days. Unlike the long time it usually takes to sell the physical properties.
REITs are available for investment in both the Nigerian Exchange and foreign exchanges like NYSE, LSE,NASDAQ etc, which we can access through our stock trading partners like ARM and Bamboo. However all form investments often require some degree of guidance. Are you interested in property investments? join us here on WhatsApp for further discussions.