If you're a self-starter with a good work ethic and can truly bring out the best in other real estate agents, then i think you may be the perfect candidate to start your own real estate business!
However, there are several steps you need to take, like registering your business under CAC, creating a business plan, before you can enter this real estate business.
Here are some of the steps you need to take to be able to start real estate business in Nigeria.
Your Mission, Vision & Values For Your Business
To start up this business, and to motivate your team member, who will be working with you, you should establish a mission statement for your real estate business, defining your company’s purpose.
The vision statement has to do with the inspiration for where you see the company going in the long run.
The values and principles that you will uphold while achieving your mission and vision. These statements create guidance and clear direction for where your business is headed.
What Will Be Your Company Name
Name recognition is very important. This is not the time to be cute or funny with your office name.
When choosing your when choosing a name, for your real estate business, you must also make sure that your name is memorable and relatable to real estate.
1. Register Your Business legally
If you want people to take you serious and to trust you in this business, then you have to legalize its existence by registering the business. click on the Real estate business to register your business with Cooperate Affairs Commission CAC. The link takes you to their official website.
Also, watch out for the rules and regulations guiding professional real estate bodies in Nigeria to ensure that you are not operating against the law.
Strategies You Can Use To Start Your Real Estate Business
Joint Ventures
What is a joint venture in property development?
A joint venture involves a process whereby two or more persons form a partnership where they jointly undertake a project and see it through to completion.
By forming such a joint venture, the parties involved hope to mutually benefit and profit from the resulting transactions.
Joint ventures are not just limited to real estate but can be undertaken in various other industry verticals, where companies stand to benefit.
For example, in real estate, one party may have land but doesn’t have the technical expertise or experience to see it being developed. Hence the land owner may seek a partnership with a party that can bring in that expertise to see that property built.
Other examples of joint ventures include:
A mother with capital and a son with real estate experience: partnering together
A builder, an architect, an interior designer and a financier: collaborating
Two people with similar skills and resources: co-founding a company
Joint ventures are not always as simple as the examples highlighted above. They can get very complex with multiple parties involved, each bringing something to the table.
How real estate joint ventures work
In Nigeria, joint ventures are focused on land owners and real estate developers.
The key aspect of the joint venture model in property development is that, a land owner contributes his land towards a project, while the developer’s responsibility lies in getting approvals, actual construction and marketing.
Developing a property in Nigeria is an expensive process, so outsourcing these costs to a seasoned developer is advantageous to the land owner as the owner is able to potentially profit more than if he had sold the land undeveloped.
The money that can be expected to be returned to the land owner can come in a variety of ways and is often a combination of such.
Depending on how the deal is structured, the land owner may receive an upfront payment, a share of revenue accumulated or a share of the developed properties.
The property developer profits as they would not have had to put money down to purchase the said land for development, before eventual sale.
In essence, initial costs for the developer are significantly reduced and the building process can be quickened. Thus making it a win-win situation for all.
The basis of the partnership is formed on a mutual agreement between the land owner and the property developer to develop a plot into some form of defined real estate: apartments, houses, malls, offices etc.
Where the two parties are to share the developed properties, land owners often get between 20-50% of the built up area while the builder is entitled to the rest.
The land owner must give the developer permission to develop his lands by given them a power of attorney. Furthermore, Lawyers must be hired to acquire all the appropriate approvals from the government.
How the profits from a joint venture are calculated and shared
Factors that dictate profit sharing agreements include: land cost, location, how much of the land can actually be built on (floor area ratio), approval costs, land clearance costs, interest rates and proposed project time frames.
The bigger the plot the higher the land valuation, land with good road access together with those located on corners also means higher prices.
Construction and land clearance costs are those to be incurred by the developer. While the potential value of the properties to be developed are calculated using current market rates and trends.
With regards to the cost of approval, this includes any fees related to building permits and providing infrastructure such as water or electricity.
Further, plot owners must factor in any loss of rental income. For example, some plot owners rent out raw land to mechanic workshops.
Once all these factors are taken into consideration a calculation can be made and an appropriate profit sharing agreement can be agreed between the owner and developer.
How to find joint venture deals
The main methods of finding joint venture partners include:
- Friends or family
- Real estate professionals
- Work colleagues
- Your extended network
- Real estate listings
It is important to note that joint ventures are fundamentally built on relationships. The stronger your relationship with a prospective partner the easier it will be to strike a deal.
When it comes to real estate joint ventures, working with an estate agent is perhaps the easiest and least stressful way of finding a deal.
This is true whether you are a land owner looking for a developer or a developer looking for a land owner.
Real estate agents have the necessary expertise and contacts to broker a deal that leave both parties happy.
You have more questions? Drop them in the comment box.
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