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Home Business

Ways to start house trading business

25th May 2018
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Ways to start house trading business
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Maduka Nweke

The perception that selling one’s property is an indication that he is facing a severe economic conditions is often a misplaced assumption. This and many other reasons make some people go borrowing instead of selling their property. Oftentimes, people only sell some of their assets even to pay school fees. These days, however, it has become rampant for landlords to sell their houses to make some money.

Several things can be responsible for that. One reason could be that the man who used to be financially stable and ostentatious has suddenly become very flamboyant. This could make the man, who will most likely want to maintain his status, to sell some of his property and keep his lifestyle at least for some time.
Aside these predicaments, the fact that Nigeria just exited recession could inform some landlords would want to put out their property either for lease, rent or outright disposal. The fact again is that some people who have better land locations but lack the wherewithal to develop them may decide to sell off existing properties and use the proceeds to develop other plots.

An instance is that of Mr. Chukwuma Onyekaozuru, who has a property in Ajegunle, Apapa. He felt that his children were grown and were now independent, so the times for managing situations are over. Owing to the change of his circumstances, he decided to sell the Ajegunle property and use the proceeds to develop a parcel of land in Lekki he bought years back. According to him, “I have no need to remain in Ajegunle since all my children are grown and none still lives with me. I was managing this house so that I could finish training them. Now that they are grown, I have ample time to channel whatever I have to develop the Lekki plots.” He said if he sells the Ajegunle house for at least N45 million, he will use part of it to develop the Lekki property and use the remaining to sustain himself.

But there are other factors that can push one to give out his house for outright sale. The combination of strong tenants’ demand and a limited stock of good quality property on offer is pushing rents ever higher across most parts of the country. This is the case for both houses and flats. It is not exactly a flood of sellers but curious nonetheless, given that demand is strong, voids are short and rents are rising and we do not really know why it is so. Whether it is because there is opportunity to sell and landlords are taking it, or whether they are taking a view on the market, it is difficult to know. There could be a number of reasons but the most likely is that the small landlords who financed their buy-to-let purchases with loans of 75 per cent or more in the dog days of the market boom in 2007 are now coming up to remortgage their property and cannot find a deal that stacks up or even any deal at all.

They may now have very little equity left in the property that are not enough to qualify for a remortgage. With the possibility of further falls in house prices, they prefer to sell now even if they have lost some capital, rather than struggle on. Latest figures from the Council of Mortgage Lenders show that 65 per cent of buy-to-let mortgages are remortgages.

Some landlords could be getting ready for retirement and want to realise their investments while they still have a profit before the market falls further. Many of those who started and are making profits have now reached this point. Others could be suffering from arrears or outright defaults and are fed up with the hassle.

Another reason landlords sell their property could be to offset a loan used in establishing a business outfit. Most people who borrowed money with expectations that after the gestation period, the profits therefrom would be enough to do instalment payments until the whole amount is defrayed got disappointed by the gain tradition. But in the event of not getting what they wanted and that not being the case, they decide to sell and meet up with the agreement to run off forfeiture. Property in itself is not a trouble-free asset and demands maintenance as well as time and trouble spent on tenants. These landlords could be struggling to meet mortgage repayments if rental income is suffering a shortfall or has dried up entirely.

The latest survey from the Association of Properties Agents (PA) for the first half of last year reveals that more than four out of 10 PA members’ offices (42 per cent) said they had seen an increase in the number of tenants struggling to meet rental payments in the last six months.

According to one of the agents, Mr. Pinnacle Idogie, “the last time we saw a sell-off by landlords was the fourth quarter of 2007 before the crisis (credit crunch) began to unfold. Then one could see landlords selling with very low profits like 6.5 per cent just for the purpose of making a sale. The latest figures from similar groups show that 3.6 per cent are contemplating a sale so it is not a flood of sellers but that it seems something is wrong somewhere. This fall among the economic barometer indicates that the economy is nosediving seriously.

According to Lee Grandin, Managing Director of Landlord Mortgages, in the United States of America, several landlords saw substantial capital growth over a 10-year period and they are not seeing that anymore. Now they are not seeing much future growth and are cashing up. Others have been a bit burnt by the experience and there is a shortage of good buy to let deals.

Rapheal

Rapheal

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