11 DIVERSIFIED AREAS OF ESTATE MANAGEMENT DISCIPLINE: PART 2

.......continuation from Part 1 (link…. http://realestatesurveyor.blogspot.com/2013/11/11-diversified-areas-of-estate-html)

7.         REAL ESTATE INVESTMENT APPRAISAL 

Real estate investment appraisal refers to the estimation of investment worth/value to a real estate investor by determining its risk and return characteristics in relation to that investor. 

Real estate investment involves the purchase, ownership, management, rental and/or sale of various classes of real estate holdings for profit by a real estate investor. Just like other form of investments such as stocks and bonds, real estate investors must determine the value/worth of the type of properties they purchase and/or develop, so as to know how much income/profits the investment will generate in the long run.

Real Estate investment appraisal is the bedrock for different categories of income generating property investments as it helps real estate investors to evaluate investment opportunities. 

Real estate investment appraisal as an aspect of estate management discipline focuses on knowing the various investment appraisal techniques that are used in calculating and advising prospective real estate investors about the returns on their real estate investments in the short and long term. 

It focuses primarily on a combination of the income and market approaches when determining value for an investment property. 

Some of the methods/techniques used for real estate investment appraisal are:

·         Payback Period

·         Accounting Rate of Return (ARR)

·         Internal Rate of Return (IRR)

·         Profitability Index (PI)

·         Net Present Value (Discounted Cash Flow)

·         Modified Internal Rate of Return (MIRR)

·         Discounted Payback Period

·         Real Option Analysis

·         Adjusted Present Value

·         Equivalent Annuity

8.         PROPERTY AUCTION

Business Dictionary defined auction as “common name for several types of sales where the price is neither set nor arrived at by negotiation, but is discovered through the process of competitive and open bidding”

In this regard, property auction is described as the kind property sale whereby the sales price/value of the property is only determined through the process of competitive and open bidding from prospective buyers/purchasers or bidders of that particular property.

Property auction exercise don’t usually reflect the true market value of properties as it’s just a way of taking off a particular property from the market as fast as possible through a competitive process among various purchasers looking to out-bid each other. 

There are so many reasons why properties are put up for auction in Nigeria. Some of the most common ones in Nigeria are:

·         Foreclosure

·         Disposal of government properties/assets

·         Seized properties of criminals

·         Investment purpose

·         Property in distress

Some of the factors that will determine the success of a good property auction exercise are:

·         Location of property

·         Age

·         Ownership status

·         Title documents on the auctioned property

·         Property type

9.         PROPERTY DEVELOPMENT

Development is defined in Section 91 (Appendix I) of the Nigerian Urban and Regional Planning Decree No. 88 of 1992 (NURPD) as “the carrying out of any building, engineering, mining or other operations in, on or under any land; OR the making of any environmentally significant change in the use of any land or the demolition of buildings including the felling of trees and the placing of free-standing erections used for display of advertisements on the land and the expression “develop” with its grammatical variation shall be construed”

Property development as an aspect of estate management discipline involves the purchase of a tract of land as well as the direction and supervision of the development process from the conceptualization stage through to completion stage, in order to create a finished housing unit that is marketable for habitation and business purpose.

10.       REAL ESTATE LAW AND ARBITRATION

Real estate law is the name given to the branch of civil law that covers rights to possess, use and enjoy land and the permanent man-made additions attached to it. This includes the capacity to hold interest in real property, permissible interests in real property,  relations between owners, relations between owners and the community, landlord and tenant relations, the transfer of interest in real property, and real property financing including financing, deeds and mortgages. 

Real estate transactions, such as purchases, sales, and leases, are governed by a wide body of federal and state law, and the requirements established by state law often differ from state to state. (Reference: Lawyers.com)

Real estate law is a combination of different state and federal laws/statutes that regulates all real estate activities in Nigeria.

Some of the notable real estate laws/statutes in Nigeria are:

·         Land Use Act

·         Tenancy Law of Lagos state

·         Nigerian Urban and Regional Planning Decree

·         Certificate of Occupancy (Federal and State)

·         Customary Right of Occupancy (Local government)

·         Land Certificate

·         Lease Agreement

·         Deed of Conveyance

·         Rent Control Edicts

·         Estate Surveyors and Valuers (Registration, etc) Act of 1990

Arbitration on the other hand is refers to the hearing or determination of a dispute between parties by a person or persons chosen, agreed between them, or appointed by virtue of a statutory obligation. It is a formal arrangement where two or more warring parties come together to trash out their differences in a civil manner by co-operatively appointing an independent person (Arbitrator) to hear their cases.

Arbitration as an aspect of estate management discipline entails real estate professionals understand laid down principles to follow in solving all matters relating to real estate disputes in a non-judicial manner, where they are been appointed as arbitrators. 

Real estate law and arbitration are very important aspects of estate management discipline as it helps to identify all the legal implications inherent in real estate holdings from investment, sales and purchase, management, ownership, lease, to civil disputes arising from real estate ownership, tenancy and transactions.

11.       PROPERTY RATING AND TAXATION

Tax is defined as a form of money levied on the citizens and non-citizens of a country by the government.

Property rating is a form of tax that is levied mainly on built-up landed properties by local and state governments for raising additional revenues to carry out specific developmental projects. 

Property tax is the money levied on all real estate transactions by the appropriate government agencies (Local, State and Federal).

Apart from property rating, other forms of tax levied on real estate are:

·         Withholding tax

·         Capital Gains Tax

·         Estate/Probate Tax

·         Value Added Tax

·         Land Tax

·         Inheritance and Gift Tax

·         Transfer Tax (Consent fees, Stamp duty fees, Title Registration fees)

From my explanations of the various diversified aspects of estate management discipline, you will agree with me that real estate practice in Nigeria is a “Jack of all Trade, Master of All Profession”. 

This is so because all the mentioned diversified areas of estate management discipline involves the direction and supervision of an interest in land and landed properties with the sole aim of securing optimum returns which are in varying forms.

ABOUT ME

I am a Higher National Diploma (HND) holder of Estate Management from the prestigious Yaba College of Technology, Yaba, Lagos state, Nigeria. I also possess a Professional Practice Certificate in Estate Surveying and Valuation from the Nigerian Institution of Estate Surveyors and Valuers (NIESV).

I am the principal consultant of Aakient Consultants Ltd, a highly progressive and consolidated property and construction project management company, which is committed to providing the highest level of professionalism and services in meeting clients’ real estate needs.

Feel free to contact me at: aakientconsultants@gmail.com