By Mashe Umaru Gwamna
An Estate Surveyor ESV. Jasper Oleka said securing rental income from property investment is very vital in real estate.
Oleka made the disclosure yesterday in Abuja.
He explained that, an investment connotes parting with funds that could be spent immediately on a venture or activity that will generate profit on a future date.
He said “this is expected to preserve the original capital invested and increase its value. It presupposes that the venture will be able to produce return on investment profits well as return of your initial Investment,the Capital sum Invested.
“The security of an investment is inversely proportional to the yield drivable from such investment, as well as risk associated with the investment in question”.
He said, the aim is to secure the rental income and ensure that landlords are not forced to disinvest in properties due to rent defaults amidst the quantum of security it affords.
Oleka pointed out that ”It is important to note that,high security because of fixity in supply nature of real estate is the fulcrum that stimulates investments in real estate.
“The higher the security of an investment, the lower the yield and the lower the risk inherent in the said investment.”
“Management Surveying business will become more vibrant, effective, efficient and sustainable with so many participants and middle class players.
“Whereas other investments lend themselves to high liquidity, divisibility, elasticity in supply, free flow of information, multiple substitute, among others, real estate investments are characterize by huge capital outlay, immutability.
“Others are immobility, somewhat indivisible, inelasticity of supply in response to demand, paucity of transaction details, heterogeneity in terms of position/location and estate personality.
He said”There is also imperfection in terms of market operations, high susceptibility to legal issues and control of public authority, complexities associated with title documents and tenure system among others”.
He said having identified high security as one of the characteristics of real estate investment.
It is, therefore, now necessary to jettison the unrealistic and unproductive practice of advance annual rent collection, especially in connection with residential property.
“What is needed is the more realistic and pragmatic approach of tying the rent to tenant salary, to be charged from source and securing rent default insurance cover from the tenants working in a less organized sector or who are self-employed.
“At its face value, this may look like loss of fund to Landlords and Estate surveyors and Values, as well as the key practitioners in property market and other stake holders on the landlord side will be divide”.he said.
He however, he said that in the long run, its benefits outweighs whatever perceived losses those enjoying the immediate gains that appears to accrue to the beneficiaries of the current practice of annual advance rent collection that lacks long term security.
“The gains remain evasive after the first payment during the commencement of the tenancy contract. “
He also spoke on the advantages of
this approach is that,it will stabilize the property market and ensure proper planning and projection, with a steadier rental income.
“It will give landlord’s more confidence in the market and enable them plan with the fund which is already earned; unlike what obtains currently, where landlords warehouses tenants advance rent for tenants that are paying and remains in courts with recalcitrant tenants in rent defaults”.
He advised on the need to embrace a new approach that will stimulate investors and create more business, though in small sum, but with large volumes.
“This will create a business environment where every household and adult is a target; just like Coca-Cola is for everyone.”
He stated that,this proposed approach will address is corruption, which has for long bedeviled our national growth.
“This will ensure that household,tenants occupy properties within their income brackets, since their rent is tied to their salary.
“It is also important to mention here that if the approach is adopted, our courts dockets will be reduced substantially; especially in lower courts where rent issues usually find their way for adjudication.”
He said the Nigerian Institution of Estate Surveyors and Valuers (NIESV), in collaboration with Estate Surveyors and Valuers Registration Board of Nigeria(ESVARBON) and the Federal Ministry of Works and Housing,
He advised them to work together in sponsoring a bill that will ensure that rents are tied to tenants’ salary and paid from source.
“While insurance cover policy for rent defaults obtained in favor of landlords for people working in the less unorganized sectors/ self-employed.
“With that, default in rent can be made a criminal offense, with specific reference to residential properties”,Oleka said.