Why due diligence is a must for first time home buyers, investors

In the real estate business, due diligence is like oil in an engine and, for first-time property buyers and investors, it is as important in transactions as the property itself, according to experts.

The experts explain that due diligence, which means investigating facts about the physical and financial condition of a property and the area the property is located, is a good route to finding out inherent opportunities and challenges associated with a real estate asset.

Gbenga Olaniyan, Principal Partner at Estate Links Limited, explained recently that inability to carry out due diligence on the property put up for sale has put many first time buyers and investors through ugly experiences and challenges

Olaniyan, who was a keynote speaker at the ‘Blue Print 2022 Conference’ hosted by Relive Housing in Lagos, explained that the lack of due diligence on a property before buying has made many buyers and investors lose their investments.

“We have seen the demolition of buildings after investing huge amount of money and that usually comes before finding out that properties given out for sale bear another name; it could be also for one getting involved in a building with a dispute, leading to huge expenses on legal cost in the processes,” he noted.

He noted that all these problems follow buyers’ inability to ensure due diligence at the transaction level, advising that first property buyers and investors should always do their due diligence before getting involved in any real estate transaction.

“Critical and extremely important, everyone must just do their due diligence on property transactions because a deal is as good as the personality behind it ,” he said, advising further that investors should always go to lawyers who are experts in land titling.

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On her part, as a matter of business principle, Chukwunonso Onny-Eze from Assist-2-Sell Properties Limited doesn’t sell a property that she didn’t search on.

This, according to her, is because “I have seen developers who have printed brochures, rushed to the market but the companies do not yet exist. When I went back to them, they said they existed and were registered, but when I got back to them after doing availability search, the reverse was the case.”

Onny-Eze, who is a lawyer with many years working experience, added, “I search the developers at all cost; I don’t just search you at Companies and Allied Commission (CAC), I also pay N5000 and run a search on you at the credit bureau to make sure you are not fake.”

Besides due diligence, another major challenge for first-time homebuyers is affordability which these experts at the conference with the theme, ‘Unlocking Wealth: Tapping into Real Estate in Africa’, noted has everything to do with finance.

Tunde Balogun, CEO, Rent Small Small, noted that the cost of land would continue to be a major factor, adding that the only way to help that was to be creative, citing Lekki Phase1, a highbrow neighbourhood in Lagos where 1000sqm of land is used for building only one house.

In this neighbourhood too, a single-family rents a mansion and so makes it difficult for an individual to afford a 5-bedroom apartment, yet this is a place where many people want to live in order to be close to their workplace.

“How we use space as is the case in Lekki Phase1 and similar places, creates affordability issues,” he said, encouraging buyers to start aiming and buying from the little till they get to the bigger. “This is the reason behind the name of our company— ‘Rent Small Small’.

To deal with the financial challenges, Balogun advised first-timers to go into what he called ‘Co-Ownership’ which involves owning properties as a group in order to reduce individual burden.

“Mortgage penetration in Nigeria is still less than 1 percent, making it one of the lowest in Africa. So, another way we can go about owning homes is co-ownership. When you start co-investing with people, by the time you realize it, you have had 5 property investments. When you sell your shares in them, it will be something to start with in real estate investment,” he observed.