History will one day remind us of a period when N50million could get you a 400sqm plot of land in Ikoyi (in the last 2000s), probably not a single-family home or a standard land size to buy, but about that size of land.
This same history will tell of a time when you would rarely see small-unit apartments to buy in Ikoyi because the market had larger homes than apartments until 3-4 years ago.
The last recession in 2017 made investors and developers open to investing in smaller apartments since more of the demand for accommodation from home seekers/renters gradually shifted towards these smaller homes than Family-sized homes.
Apart from the fact that these homes are affordable, they also appeal to the high number of young working-class professionals who constitute a large chunk of Lagos’s population.
So it’s not surprising to find a One Bedroom Apartment selling for N50million in Ikoyi, mind you, the current average price is about N80million.
But let’s treat the main question here, which is, “how much return can you earn from a 50million One Bedroom Apartment in Ikoyi today?”
If you’re buying a One Bedroom home in Ikoyi for rental income, you’re either going to short-let the apartment or let it out to a yearly tenant.
For someone who avoids taking risks, then annual rent may be a better option because it reduces the risk of uncertainty and increases your chances of earning regular income yearly.
For instance, it currently costs an average of about N3.4million to rent a One-Bedroom Apartment in Ikoyi. What that means is that it will take you 15 years to get back (your payback period) your N50million and start earning returns (assuming rent remains the same).
On the other hand, an investor who’s open to more risk will choose the short-rental option, which may offer more income but irregular cash inflow.
The demand for short-rentals in Ikoyi has, over the years, been on the rise, and property owners have found it to be an easier way of earning quicker returns as compared to long-rental homes.
For example, while it may cost you N3.4million to rent, the average cost per day to short-let a One Bedroom apartment in Ikoyi is N45,660 today.
It also means what you would have earned in a year can be made in just 75 days. Imagine earning this same income for 150 days in a year that’s twice the average rent.
Imagine when it is 200 days in a year, already you’ve reduced your payback period from 15 years to 5years 6months and increased your rental income from N3.4million to N9.13million.
That looks like a lot, but then again, you should understand the risks involved in Short-rental properties and know your Risk-profile (either Risk-averse or Risk-seeking).
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PS: Should you be open to investing in the Lagos Real Estate Market and you need data, please shoot my email at firstname.lastname@example.org