In the dynamic and rapidly appreciating real estate market of Lagos, both off-plan and completed projects offer unique investment opportunities. Deciding which one makes more money depends on your risk tolerance, financial goals, and investment timeline.

Here’s a breakdown to help you decide:

Off-Plan Projects: High Risk, High Reward

Off-plan properties are units sold before or during construction. They are a popular investment strategy in Lagos due to their potential for high returns, primarily through capital appreciation.

How They Make Money:

  • Capital Appreciation: This is the main appeal. You buy the property at a discounted price, and as the project progresses and nears completion, its value increases. In Lagos, where property values have been surging, off-plan investors have seen significant returns. Some sources suggest that property prices in prime areas of Lagos have doubled in under three years, providing investors with a 100% return on their initial investment. The key is to buy into a project at an early stage to maximize this price difference.
  • Flexible Payments: Off-plan projects often come with flexible payment plans, allowing you to spread the cost over several months or years. This makes property ownership more accessible and reduces the need for a large lump sum upfront, freeing up capital for other investments.

Risks to Consider:

  • Completion Risk: This is the most significant risk. The developer may delay the project, fail to complete it, or even abandon it entirely. This can be due to poor financial forecasting, rising material costs, or fraudulent activities. In Nigeria, buyer deposits are not typically held in escrow accounts, which increases the financial risk to the buyer.
  • Market Fluctuations: While the Lagos market has been on a strong upward trend, a downturn could mean the property is worth less than expected upon completion.
  • Quality and Design Discrepancies: The final product might not match the initial architectural plans, 3D renderings, or promises, leading to a property that is less valuable or desirable than anticipated.

Completed Projects: Stable and Immediate Returns

Completed properties are ready for immediate occupancy or rental. While they don’t offer the same high-risk, high-reward appreciation potential as off-plan, they provide a more stable and predictable income stream.

How They Make Money:

  • Immediate Rental Income (Rental Yield): Unlike off-plan, a completed property can start generating rental income immediately. Rental yields in Lagos vary by location, but they can be substantial. For example, in prime areas like Ikoyi and Victoria Island, gross yields are around 4.5% to 6%, while emerging areas like Lekki Phase 1 and Yaba can see yields of 7% to 10%.
  • Lower Risk: Completed projects have a clear title and existing physical structure, significantly reducing the risks associated with project delays or abandonment. You can inspect the property in person before buying, which helps to verify its quality and condition.
  • Steady Appreciation: While not as explosive as the off-plan appreciation, completed properties in Lagos still experience steady capital appreciation, especially in desirable neighborhoods with strong infrastructure.

Key Considerations:

  • Higher Upfront Cost: Completed properties typically require a larger, more immediate financial commitment compared to the installment payments of off-plan.
  • Maintenance and Management: As the owner, you are responsible for immediate maintenance, repairs, and property management, which can incur additional costs and effort.

Which One Makes More Money?

In a rapidly appreciating market like Lagos, off-plan projects have the potential to make significantly more money through capital appreciation. The discount you get for buying early and the subsequent rise in value by the time of completion can lead to a very high ROI.

However, this comes with a much higher level of risk. The potential for loss is also greater if the developer fails to deliver or if market conditions change unexpectedly.

For a more conservative and consistent investment strategy, a completed property is the better choice. It provides a predictable cash flow through rental income and offers more immediate returns, albeit at a potentially slower rate of capital appreciation.

The best choice for you depends on your investment profile:

  • For the risk-taker or long-term investor with a focus on maximizing capital growth, off-plan is the way to go.
  • For the investor seeking immediate, steady cash flow and lower risk, a completed property is the more suitable option.

Regardless of your choice, conducting thorough due diligence is paramount. This includes researching the developer’s track record, verifying all legal documents, and understanding the market trends of the specific location you are interested in.

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