Why residential housing estate thrives better than commercial property

Why residential housing estate thrives better than commercial property

31st January 2020

in Business

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Why residential housing estate thrives better than commercial property

Maduka Nweke, manweke@gmail.com

Most Nigerians lack where to put their heads at the end of each day’s work. This lack of shelter is what professionals call housing deficits. Housing deficit has lived with Nigerians right from time immemorial and because one will first get where to lay his head, the type of real estate that goes for commercial are less lucrative compared to the ones that go for residential.

Those who go for residential real estate always target family homes where he and his family will first of all lay their heads. The style of the homes are unique because they are usually where one will keep his head after the day’s job. Commercial real estate is business-focused, meaning that the owner of the property uses the property for a specific business objective. The owner expects to make a certain return on the investment. Residential property is for non-business use, most often to provide a home for individuals and families to live in.

A residential housing estate is a group of homes and other buildings built together as a single development. The exact form may vary from country to country. Accordingly, a housing estate is usually built by a single contractor, with only a few styles of house or building design, so they tend to be uniform in appearance.

The desire for adequate and affordable housing also has strong links to the need for security, safety and proper socio – economic status of individuals and communities. In spite of this widely acknowledged importance of housing and various efforts in making adequate and affordable housing available to majority of people, a large proportion of urban residents in less developed countries do not have access to decent housing at affordable cost.

Most people take out a mortgage in order to purchase property. However, residential and commercial mortgages have significant differences. In order to take out a residential mortgage, the mortgage usually cannot exceed 45 per cent of your gross income.

However, for loans that are commercial, the lender may consider the business’s ability to make money in determining how much the borrower can borrow. Residential loans have negotiable down payments, whereas commercial loans normally require at least a 20 per cent down payment. Terms for residential loans are also usually longer, between 30 to 50 years, whereas commercial loans tend to be around 10 years. Finally, residential loans do not usually charge penalties for paying off the loan early, whereas commercial loans do. If you are considering purchasing residential real estate, you might speak with a local real estate who can answer all of your questions.

It involves property that is sold, leased, or used to achieve a predetermined business objective. It’s used as an investment to achieve an anticipated rate of return on the funds invested. Residential real estate revolves around the wants and needs of a homeowner and his family. It involves property purchased for individual use, most often to provide housing for families.

The selling process for commercial real estate hinges on numbers and return-on-investment calculations. Residential real estate is nowhere near so cut-and-dried because it’s more of an emotional purchase. Many buyers make decisions based on the fact that the house just feels right to them. The key factor is the return on investment. Selling secondary homes to people seeking a “home-away-from-home” to get away from it all. The second home market is one of the fastest-growing segments of the residential real estate arena. More than 21 percent of the sales in 2004 were second home purchases for use by the purchaser or for investment purposes.

Working exclusively for a builder of new homes, usually by serving as the on-site salesperson for a new home community. In this role, the agent sells only the builder’s homes. If buyers need to sell an existing home outside of that community, usually another agent handles that sale. Representing residential real estate investors who are looking to increase wealth through the ownership of homes, duplexes, triplexes, and fourplexes. Small-scale multiplexes are handled by residential rather than commercial agents for the following two reasons: Often the purchaser lives in one segment of the multiplex, creating a residence as well as an investment property. Usually a purchaser can buy up to a fourplex with a conventional mortgage. Residential agents rarely represent buyers or sellers of multiplexes with more than four dwelling units. Purchasers of larger complexes must qualify for and secure commercial real estate loans — which involve a more restrictive set of conditions, including higher interest rates, shorter amortization schedules, and considerably higher initial equity positions or down payments.

In commercial real estate, you can buy, sell, lease as a lessor (the person who owns the property for lease), lease as a lessee (the person who’s trying to lease the property for their use), syndicate, joint venture, develop, option, and invest in a wide range of commercial real estate categories, including retail, office, industrial, apartments, investments, and raw-land leasing. Representing tenants or lessees by finding, selecting, and negotiating new space for client businesses.

Representing building owners or lessors by working to lease out building space for the highest possible price and with the most favorable terms. Frequently a commercial agent represents one owner or even one building exclusively in order to ensure the building is leased to capacity. Representing investors who want to buy and sell commercial property by finding opportunities that offer the lowest risk to the client, the best return on investment, and the best capitalization rate, which is the net operating income of the property divided by the sales price or value of the property.

Few residential estates built across Nigeria by both federal and state government has been able to meet the housing needs of many Nigerians. Shelter is a basic necessities, an esteemed need of man. It used to be ranked second after food in the hierarchy of man’s needs but an expert posited in 2009 that it is the first and most important of all rights.

The expert noted that because of the importance attached to provision of housing and coupled with the fact that a proper housing unit in all its ramifications is more than mere blocks of buildings since it embraces all social services and utilities that go to make a community or neighbourhood a livable environment, it is now a right.

Though inadequate, but the federal government of Nigeria and various corporate organizations have invested in the building residential estate for the purpose of profit making and meeting the housing needs of Nigerians. Even though this provision is not actionable, it reinforces the call for government at all levels to invest in massive housing provision in Nigeria and this study is however examining the role of Akwa Ibom State Government in the development of residential estates in the state.

Source : https://www.sunnewsonline.com/why-residential-housing-estate-thrives-better-than-commercial-property/