Oftentimes, some clients tend to complain about charges that come with properties that are selling in a serviced Estate.
In this post, I have written an in-depth article on what you need to know about Serviced Estate / Service Apartments and the pons & cons that come with it.
Note: When the word “Service Estate” is been used it refers to the entire estate services. On the other hand, when the word “Service Apartment” is used it refers to a service of a single flat/ apartment.
About serviced Estate/Apartment
When you hear or see a property being marketed as a fully serviced estate or service apartment it simply means that there is a high maintenance service on the property which attracts compulsory charges (services charges).
These maintenance services include Street light, 24hrs security, 24hrs water supply, cleaning of the estate, 24hrs electricity, waste bin, etc.
A fully serviced estate often has a central treatment plant that supplies water to all the houses in the estate as well as the central generator that powers the entire estate when there is no electricity.
This simply means that all the estate utilities are been controlled on a central unit.
Service Charges in an Estate Properties
In every serviced estate there are mandated amount each block of flat/apartment or a unit of terrace as the case may be is expected to pay annually or quarterly for the maintenance and upkeep of the estate.
In other to keep the estate in good condition.
The cost/amount is considered based on the size of the house. For example, there is an annual mandated fee for 2 bedrooms, there is also an annual compulsory fee for 3 bedrooms, which are of cause at a different.
The issue with these service charges is that the amount is not stable. Especially with the high increment of diesel and petrol in Nigeria recently.
In the last 2 years, the serviced charge in several estates in Nigeria has tripled, and this tends to worry a lot of prospective clients who are looking forward to buying a property in a serviced estate.
Many times prospective clients have always requested to know the current service charge of the desired property they wish to acquire before they can proceed with the buying process.
Advantage of Service Estate/Apartment in Nigeria
Just like any other thing, the serviced estate has its own advantage and disadvantage. You may want to consider the pons and cons before making that decision.
Below are the advantages of it…
- Well-maintained, and serene environment – As I previously mentioned, one of the magnificent things about the Serviced Estate, is that everything is well-maintained, organized, and neatly done. Life is easy with constant light and water. You don’t need to worry about light or no light. Quit environment. No one knows when you are around or not. Security is top-notched.
- Good for short Let – serviced estate has proven to be the best when it comes to the business of Air-BnB. If you wish to buy a property for the purpose of short let, what you should look for is serviced apartment/terrace knowing fully well that the business will yield returns that will be used to pay for all the serviced charges and at the same time give maximum satisfaction to your customers.
- High Appreciation Rate – Serviced estate/apartment often has a high return on investment than self-serviced estate. This is a result of the high-maintenance culture in the estate. For example one of the estates that was delivered last five years at a price of 40 million for 2 bedroom terrace its current market price is 85 million. After the owner has made some profit for the past 5 years. Also, the estate still looks very new as if it was built last year.
- Good for Renting – is also good for rental purposes. If you are buying it for the purpose of putting it out for rent, is a good investment. When you know that the tenant will be the one paying for the service charge. While you collect your annual rent.
- Good for work from Home: if you are someone (for example programmer) who does his work from the comfort of his home, then this is designed for you. You will definitely enjoy the life of living in a serviced estate.
Disadvantage of Serviced estate in Nigeria
- Regular increase of the service charge – As I said earlier in this post, for the past 2 to 3 years in Nigeria service charges of many estates have tripled due to increment in petrol and diesel. And this has given a lot of property owners a big concern regarding the chargers.
- Longer Time to Resale – many times reselling a fully serviced estate property at its market price has proven to take longer time. That is while most times when an owner wants to sell his or her own property faster, he/she will result to putting it as a distress sale which reduces the actual market price of the property.
- Service charge is not cheap – these annual service charges in most estates in Nigeria are not cheap. Especially in Lagos Island and Abuja central, it runs in million depending on the type of property, the estate, and location. Is around 2 million to 6 million naira annually
- The cost of purchasing an apartment or terrace in a service estate is higher than the self-serviced estate – The market price of purchasing a property in a serviced estate is always higher.
If you are looking forward to purchasing a house for the purpose of using it with your family (as a family home). I strongly advise not to go for property in “service estate”.
The reason is that I believe when one is buying a property for family use he/she will have to consider the future, especially old age, and the uncertainty of the Nigerian economy today and make the decision wisely.
That is why I do not subscribe to the Ideology of mandated fees on family property, rather one should be able to pay utility bills when he/she wishes, according to what the person has and how he/she uses it.
Unlike, a in the case of serviced estate, whether you use the house or not, whether you are in the country or not, whether you have the money or not. Even in your old age you may not have enough to pay for the current charges at that time. You will likewise be mandated to pay the service charges.
I think serviced estate is not advisable for family use rather is good for investment purpose.
Furthermore, I will like to factor in a scenario whereby the present earning of the person is no longer what the person earns in the next 10 to 20 years. How then will the person pay the annual charges for that year?
The thought of after buying a house and taking full ownership of the house, one will also be mandated to pay an unstable annual maintenance fee doesn’t balance when it comes to taking full ownership.
I think the mandated annual charge is breaching the full ownership of the property, and I believe if one owns a property, he or she should take full ownership and runs it the way it pleases the person. Not been bounded by some rules and regulations.
Serviced charge is an annual mandated fee the house owner must pay either you stay in the house for only once in a year or throughout the year, or even didn’t stay at all.
Take out time to inspect the property and check the following, the security of the estate, the location, the current annual fee, the neatness, and the business attraction of the estate. Finally the serenity of the environment.
Yes, it is, but it works with Location. There are locations that are highly demanding.
High maintenance services such as: Street light, 24hrs security, 24hrs water supply, cleaning of the estate, 24hrs electricity, waste bin etc.
It depends on the area in Lagos, some service charges in the Island of Lagos range between 2 million to 6 million or more.
Areas like Lekki Phase 1, Ikate Lekki, Chevron Lekki, and Ikeja(mainland) are the most demanding places for Air-BnB business in Lagos.
I hope you find this post useful, for more inquiries, to schedule a site visit, or to find out how to get a property that suits your needs and budget contact us.
Also, if you have any questions, contributions, requests, addition, or corrections please feel free to drop your comment on the comment box below.