Making a real estate investment in Senegal can be motivated by various factors: seeking additional income, reselling for a capital gain, building wealth, preparing for retirement…
Whatever the reason, an investment of this type must be carefully considered and be the culmination of a real strategy, in which several elements must be taken into account, and certain pitfalls avoided.
Here are our 4 tips for a successful real estate investment in Senegal :
1) CALCULATE THE POTENTIAL PROFITABILITY
The simplest method is to calculate the gross profitability . For this, we will only need the purchase price and the amount of the rent.
For example: I buy an apartment worth 50,000,000 FCFA. I decide to rent it out for 400,000 FCFA per month, which makes a total of 4,800,000 FCFA in annual rent that I will receive. To obtain the gross annual return, I apply the following formula: (ANNUAL RENT x 100) / PURCHASE PRICE. In this case, (4,800,000 x 100) / 50,000,000 = 9.6% .
This refers to the gross rental yield this apartment will offer once it is rented. It's an initial indicator which, although incomplete, still provides some indication of the property's potential.
Let's now go into detail, by evaluating the net profitability , which will tell us precisely the real income that this apartment will bring us:
The calculation is exactly the same, except that it is much more precise because several elements are added.
Without going into detail about all the expenses generated by an apartment, we will simply consider the following elements: notary fees of 5%, agency management fees of 5% and one month of the year when this apartment would potentially not be rented.
SALE PRICE + 5% NOTARY FEES = 52,500,000 FCFA
ANNUAL RENT – 1 MONTH OF VACANT HOUSING = 4,800,000 – 400,000 = 4,400,000 FCFA
4,400,000 – 5% MANAGEMENT FEES = 4,400,000 – 220,000 = 4,180,000 FCFA
The calculation is therefore as follows: (4,180,000 x 100) / 52,500,000 = 7,96%.
This therefore refers to net profitability , which takes into account the various expenses added to the initial investment. We could also have included the various renovations carried out, the purchase of furniture, etc.
The higher the return, the more attractive it is. Therefore, pay close attention to all these additional expenses and include them in your final calculation. This will make your calculation much more accurate. A net return is considered attractive when it exceeds 6%, as this is higher than the returns offered by bank investments.
2) THE LOCATION OF THE PROPERTY
It is important to choose the location of the property wisely, especially if the goal is to realize a capital gain upon resale. Indeed, it is preferable to choose a location where property prices have strong growth potential.
The quality of a location is determined by several factors (proximity to shops, infrastructure, amenities, etc.). For example, if we imagine two similar houses, one located in Almadies and the other in Patte d'Oie, there would be a significant price difference due to their location.
This is indeed a crucial criterion, as finding a good location is part of a long-term vision. Some investors may choose to buy land in Saly , where property prices have steadily increased in recent years, and resell it five years later, thus realizing a significant capital gain.
It is therefore essential to compare and understand the price differences between each location before embarking on an investment.
3) THE QUALITIES AND SPECIFICITIES OF THE PROPERTY
This is a very important question because the quality of the property will have a direct impact on the expected profitability.
Indeed, a property in good condition at the time of purchase will not necessarily need much work, which will considerably reduce expenses in the long term, and thus ensure you a better return on investment compared to a property in poor condition.
So remember to check all the components of your property, and thus avoid unpleasant surprises when you have bought it, because depending on the work to be done, you can find yourself facing a financial abyss.
The same applies to specific features. These are, in a way, the options that will add value to the property. For example, a serviced plot of land, fenced and equipped with a gate, will have more advantages compared to a plot without these features.
4) DEFINE A CLEAR STRATEGY
A real estate investment in Senegal will only be successful if it is part of a genuine wealth management strategy .
This investment should best meet your objectives. What is my goal with this investment? Supplemental income? Capital gains? Preparing for my family and children's future? Building or increasing my wealth?
you've answered the question of why how . Will I pay in cash? What will the impact be on my savings? Wouldn't it be more appropriate to opt for a mortgage , thus avoiding impacting my cash flow?
Real estate is indeed a key sector driving Senegal's economic growth, and this is just the beginning given the country's significant potential for development. Perhaps now is the time for you to participate and make a real estate investment in Senegal? Discover all our properties for sale .