When you think of it, on the surface level, there’s really no connection between the automotive industry and the real estate industry. However, many car dealers in Lagos, Nigeria, have carved out a connection between both, and it’s clearly for business purposes and monetization.
So, if you’ve ever had to imagine why many Lagos car dealers are also moving into real estate, here are the obvious reasons why it’s happening, which is also why it’ll never stop.
- Investment Diversification
Every type of business comes with its associated risks and the car business. Diversifying your investment strategy is the best way to hedge against loss in business investments. So, many car dealers in Lagos find real estate investment as a more stable investment option that helps to cushion the blow of the constantly fluctuating car dealership business.
- Profit Maximization
The first thought of every business-inclined person is: “how do I maximize profit?” Nobody does business for the sole purpose of answering an “entrepreneur.” Lagos car dealers understand this, and the real estate business in Nigeria keeps paying forward with high demands and returns. So, Lagos car dealers use it as an additional earning source to support their car venture.
- Business Synergy
Car dealers in Lagos see moving into the real estate business as a means to use one stone to kill several birds. In this case, having a real estate business they manage means they don’t have to pay additional fees from their car showrooms. They save on rent and earn from real estate.
- Asset Accumulation
The goal of every business person is to accumulate as many fixed assets as possible. In reality, cars are not fixed assets. So, having a real estate business is a way to blend assets and grow generational wealth for themselves.
- Business Strategy
Going into real estate is equally a business strategy Lagos car dealers use to push their car business. If they can invest in real estate in a strategic location, not only do they win in the real estate angle, they win equally in the exposure it brings their car business.
Car Dealership & Real Estate: Which Is More Profitable?
Many factors determine the profitability of a business. Car dealerships and real estate depend on the market condition, location, investment size, and how the investment is managed.
When car dealers invest significantly in real estate, the reality is that it brings more consistent profit than the selling of cars. Sometimes, selling cars brings profits that can measure up to the real estate. But for selling cars, the profit fluctuates due to demand. Real estate continues growing over time to generate even more profit.
However, car dealerships are equally very profitable and can outmatch the real estate business. But it all depends on how well it’s being managed, the seller’s clientele, and the quality of the product they sell.
Car Dealership and real estate which should I invest more
Ultimately, the decision to invest more in car dealerships or real estate will depend on your financial goals, risk tolerance, and investment strategy. It’s important to do your own research, consult with a financial advisor, and make an informed decision based on your own personal circumstances.
Conclusion
Generally, running a car dealership comes with higher business risks than real estate. Since Lagos car dealers know this, they invest in both businesses so they can always complement one another.
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