real estate investment in Nigeria
real estate investment in Nigeria

Real estate investment is one of the top areas of investment that has contributed to the financial economy in Nigeria. It has become trendy over the last couple of years as people are making millions from it.

You can invest in Real Estate directly by purchasing a home rental property or other property. You can also invest in Real Estate indirectly through a Real Estate Investment Trust (REIT).

Several Individuals and companies engage in Real Estate Investment starting from Lagos (Commercial City) to Abuja’s Centre of power. 

What is Real Estate?

Before you decide to go into Real Estate Investment, You need first to understand its concept. Know what Real Estate is all about and the critical factors to consider before going into Real Estate Investment.

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Natural Estate island along with anything that is permanently attached to it, whether natural or artificial. For example; Minerals, buildings, trees, and utility systems. It also includes the rights of ownership – the right to sell, lease or gift it.

Types of Real Estate.

  • Residential Real Estate – Any property used for residential purposes. Examples include Condos, single-family homes, duplexes, townhouses, and other types of living arrangements.
  • Commercial Real Estate – Commercial property refers to land and buildings that are used exclusively for business purposes. Examples include theaters, shopping malls,   individual stores, office buildings, parking lots, hospitals, and hotels.
  • Land – Land typically refers to undeveloped property and vacant land. Developers acquire land, combine it with other properties, and designate it for a new purpose to increase the property’s value.
  • Industrial Real Estate – Industrial real estate refers to land and buildings used for industrial purposes like manufacturing, production, storage, and research and development.

Real Estate Investment

 A rational investor is expected to give maximum return on investment while minimizing risk. Concern for higher returns and lower risks are two essential investment considerations that generally guide investment decisions. 

Real estate investing refers to acquiring property as an investment to generate income rather than using it as a primary residence.

 It is common for investors to own several pieces of real estate, one of which serves as a primary residence. In contrast, the others are used to generate rental income and profits through price appreciation. The tax levies for industrial real estate are different from those for residential real estate. The purchaser of an interest in real estate is liable for ensuring that all taxes required are paid.

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Under Nigerian law, foreigners are not allowed to invest directly in real estate. This restriction is to control foreign monopolization of land ownership in Nigeria. Foreigners are only allowed to invest in real estate in of the following ways;

  • In the provision of Acquisition of lands by Alien Laws of the federation states, foreigners may be allowed to acquire real estate from a Nigerian citizen in Nigeria. Still, the state governor must first approve such an acquisition.
  • Foreigners can also invest in real estate by acquiring land through a corporate body incorporated in Nigeria. 

Benefits of Real Estate Investment 

The benefits of investing in real estate are numerous and can vary depending on the goal of the investor, but the primary benefits of investing in real estate are;

  • Capital Appreciation

Investment properties can bring in capital gains for investors due to property value increases over time. Capital gain is a profit gotten from the sale of a property or investment. Of course, investors can only realize the profit after they sell it. 

However, real estate value has risen dramatically over the last few decades as demand for housing has increased. 

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Mutually, supply and demand play a part in earning capital gains from real estate. If there are fewer properties in a particular geographic region or less supply, property prices tend to appreciate–all else being equal.

  • Rental Income

Many investors buy real estate for the stable income that it provides. Whether residential or a commercial property, occupants pay the owner each month until the rental agreement or lease expires. This revenue stream can offer a stable income for retired people and others looking for an alternative source of income to support other retirement funds they might already have in place. Income from real estate can also protect against stock market downturns and rising prices of consumer goods.

How to Invest in Nigeria Real Estate

Aside from the house, there are so many options for a real estate investor in Nigeria, and they are not all physical properties. 

Here’s a look at 12 ways to invest, along with the reasons to invest.

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  • Property Flipping

This is a type of real estate investment strategy in which an investor purchases a property not to use but to sell it for profit. Flippers buy properties to hold them for a short period and sell them off once the market price rises.

There are two main approaches to flipping a property:

  • Repair and update You buy a property that you think will increase in value with specific maintenance and updates. Complete the repair as quickly as possible and then sell at a higher price.
  • Hold and resell As opposed to the Repair and Update, this type of flipping works differently. Instead of buying a property and fixing it up, you accept the market value is rising, hold for a few months, and then sell at a profit.

The risk involved with either type of flipping is that the longer you hold the property, the less money you make. You run the risk that you won’t sell the property at a price that will turn a profit.

  1. Real Estate Investment Trusts (REITs)

A real estate investment trust (REIT) is a company that owns, operates, or finances income generation real estate. The assets are placed under professional management to make it possible for individual investors to earn dividends from real estate investments without buying, managing, or financing any properties themselves.

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Many Real Estate Investment Trusts are publicly traded on major securities exchanges, and investors can buy and sell them like stocks throughout the trading session. 

  • Rental Properties

Investing in rental properties is an ancient practice of real estate investment. You buy properties and then rent them out to tenants. This will automatically make you the landlord; you will be responsible for paying the costs of maintaining the property.

You just have to make sure to charge enough as rent to cover all the costs associated with owning a rental property and a profit portion. Generally, properties appreciate over time, leaving the landlord with awrongore valuable asset. This is a trendy way to grow your wealth when it comes to real estate investment.

Of course, there is a bad side to this type of real estate investment as you might end up with a bad tenant who would damage your property. It also requires time, work, and dedication to maintain your investment (Rental Property).

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  1. Real Estate Investment Groups

Real estate investment groups (REIGs) are businesses that focus most of their capital and efforts on investing in real estate. For-profits, real estate investment groups buy, renovate, sell, or finance properties.  If you want to own a rental property but don’t want the stress of being a landlord, a real estate investment group may be the solution for you.

A company will buy or construct a set of buildings, often apartments, then allow investors to buy them through the company, thus joining the group. One investor can own one or multiple units of self-contained living space. But the company that operates the investment group manages all the home units and takes care of maintenance, advertising, and finding tenants. In exchange for this management, the company takes a percentage of the monthly rents.

 Some real estate investment group in Nigeria includes Jide Taiwo & Co, Adron Homes and Properties Ltd., Abode Real Estate, Kings Court Realtors.

  • Online real estate investing platform

These platforms connect regular investors who want to finance projects to real estate managers. These platforms have opened up pooled fund real estate investing to everybody. An investor expects to receive monthly or quarterly distributions in exchange for taking on a significant amount of risk and paying a fee to the platform. 

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These platforms are called crowdfunding platforms. You just lend your money to experienced real estate managers and watch them increase your capital. Some of these platforms include; Rise Vest, Coreum, Wealth.ng.

  1. House Hacking

House hacking is also an excellent way to get into real estate investment. This strategy works if you buy a property – a duplex, for instance. Simply live in one unit, rent out the extra units, and begin generating income without having to do much work. Easy money, right! You can use the rent to cover your expenses, and you get to live in your house for free! This also gives you a hands-on experience of what it’s like to be a landlord without buying real estate rental property. Several experts consider this the best way to invest in real estate with no money and no experience.

  • Becoming a Real Estate Agent

You could start a side business or a full-time career as a real estate agent to begin earning money. While technically not investing, it’s a great way to learn about real estate transactions and the overall real estate market and still make money from it.

You can even pursue this as a career, take a certain number of classes to gain more knowledge, and get your real estate license. Finally, most agents join their local association of realtors and pay for access to multiple listing services. This method requires time and energy to start making money. As a leasing agent, you help match a tenant with a particular rental unit, and you earn a fee.

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  • Airbnb

This service is available in some states like Abuja, Lagos, and Ibadan. It is an online marketplace connecting travelers with local hosts. This platform enables you to rent out your property to tenants for short-term periods. Mainly, you can buy an investment property and rent it out on Airbnb as lodging to travelers and tourists. 

This strategy is one of the most common answers to investing in real estate with no money because you can even rent out your primary residence on Airbnb, and vacation rentals sometimes yield a higher rental income than traditional rentals.

However, you should note that the success of this rental strategy depends on the location of your rental property.

  1. Real Estate Limited Partnerships

A real estate limited partnership is similar to a real estate investment group. It is a group formed to buy and hold properties, or sometimes just one property. However, this partnership only exists for a finite number of years.

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An experienced property manager or real estate development firm serves as the general partner. Outside investors are then sought to provide financing for the real estate project in exchange for a share of ownership as limited partners. The partners may receive periodic distributions from the income generated by the RELP’s properties. Still, the actual payout comes when the properties are sold at a sizable profit—and the real estate limited partnership dissolves down the road.

  1. Related Commission

Finding good real estate deals for another more experienced investor is another way to generate revenue. With this method, you don’t need much money or experience to get started. You’ll need your real estate license in most cases to earn your finder’s fee legally.

So, this is a specialized form of being a real estate agent. But rather than focusing on all buyers, you just concentrate on investor buyers. This strategy is straightforward just find good deals and find several active investors with money they buy, and you receive our commission.

  • Land Banking

The land is a fixed asset that is  a smartwrongdoereasy to maintain and is guaranteed to appreciate over time. All you need to do is buy a piece of land or several on the fringe of a developing city, wait for a few years and sell for a profit. Land banking in developing markets is arguably the most profitable as they tend to have plenty of developing areas.

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  • Wholesale Real Estate

Wholesaling is the business of finding discounted deals and quickly reselling them for a profit to a prospective buyer. In tons of cases, you can use very little money but still profit on a wholesale deal. With wholesaling, you essentially get the property under contract or buy it before reselling it for a profit.

The tricky part here is that wholesaling is a sales business. This means you’ve got to be good at making many offers and getting rejected a LOT. But if you’re good at sales, then this is an excellent way to invest.

Real estate investment can offer robust long-term returns, But as with all investments, research is critical. Make sure you do your research well before deciding on which way you want to invest in Real Estate. Make sure the Pros outweighs the con,ground and talking to an expert might even be the right way to go about it.

 

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