Have you found yourself asking – What is real estate investment in Nigeria and how can I make passive income with it? Well, you’re at the right place.
A Nigerian Real estate investment is a smart way to invest your savings. Land or housing investment are always super lucrative.
If you think otherwise, check out the top 10 wealthiest people in Nigeria, or in the world; you will see some element of real estate investment or something similar in their portfolio.
Today, we are going to be looking at real estate investment definition, real estate investing for beginners, and how to invest in real estate with little money and earn some serious profit, no matter the amount of money you want to put in.
What is Real Estate Investment in Nigeria?
Real estate is property made up of land and any structure(s) or natural resource on it, including mineral deposits and water bodies, as well as any fauna or flora.
Based on use, real estate can be categorized into 3 broad groups:
• Industrial properties, e.g. mines and factories and mines.
• Commercial properties, e.g. office buildings, retail store buildings, and warehouses.
• Residential properties, e.g. undeveloped land, condominiums, and private residences.
Investment Opportunities In Real Estate
Now, let’s discuss some real estate investment strategies. Buying a building or house is not the only means you can make a real estate property.
Buying a building or a house is not the only way you can make a real estate investment. The market has plenty opportunities.
Here are some real estate investment strategies to make money:
Real Estate Investment Trusts (REITs):
This is one of the simplest methods of securing real estate investments without actually acquiring a physical property.
REITs are regulated by the Securities and Exchange Commission (SEC). They are a form of collective investment scheme, which puts together funds from investors and use them to acquire income-generating real estate.
The portfolio of underlying assets is managed by a professional whose job is to maximize your returns. With REITs, you hold an indirect interest in real estate on a flow-through basis, which means that you hold the property as if it were a direct investment.
REITs are traded on the Nigerian Stock Exchange (NSE). To purchase one, you have to go through your stock broker. It’s just like selling or buying shares.
REITs are a solid investment stock that can make you money on a constant basis. The advantages include but not limited to:
• Needs no minimum investment.
• Features tax advantages.
• This strategy is a super liquid way to invest in real estate. You won’t need a realtor to cash out your investment.
• REITs pay high yields in the form of dividends.
• Provides you the opportunity to share in non-residential properties like malls, industries, and hotels.
This is one of the many types of real estate investment out there. Buying land and selling at a higher price is very profitable (especially when you purchase land in rapidly developing area), in which case you can make up to 300% in profits within a few weeks, months, or years, as the case may be.
You can begin by buying only a plot. Or if you have enough capital, purchase as much land space as you afford and continue selling all year round.
Note: Keep the following in mind when acquiring lands:
• Purchase in areas that are quickly developing if you want to sell within a couple of months. Some areas are faster than others.
• Make sure you collect all the land documents that show you are buying from the legitimate owner. The documents should include a Certificate of Occupancy or a Governor’s consent. To avoid meddling in land issues, acquire lands with the appropriate land titiles.
• Low or zero maintenance costs.
• Selling is easy
• High profits
Become a Real Estate Agent
This option is a good one if you lack sufficient capital to make an investment. You can simply offer your services to property owners who are searching for a buyer.
Becoming an agent means you enjoy a commission after you find a buyer for the property. The general rate is 10%. So let’s say you find a buyer for a 80 million naira property, you get a commission rate of 8 million naira.
How sweet is that?
To maximize your chances of success in this field, you need to have good networking skills in order to locate sellers and buyers.
Here are primary roles you’d need to play:
• List the property to the public via fliers, notices, and so on. I would recommend advertising on the internet as this is the cheapest means and it converts well.
Alternatively, you can hire me to run highly targeted ads for you for a fee of course.
• Be quick to answer any questions potential buyers may throw.
• Take buyers to inspect the property (property inspection) and negotiate prices on behalf of the seller.
• Screen the buyers until you’re convinced they’re qualified to make the property purchase.
• Grow your network.
• Huge earning potential.
• No investment or (Little) investment on capital is needed
Open Space Leasing
In this case, you own a land in a good location. While you wait for the property value to increase, you lease the land to people for temporary use for a monthly feed.
For example, you can lease it to a car wash, mechanics, or a church, or other businesses that can build a makeshift structure that will be easily dismantled when you’re ready to sell.
• Extra monthly profits before actual land sale, etc.
In my book, this is recommended means of real estate investing for beginners with capital.
Property development needs a large capital investment. It involves acquiring depreciated properties that you can renovate, sell or rent at an extremely high profit margin.
Like any other real estate investment in Nigeria, a good location is important if you want to make good profits.
Note: Before you run and throw in money into property development, ensure you have enough cash that is will cover it all and that the development costs will be far outweighed by the asking price or value of the property when the renovation is done.
So, if you spend 4 million naira in renovations, ensure your property is valued at or can sell for at least 5 or 6 million, or more
Listed below is one of the benefits:
• Earn a higher profit than when you buy and sell undeveloped land.
Franchising is an excellent means of acquiring and holding land in various growing locations. The only con is that it needs a considerate amount of capital.
It’s as easy as when you acquire a land and use it to establish a business, such as a fast food restaurant. You then purchase land in several other locations, build your structures and locate franchises who will manage the restaurants on your behalf.
It may appear that brands, such as Shoprite, Sweet Sensation, Chicken Republic, Mr. Biggs, McDonalds, and several others that exist today are only involved in the fast food business. However, real estate acquisition is a big part of it.
These lands quickly appreciate in value over short period of time.
• Run a sustainable business while acquiring high value real estate.
• Own land in multiple major locations across the country.
Build or Purchase Rental Properties
If you’re searching for how to invest in real estate with little money, then this is for you.
Rental properties investment is one of the smartest way to keep earning passive income for life. As a landlord, or landlady, you enjoy monthly or yearly income after you buy or build properties and rent them out to tenants.
You’d need to constantly maintain the building to keep it in god shape, so that you can attract new tenants or keep up with the competition from other neighborhood landlords.
You should find out the price other landlords in the area charge on rent so that you too can fix something reasonable. Over time, your property will appreciate in value, especially if you are in an area with high demand for land, housing and properties.
The biggest different between rental property investment and other types of real estate investments in Nigeria is the effort and time it demands, especially if you accept twisted or bad tenants who cause damage to your property or delay rent payments.
If the property is not situated in a good location or you fail to invest in proper maintenance, you face the risk of not attracting any tenants at all.
Benefits of investing in real estate include:
• Earning passive income for the rest of your life.
If anyone asks you this – What is real estate investment in Nigeria? What would you say? We’d love to hear your experience and thoughts in the comment section below.