Over the past few years, investing in Nigeria’s real estate sector has seen a rise in popularity, especially in locations like Lagos, Abuja, Port Harcourt, Asaba, Edo, and other state capitals.
Table of Contents
This article explores the different investing methods an investor can adopt to make a profit from Nigeria’s real estate sector with little risk if it is done by using the best practices.
Why should I invest in real estate in Nigeria?
Investing in property whether a completed apartment or buying acres or hectares or plots of land, it is now a popular investment option for smart investors who want a recurring return on investment.
Nigeria’s real estate sector is booming thereby fetching millions of Naira as returns for the owners. It can even be considered a money-maker, regardless of the economic downturn.
The best thing about Nigeria’s real estate industry is the diversity of investment opportunities. You can grow your business and expand your portfolio.
The population of Nigeria is growing every day, and rural-urban migration continues to grow because the people are searching for greener pastures. They all need accommodation, they need a place to stay after the day’s work. Rental service is a huge business to solve the problems of the new migrants who need accommodation
Note: Real estate investing is more complex than stocks
There are many opportunities to double your investment in the real estate market. Below are the effective ways to invest in real estate in Nigeria:
Property development can be very capital-intensive. It involves purchasing properties in desirable locations, developing them into luxury apartment buildings, and commercial structures and then selling at a high-profit margin.
You can expect to sell a property that you have spent NGN400 million on in a desirable location for NGN800 million. If you’re thinking about investing in property development, the location is crucial.
It would be ill-advised to buy a property worth millions of naira at a remote location without a road, no power supply, no schools, and no hospitals among others unless you have a plan to start a farming business.
Even a farm needs a motorable road to transport finished agricultural products to other locations and buyers outside the place of jurisdiction.
You should decide whether to buy or build a house when you are considering property development as an investment option.
These examples of real estate investments are just a small part. There are many other types of real estate investments. There is a lot of potential in real estate investments. However, you need to be careful and do your research before making any decisions.
Real Estate Investment Trusts (REITs)
Many Nigerians don’t know much about Real Estate Investment Trusts. REITs, a type of collective investment scheme, are regulated by the Securities and Exchange Commission (SEC).
REITS are real estate investments whereby there is a pool of capital from investors use to acquire income-generating real property, mortgage loans or a combination thereof.
Professional management is used to maximize the returns for investors. They can hold an indirect interest on a flow-through basis in real estate, which puts them in the same position as direct investors. Just like other stocks, REITs can be bought and sold on major stock exchanges.
Diversification: Easy Portfolio diversification is one of the benefits. Real estate investment can be an alternative to fixed-income securities and equities, particularly for diversification-minded investors.
Liquidity: It makes it relatively liquid (compared to direct investment into real estate), and can be sold quickly to raise cash, or take advantage of other investment opportunities.
Solid investment: For stock market investors who want regular income, REITs can be a solid investment. REITs are also a great way for investors to invest in non-residential properties like malls and office buildings. They are also highly liquid. You don’t even need a realtor to cash out your investment.
Gift of Rental Properties
As old as land ownership is the practice of investing in rental properties, so too is renting them out. Renting out a property to tenants is possible after you have purchased it. The property’s maintenance costs are borne by you as the owner.
Rent is usually enough to cover the cost of renting a property. You also need to know the rent value charged by other landlords who may have the same property. Renting out a property is a guaranteed way to earn a steady rental income, either monthly or annually. The landlord will have a better asset because properties tend to increase in value over time.
You can have a poor tenant, or worse, no tenant at all, and ruin what appears to be a great investment. You could end up with negative monthly cash flow. It is important to choose an area that is safe for residents, and a place people love to rent.
The biggest difference between renting property and other investments is how much time and effort you put into maintaining it.
You buy stock and it sits in your brokerage account. It may increase in value. You have many responsibilities as a landlord if you decide to invest in rental properties.
Your property’s maintenance and operation require your active involvement. If it becomes too difficult, you can hire a professional manager, but this also means you have to pay for their service.
Land flipping is the act of buying a piece of land and quickly reselling it for profit, according to Property Development Company. This is a smart investment that requires very little effort. This investment requires your money, as well as a good understanding of land ownership and how land appreciates in a particular area.
Once you have this knowledge, you’re ready to go. If you are looking to make millions, you will need to have substantial funds. However, you don’t have to start with just one plot.
You can grow your portfolio by purchasing dozens of acres and hundreds of plots over time and then sell them as the land begins to appreciate in the area.
For instance, smart investors who bought hundreds of plots of land in Epe 10 years ago are even regretting they should have bought more. Some of them are making double of their investment or X3 of their investment. That’s how profitable investing in real estate in Nigeria is.
Profitable places to invest in real estate in Nigeria
The real estate business in Nigeria is a hidden investment some people are underrating, but the fact is investors are making billions every year in the property business.
Real estate remains one of the most competitive and long-standing industries with many new and experienced players. The majority of the wealthiest people in Nigeria and around the globe have some form of real estate investment.
Some of the best places to invest in real estate as earlier stated are:
- towns where higher institutions
- Industrial locations e.g Sango-ota axis
- The FCT, Abuja,
- Port Harcourt,
- Asaba, Akure,
- Ado Ekiti,
- Benin-City, among others.
Considering the insecurity across Nigeria, it is important to note that you should be a background check of the area before you buy land there. It will not be advisable for anyone to invest massively in states that have been partially be taken over by bandits and terror groups in Nigeria.
Above all, investing in Nigeria’s real estate is more profitable than you think. However, it is important to remember that real estate’s value will appreciate depending on its location.
If you are considering investing in real estate in Nigeria, it is important that the location is not too far from popular tourist destinations.
There are many places in Nigeria that are worth exploring for real estate investment. They include Lagos Island where there are beaches and many resort centres and the growing number of people from within and outside Nigeria who are migrating into the state every hour.