How to Invest in Real Estate in Nigeria: Why you should start!

In any part of the world including Canada, the UK, the USA, Dubai, and Nigeria, an investment in real estate never goes wrong because of the high possibility of making a substantial increase in value within a short period.

If you are considering making steady streams of income, this is more reason why you need an understanding of some of the best business ideas you can invest on of which real estate business happens to be one. Meanwhile, it is one thing to seek knowledge and another to execute them.

While there are several lucrative ventures one can invest money and time in, there are several things to bear in mind. Like most businesses in Nigeria, whether offline or online businesses, there are several loopholes that one may encounter. However, if you are persistent, it won’t be long before you realize there is so much to gain than whatever disadvantaged situations that may creep in. This is why one must be willing to engage in thorough research to avoid being at the receiving end.

Real estate business is often looked to be a business for the rich. Anyone can go into it, but a small percentage of the principal will be needed as a down payment if you are financing with a mortgage loan.

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How does Real Estate Investment work?

Even if you are not experienced enough in this field, it is easy to get the hang of it. If you have purchased things before and later sold them for a profit, then you now have a brief idea of how a real investment works.

Real estate is a good alternative to mutual funds, treasury bills, or any other stock investment you are familiar with. The most cogent part about real estate is you need to be familiar with the legal aspects of the real estate business to avoid accumulating losses.

Real estate investment entails adopting strategies that revolve around managing, buying, owning, renting, and sales of properties with the sole aim of generating substantial profit.

As per the investment type in Nigeria, residential real estate is the most popular one and also the most likely one to get buyers or clients within a reasonable time. The number of people who are looking to buy homes is more than the ones looking to make purchases for any other purpose. With the number of properties, this makes it easier especially if you are just getting started.

Notwithstanding, commercial real estate is also an ideal one, but may not command the same attention as residential real estate. Commercial real estate is only used for business purposes which may include retail space, hotels, office buildings, etc. This real estate type is normally very expensive but could be worth it since people are more likely to pay more for it.

Land is another investment type under real estate. Lands are also in high demand due to the many purposes they could serve. It can be used for farmlands, residential apartments, commercial structures, and more. The major disadvantage to owning land without putting up some structures on it is being at the receiving end of Land Grabbers (Omo Nile), especially in places like Lagos.

When trying to choose your investment type, you should consider if you are doing it for the short or long run. This will help you to adopt the best strategy to implement. If you are doing it for a quick profit which is the same as the short run, then your strategy might involve buying available ones and then quickly selling them for profit. Whereas, the long run could mean acquiring the property, holding, maintaining it while also letting it out for a long period. Over such time, the structure will increase in value and when you choose to sell, you can get huge money from the sales

Still, there are two things you should have at the back of your mind. One is the ability of the property to appreciate and also the cost of owning and maintaining it must be lower than the appreciating value. If such is not the case, then there could be a loss. Remember, whether the investment strategy is based on quick or long term, making enough profit is what makes real estate business lucrative.

Why you should invest in Real Estate in Nigeria

In 2013, Vanguard recorded that only 25% of Nigerians own landed properties which is still very low. With the current state of the country, it is not surprising that not much has changed. The cost of acquiring lands or any landed properties has even become increasingly difficult due to inflation. However, if you have been able to acquire lands, especially before this time, you might try making a call to your property manager or real estate valuer to know the modern pricing of your property.

You can still invest in real estate if you have money to pull through. That being said, to accelerate your progress, you need to have attained a particular financial status. However, people still run it with not much money which can be very difficult. If you want to enjoy quick capital gains and diversify your investments, money will go a long way in making that happen, instead of working as an agent which can be uncomfortable and not rewarding enough.

Real estate is not only limited to buildings but also lands. Despite that it is always very expensive to start, it will always be worth it in the long run because it rarely depreciates. When you make an investment in lands or landed properties, it could be worth even double of the actual cost in a few months and if left for years, it would have appreciated well enough to earn you vacation in any 5 stars hotel in any country of your choice.

Reasons Why You Should Invest In Real Estate in Nigeria

1. Real estate rarely depreciates

Over 80% of lands and buildings tend to increase in value if left for long. If you put some money in real assets, there is a greater chance of it being increased in value. This is a common practice by people of means which is one of the ways they manage to keep their profile for long.

Nonetheless, one does not need to have a substantial amount of money before he or she can start a real estate business in Nigeria. You can buy old buildings at a cheaper price. Then, renovate to get the desired appreciation in no time and sell off for profit if you wish. You can also add some structures to command a greater price.

Whether you improve properties or not, there is always a chance of it increasing in value over the course of time. Meanwhile, the quickest way is to improve the overall structure.

2. It provides physical value in terms of tangible asset

The expression, “A bird in the hand is worth two in the bush” could be used to describe the benefits of having a tangible asset rather than an intangible asset.

Lands and buildings are tangible assets that are more valuable than intangible assets like bonds and stocks. For instance, when you invest in an intangible asset, you do not have control or an overview of your investment except a certificate or piece of paper showing evidence of ownership.

How the intangible assets turn out to be is not in your total control and it is easier to lose all or part of your investment. With investment in real estate investment, there is a possibility of holding onto the value or having it increased. Still, even if there is a tragic event, you should be able to get something worthwhile.

3. A way to earn steady cash flow

What better way to earn constant cash flow than making an investment in real estate in Nigeria. If you are considering such, then you are looking to make a long-term investment which involves buying a property, holding on to it, and then renting out for a monthly cash flow. The arrangement can also be quarterly or yearly depending on the nature of the agreement.

For instance, in places like Lagos, Port Harcourt, or Abuja in Nigeria, it is common practice for Homeowners to rent out their spaces. This is a good way to make passive income if ever you are considering one. With this, you can make minimal efforts and still get paid from time to time.

4. It provides long term security

Real estate can be held for years without the fear of it facing depreciation. During this time, you can make money off your property investment through leasing.

Aside from that, you will also be avoiding having your money tied up at the bank which the bank will use for business. Instead, you can make more from your investment and still sell it at a bigger price when it appreciates.

5. Diversification

Smart business owners know the importance of diversifying, especially if it is adding lucrative businesses like real estate into the folds. This could help when the other businesses are not going as expected or when the economy is suffering.

Even when the unexpected happens, you will be surprised that real estate rarely suffers and this could help you to curtail the effect of the economic crisis.

6. It helps protect against inflation

Although, we have already subtly discussed that, it is important to state clearly another benefit of why investment in real estate pays. By investing in real estate, you are protected against inflation that many arise.

It is common that when prices of things rise, the cost of properties will also increase which can help you to weather the storm caused by inflation. With the rising monthly income and increase in value of the property, you are ready for anything,

7. A great way to build a large portion of Capital

One of the major reasons why people go all the way to invest in real estate in Nigeria or any part of the world is to make money. If the plan is also to build capital with minimal chance of losing your money, then real estate investment is the way out.

Unlike stocks and bonds, it is rare for real estate to depreciate. This gives you a chance to sell in the future for larger profit which will eventually increase your capital.

8. The prospect of being fulfilled

In Nigeria, acquiring or owning properties could also provide non-financial benefits. For instance, it is common to gauge people’s successes by the number of properties they own.

Aside from that, when you have acquired a landed property, you will be more fulfilled than people with none. Also, you may no longer need to pay for rents for life if you acquired residential property and can also use the asset to make money through leasing.

9. A means to plan for the future

One way or the other, nature will eventually take its course on everyone no matter how much they try. A real estate investment is a great retirement plan.

As you go up in age, your level of performance will eventually reduce. When you invest in real estate, you have something of immense value. This can be used to earn equity as time passes or sell for great returns which you can use during your old age.

10. More benefits than you think

We have been able to look out at some of the benefits you can enjoy by investing in properties in Nigeria, it will interest you to know that there are several others which we will not be able to discuss. They include Tax benefits, being able to leverage funds, feeling of being in control, using the asset to acquire loans, and more.

The challenges facing Real Estate Business in Nigeria

There is no business without its challenges and this is also not peculiar to real estate. Despite the varying risks that may occur, the gains are more than the likely challenges. Meanwhile, below are some problems of investing in real estate:

1. Start-up fund

A Start-up fund is the money to start a business. It can also be called start-up capital. To engage in the real estate business, you need money as land and property can be very expensive.

If you do not have enough to meet up with the purchase of your dream property, you can apply for mortgage loans. This is one of the best ways to get money for the purchase of real estate in Nigeria, even at that, most mortgage banks will still require a certain amount upfront before you will be able to buy properties.

Additionally, they would also carry out necessary homework to ensure that you can pay back the loans. If you default, they can reclaim the property and sell it off to get the borrowed amount plus interest.

2. Location of the properties

To have a chance of a considerable increase in value in real estate, location is also paramount. If you want to make money in real estate, Port Harcourt, Abuja, Lagos, and other places where the prices of real estate tend to rise are the best locations to concentrate on.

Still, Landed properties can also appreciate in some communities, but you will be able to make more money in regions where real estate is more valued.

3. The waiting period

With real estate investment, you might need to wait for years before making enough money. Still, during the waiting period, you could make some decent money from the property by renting it out for residential or commercial purposes depending on the structure.

If it’s land, you can also convert it to parking space if you are in a location where vehicle owners always need space to park their vehicles. With the money realized, it can be used to offset some of your mortgage repayment or maintain the property.

4. Fraud

There are lots of people who want to invest in real estate in Nigeria but are afraid of losing their hard-earned or borrowed money to fraud. Fraud is prevalent in the country, especially the one normally perpetrated through sales of off-plan properties.

If you are just getting started in the real estate business, you should avoid off-plan properties until you have gathered enough experience. The major reason why people tend to go for the off-plan property is that it is usually cheap compared to a completed one.

5. The decision to buy or develop

When starting a property business in Nigeria, you have two choices, you can buy a completed property or develop one. Both have their advantages. For instance, buying a property is usually very cheaper, however, you do not have the option of the property being structured according to your needs and tastes.

Whereas, building one would cost you more aside from having to deal with the hassles that may occur during its execution.

6. Getting it right especially the first time

When going into a new business that one is yet to be familiar with, it is normal to develop cold feet. And with investments like real estate when one needs to put down a huge amount of capital, pressure is bound to develop

There is always the danger of not getting the actual value for money, getting cheated if one chooses to use third parties, the legality aspect of the real estate investment, and more. Once you are able to pass through this stage, it becomes easier the next time.

Tips for real estate investment in Nigeria

If you are new to the real estate business, then you are still yet to gather enough experience in the business. We have provided some tips you can follow:

1. Know the right time to buy properties

There is no better strategy than buying an investment property when the price has dropped or is very low. If you can get a good deal, you should not sleep on it.

More reason why you need to follow trends in the market so you can buy at the right time. One of the advantages of buying for low is you can benefit from a low-interest rate on a mortgage.

2. Invest in a prime location

Choosing a good location for the business is very important for the business of real estate. You should consider investing in locations where the rents are high. Over the years, it is common knowledge that real estate strives well in such locations.

Avoid rural locations at any cost to avoid missing out on huge profits which can only be gotten in tier one locations. For instance, buying a property in the rural part of Ondo state may not increase in value in time quickly compared to one set up in Lagos.

3. Stay in touch with experts and legal practitioners

Since you are new in the property business, it is important to stay in touch with people that can add value to you and your business, especially during your learning stage.

Experts like Estates Surveyors could guide you towards the proper running of your investment. They can also help in the maintenance of the assets. Also, legal practitioners are needed to avoid being defrauded.

4. Ensure the fund is readily available

Ensuring that there is substantial money on the ground for real estate investment is one of the key aspects to take care of. By organizing funds in advance, you are putting yourself in a pole position to quickly make a good bargain.

By having the funds available, you are confident in your search for properties and making deals happen in no time before another pounces on the opportunity. Besides, property owners who urgently need money will rather sell at a reduced fee to buyers who can make payments quickly.

How to Invest In Real Estate Business in Nigeria

1. Make a thorough research

No one goes into a business expecting to make it a success without a thorough action meant to identify possible threats and opportunities available to you.

How do you get started? You will be surprised that it is easier than you thought, especially in this internet era. A lot of articles have been written to educate new real estate investors. These pieces can be found on the internet through google search.

You can also attend free workshops normally anchored by experts which can provide you an opportunity to find a role model. Another way is to look around for experts like valuers, surveyors, and developers for guides and tips.

2. Adopt a strategy

Your strategy will depend on what you aim to achieve. You can decide to choose between the residential and commercial real estate or even operate both.

If you intend to go for residential real estate, then it means your strategy aligns around slow and steady income-generating investment. For quick returns, your strategy could be putting a hall for rent, space for vehicles, temporary office space for business, retail centres, etc.

3. Take care of the financial aspect

Normally, your source of finance is the first thing that needs to be sorted out. Are you financing the project through loans, getting money from loved ones, or using your own money?

Using a loan as a source of finance may not be the wisest thing to do unless you have a job or business that generates high income. By making use of mortgage loans, you are running a risk of losing the property if you default on payment.

Be careful of the kind of financing you are adopting for real estate investment. If not, it could end before it begins.

4. Identify opportunities around you

Although we are very particular about investing in locations known to favor the business of real estate, notwithstanding, other places could emerge due to their easy access to urban areas and ongoing development.

Governments from time to time are always interested in places that are likely to be of immense benefit to the country. Such places normally are places with access to central business areas. If you find one, then you should tap into it quickly before the price begins to rise.

Chances are that in years to come, working class and business owners will be moving into the region due to its proximity. The more people start favouring such locations, the more opportunities to make money in real estate.

5. Make more findings, especially when transacting

Most businesses could end abruptly due to not getting the details right. If you want to go far, ensure you are transacting with trustworthy people.

Being your first time, it is very important to call on experts to walk you through the details. With experts like experienced real estate agents, surveyors and lawyers, it is almost impossible to get scammed because they will always work you through the process, especially the legal aspect of the business and verification.

In places like Nigeria, it is common for fraudsters to try selling properties, especially ones whose owners are not around. If one is not careful, you might lose your hard-earned money.

6. Know the necessary laws about real estate business in Nigeria

Everyone has a right to own land provided you operate under the confine of the law. If you are buying from local chiefs without obtaining a certificate of occupancy, you might lose it without any form of compensation from the government. Nigerians have already been warned against buying lands from traditional chiefs. As said by the administration, all lands are statutory and covered by certificates of occupancy (C of O), which can only be authorized by the government.

By holding a legitimate C of O, you have proven to be the real owner and will be entitled to compensation even if the Government needs the land. Another reason is you are protected from anyone trying to take over your property from you.

Also, some lands may not fit into the kind of structure you intend to build on them. If you go ahead with structures not approved or allowed by the government, you may be asked to pull them down. It is important to be familiar with the various do and don’ts of laws guiding real estate in Nigeria.

7. Pay close attention to changes

Several factors affect prices. In the case of real estate, having proximity to where companies and businesses are located can also influence pricing. Currently, there may not be so much to talk about in the place where your property is, but the fact that it is closer to locations currently developing will help things speed up.

If you can hold onto your property, you will be surprised how much you will be able to make from it. Do not live in the now, rather think ahead.

8. Marketing

Marketing is important if not the key aspect of any business. And with the emergence of the Internet, provides you with more options to get your business out to prospective buyers.

Social media platforms lately have become huge when it comes to making sales and the best part of it is that you do not need to pay for ads. If you are in it totally, you can as well create a real estate website. People can easily find you on the internet and visit your page for any potential deal.

Meanwhile, the traditional way of advertising can still be used, but you will be saving more by using the various opportunities provided by the internet.

Where to buy Properties for Real Estate Business in Nigeria

1. Make use of Real Estate Agent

Your best shot at finding land or property you can invest on quickly is to contact a real estate agent. These agents normally have a huge list of properties put for sale. For their troubles, they may request an agency fee which is normally charged to the asset.

The only issue is that most agents may not be willing to work with investors. Most of them specialized in putting space for rents and sales as well to individuals. Notwithstanding, that can still be worked out between you two leading to a favourable long-term relationship.

When selling later, you can also make use of the real estate agent if you need to sell it as quickly as possible.

2. Make use of reputable real estate investment platforms in Nigeria

Another way to look for homes or property to buy is to make use of real estate websites. From a reputable real estate platform, you can get a huge list of properties you can invest in. They will also provide you with details of the property you want to buy.

Most of the houses listed on the real estate investment platforms may have tenants still occupying, but that does not make them less suitable to buy. It only means you become their landlords and you could still adjust the term of the contract with them if needed.

If you need to get started without going through the stress of finding a property to invest in, this is an easier way. Even at the comfort of your home, your search can begin thereby saving you huge expenses normally associated with finding your dream property.

Some real estate platforms to use include Propertyguru.com.ng, property24.com.ng, and propertypro.ng

3. Buy the investment properties yourself

Although it is highly recommended to make use of a third party if you are new to the real estate business, if you have already got it figured out, then you should be fine.

Find the properties you are willing to purchase yourself, haggle prices, ensure no law or condition may put you into a disadvantaged position in the future, and then fully own the property. This is one of the best ways to acquire the needed experience especially if you plan to run it for long.

The real estate investment platform could play a role when searching for the property to buy, all left for you is to take care of the other aspects of the business.

4. Work with a Real Estate Company

Another way to buy property is from a real estate company. In this scenario, the company will purchase the property, and then put it for sale at a slightly higher price.

This may not be the best way to go about it as this real estate company may charge higher than the agents, but one thing they are known for is their ability to take care of the legality of the deal.