Real estate investment, when done correctly, is an excellent way to increase your wealth and secure your financial future. For many Nigerians, especially millennials and Nigerians in the diaspora, investing in real estate can seem intimidating, especially if it’s your first time at it.
This article provides insight and clear direction on how to get started with real estate investment, whether you’re a first-time or experienced investor looking for more ways to diversify your income.
We’ve covered everything from understanding different asset classes, like residential and commercial properties, to how to avoid real estate scams and strategies for financing and flipping houses in high-demand areas, making the process easy for anyone who wants to invest and make a lot of money.
Real Estate Investment 101
Real estate investment is a popular and reliable form of investing that has been around for donkey’s years. It refers to putting your money into physical assets like land and buildings to generate an income rather than as a primary residence.
Real estate investments involve purchasing property to rent, resell, or lease. These transactions provide immediate income through rent payments and a long-term upside as property values appreciate over time. Another way to go about this is through a real estate investment trust (REIT) if you want to invest in real estate in an indirect manner.
A real estate investment trust (REIT) is a business that generates income through the ownership, management, or financing of income-generating real estate. It’s a reliable passive income stream with minimal risk, offering an attractive alternative to stock market investments during uncertain times.
Why Should You Do Real Estate Investment?
These are some of the many reasons to invest in real estate.
Stable Investment
Real estate is a stable income source. It is a tangible asset you can feel and touch and is not subject to the same volatility as stocks, bonds, cryptocurrency, or other investments.
This means you can be sure that your investment will keep its value over time. It’s also interesting to note that as the cost of a house goes down over time because of new building styles, the cost of the land where the house is built goes up.
Passive Income
Real estate investment can be a great way to build wealth in that it can provide passive income. Passive income is money that you earn without having to work for it. For example, if you own a rental property, your tenants’ rent will provide you with passive income. You can pay your bills with this money or put it back into other properties to get even more cash flow.
Portfolio Diversification
Diversification is important when it comes to investing because it helps reduce risk. By putting money into real estate, you can spread out your investments and make it less likely that you’ll lose money if the stock market or cryptocurrency market goes down.
Hedge Against Inflation
Another great benefit of investing in real estate is that it protects you from inflation. When the cost of living goes up, the value of your property will also increase. This makes real estate an excellent long-term investment that can help you build your wealth over time.
Different Types of Real Estate Investments
Residential
Residential investment is a passive source of income that involves renting out a property to tenants. It includes both single-family homes and multi-family dwellings such as apartments and condos. These properties can be purchased for personal use or as an investment and can be either owner-occupied or tenant-occupied.
Commercial
Investing in commercial real estate means buying or renting space for a business. It includes warehouses, retail spaces, office complexes, and industrial buildings. These properties are typically larger and more expensive than residential properties and are usually purchased by businesses or investors for income.
Industrial
Factory buildings, manufacturing plants, and other places where things are made are all types of industrial real estate. Most of the time, these properties are in industrial areas or zones and have to follow special zoning rules.
Agricultural
Land used for farming, ranching, or grazing animals is considered agricultural property. Most of the time, these pieces of land are found in rural areas and are used as a backdrop for different kinds of farming.
Mineral Rights
Mineral rights refer to the ownership of minerals found on a property. These minerals can include oil, gas, coal, gold, silver, and other valuable resources. The owner of the mineral rights can extract these minerals from the ground and sell them for profit.
Land Banking/Flipping
Land banking means buying land and letting it grow in value so that you can sell it at a much higher price in the future. Land banking has proven to be one of the safest and highest-yielding forms of investment over the years, and it is mostly practiced by individual investors.
Land banking is when a person buys a plot of land in Chevron, Lagos, for instance, at 12 million naira and sells it after 10 years for 220 million naira. That’s how much a man made in early 2022 from a piece of land he bought and flipped for ten years.
Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are an increasingly popular way for investors to grow their portfolios. REITs, though similar to mutual funds, involve an individual investing in real estate without having to own and manage the underlying property directly.
Instead, they are pooled together and managed by investment companies that help diversify an investment portfolio while generating regular income and appreciation of the underlying securities. REITs, like mutual funds, offer liquidity, diversity, and access to professional management services.
Understanding the Land Investment Market
One mistake usually made by potential real estate investors is allowing sentiment to cloud their investment decision. This is especially true for Nigerians who feel the best place to buy land or build a house is in their village (hometown).
This is the wrong step to take when considering real estate investment. The right way to go about real estate investment is to invest in ‘land boom’ areas. Land boom areas are simply promising locations due to infrastructural developments, population or labor size, and other key factors.
Examples of land boom locations right now in Nigeria are Epe and Ibeju-Lekki in Lagos State. This is because of changes like the recent approval of the Epe airport by the federal government, the Dangote Refinery, the Lekki Free Trade Zone, and many other property changes that would follow from these main ones.
So, if you’re thinking about investing in real estate, it’s best to consult a reputable real estate company or learn as much as you can. This saves you from doing things the same old way, which wouldn’t yield substantial results.
Factors to Consider When Making a Real Estate Investment
Location
One of the most important factors to consider when making a real estate investment is location. The location of a property can impact its value as well as the demand for rental units. When looking for a place to buy an investment property, check out the neighborhood through the internet, friends, and, if possible, people who live there to make sure it’s a good place to live.
Property Type
Another factor to consider is the type of real estate property you are interested in. There are different types of physical properties, including single-family homes, multi-family homes, and commercial buildings. Each property type has its own risks and rewards, so be sure to research it before investing.
Financing
Another critical factor to consider is financing. There are different ways to pay for a real estate project, such as getting a loan from a bank or using your own savings. Before making an investment, look into all your financing options to find the one that best meets your needs.
Lagos, for instance, offers several options depending on your investment goals and financial situation. There are traditional bank loans, investor financing, and government loan programs like the Lagos State Home Ownership Scheme (HSOS). It’s important to learn about the different options and the fees that come with them.
Ownership and Documents
Every year, many Nigerians lose their assets to documentation issues because they didn’t do their research. Although there are laws to protect innocent buyers, litigation takes too much time, so it’s best to avoid it.
While buying from a real estate company is best, you need to ensure you’re buying from a credible one. You should ask questions like;
- What is the title of the land?
- What is the legal status of the land?
- Is the land free from all encumbrances?
- Is a copy of the survey plan available?
If you’re unsatisfied with the answers to these questions, you should walk away from the deal. You can always hire experts such as surveyors and lawyers to help you vet the deal (especially when it’s large) to ensure you’re fully protected under the law.
Rental Income
Another factor to consider when making a real estate investment is rental income. Rental income can provide a steady income, which helps offset the costs of owning an investment property. When buying a property as an investment, you should look into the local rental market to ensure people want to live there.
There’s also the option of owning rental properties through real estate investment groups (REIGs), which is ideal for those who don’t want to deal with the hassle of managing them or hiring a property manager.
Expenses
Having an investment property means paying for things like the property itself, documentation, fencing around the property, etc. So, before investing, confirm all of these details with the real estate company.
Avoiding Scams
It can be tempting to try to find the cheapest possible option when investing in real estate, but this can often lead to problems in the long run.
It’s not uncommon for individuals (“omo oniles”) to claim ownership of a property through their ancestry, even if they may not actually have the right to sell it. This often leads to disputes and legal battles, and you may end up losing the property or being caught in a tug-of-war with other buyers.
Before buying a piece of real estate, it’s important to do a lot of research and due diligence to make sure you know who owns the property and any potential issues that may arise.
While we have “Omo-Onile” as typical land fraudsters, there are also real estate companies that one should never do business with to avoid the tiring tussle and legal problems that come with buying illegitimate property. Below are a few things to look out for when looking for a reliable real estate company.
Experienced and Knowledgeable Agents
When looking at a real estate company, look at their agents to see if they’re a good fit for you. You want to work with someone who knows the area well and has experience with the type of property you’re interested in. You should also feel comfortable communicating with the agent and confident that they have your best interests at heart.
Good Reputation
You can ask for recommendations from friends, family, or colleagues who have recently bought or sold a property. Once you have a few companies in mind, you can check online to see what others say about them. Look for reviews on independent sources like Google My Business and the company’s own website.
A good real estate company will have mostly positive reviews and respond quickly to negative ones.
Variety of Services
A good real estate company can help you with every step of the buying or selling process. They should be able to provide you with market analysis, help you find the right property, negotiate on your behalf, and more. They should also be able to answer any questions you have along the way.
Transparent About Their Fees
When you’re working with a real estate company, you want to be sure that you understand all of the fees involved. Some companies may charge hidden fees, so it’s important to ask about them upfront. A reliable company will be upfront about their fees and won’t try to hide anything from you.
Strong Online Presence
Companies need a strong online presence in today’s digital world. This means having a professional website that is easy to navigate and provides useful information for visitors. The website should also be updated regularly with new listings and blog posts about the industry. A good real estate company will also be active on social media and easy to reach by email or phone.
Property Is Not Cheap
When the offer is too good to be true, it probably isn’t. Any real estate company offering a ridiculously low price for a property is probably a fraud. The property either has documentation issues, is committed, or has been in court for months or even years.
Compare the property with others in the neighborhood and ask why it’s that cheap. If you can’t get a reasonable answer that can be confirmed, run! It’s not worth taking the risk of buying a property that may not be legally yours.
No Force or Cohesion
Finally, don’t rush into any agreements with a real estate company without doing your homework first. If you take the time to research and ask questions, you can avoid getting scammed or taken advantage of.
A good rule of thumb is not to sign anything until all your questions have been answered and you’re confident in the integrity and trustworthiness of the firm.
These are just a few tips to help you find the right real estate company for your needs. With some basic due diligence, you should be able to avoid any shady deals or scams.
5 Tips for Land Banking
Land banking is the real goldmine that gives you genuine wealth. Many have built wealth in Nigeria and worldwide because they understood and implemented the tips you’re about to read.
Buy The Bush
If you’re considering investing in real estate, keep in mind that many successful investors have made their fortunes by purchasing properties in up-and-coming areas.
It’s important to do your research and ensure that the property you’re considering is in a promising location and has good documentation. As the saying goes, it’s wise to not wait to invest in real estate, but rather to invest in real estate and then wait for it to appreciate in value.
Buy More Than One Plot
If you buy only one plot, it’ll put you in a position of regret when the land appreciates. You should buy for the future, not for the present.
Keep the Land for a Minimum of 5 Years
Land appreciates with time, so don’t be in a hurry to sell your land. You might face financial constraints, but be patient enough to have a good ROI.
Sell and Reinvest
After keeping the land for five years and realizing a good ROI, you can sell a part of the land and reinvest in another promising location. You can also start developing the other half if you have the means by building warehouses, apartment buildings, malls, hotels, hostels, etc., depending on what would be best for the location to have a cash flow.
Get a Mentor to Guide You
Lastly, you should get help from someone who has already done what you want to do with real estate investment. Making wealth is not luck. and there are so many landmines you would avoid if you had a guide.
4 Reasons to Make Real Estate Investment in Nigeria
Economic Growth
Nigeria is one of the fastest-growing economies in Africa, and its real estate sector is expected to grow significantly in the coming years. The country’s young and rapidly growing population is projected to reach almost 400 million by 2050. This population growth is expected to drive demand for housing, office space, retail space, and industrial space.
Improved Infrastructure
The Nigerian government has made significant investments in improving the country’s infrastructure in recent years. These improvements include the construction of new roads, bridges, railways, and airports as well as the expansion of existing airports and seaports.
These infrastructure projects are expected to make Nigeria more attractive to foreign investors and help boost the country’s economy.
Rich Natural Resources
Nigeria is rich in natural resources, including oil, gas, gold, lead, iron ore, bitumen, and coal. The country is the largest oil producer in Africa and has the 10th largest proven oil reserves worldwide.
Nigeria’s oil reserves are estimated to be worth over $600 billion. The country’s other natural resources are also expected to play a significant role in its economic growth in the coming years.
Favorable Investment Climate
Nigeria has two distinct seasons – the wet and the dry seasons- meaning that construction can take place all year round. Additionally, Nigeria is located close to other African countries, making it easy to transport goods and materials to and from the country.
5 Hotspot Locations for Real Estate Investment in Nigeria
#1. Lagos
Lagos is the largest city in Nigeria and is on the country’s southwestern coast. The city is a major commercial center and home to several multinational corporations like the Dangote refinery, Lafarge Holcim, MTN, Globacom, etc.
Lagos is also a popular tourist destination due to its sandy beaches and lively nightlife. The city’s real estate market has been booming in recent years, with several luxury apartments and homes being built.
Promising investment locations include Lekki, Abraham Adesanya, Chevron, Sangotedo, Awoyaya, Ibeju-Lekki, and Epe.
#2. Abuja
Abuja is the capital city of Nigeria and is located in the center of the country. The city is home to several government agencies and diplomatic missions, making it a popular destination for business travelers.
Abuja is also a popular tourist destination due to its parks, waterfall, national theater, and museum. It also has an international airport, making it easy to fly in and out of the country. Promising Investment locations include Garki, Gwarinpa, Maitama, Jabi, and Asokoro
#3. Port Harcourt
Port Harcourt is the capital of Rivers State and is located in the southeastern part of Nigeria. The city is a central oil hub and is home to many international and local oil companies like Shell Petroleum Ltd., BelemaOil Ltd., Chevron Texaco Nigeria Ltd., Dominos Oil and Gas, Forte Oil, and Masters Energy Oil and Gas.
The city’s real estate market has been growing rapidly in recent years, with many luxury apartments and homes being built. Promising investment locations include Ada-George, Peter Odili Road, Igbo Etche, Rainbow Housing Estate, Eagle Island, and the New and Old GRA.
#4. Kano
Kano is the capital of Kano State and is located in northern Nigeria. The city is a major business hub that focuses on textiles and grains. Kano is less expensive to live in and also popular with tourists because it has many historical sites, museums and is a peaceful and beautiful city.
#5. Ibadan
Ibadan is the state capital of Oyo and is in the southwestern part of Nigeria. Many international businesses and production factories are based in the city because of the conducive environment. Ibadan is rich in culture and a popular tourist destination.
It is also the largest city in Nigeria in terms of land area and is home to many well-known institutions. Some of these are at the prestigious University of Ibadan, Nigeria’s first university, International Institute of Tropical Agriculture (IITA), University College Hospital (UCH), Nigeria’s biggest and best hospital. Cocoa Research Institute of Nigeria, among others.
Places like Oluyole, Alalubosa GRA, Akobo Estate, Iyaganku GRA, Kolapo Ishola Estate, Jericho, and Bodija Estate are promising investment locations.
Real Estate Investment Challenges in Nigeria
Economic Instability
One of the biggest challenges facing real estate investors in Nigeria is the country’s economic instability. Nigeria is a developing country with a volatile economy. The value of the Nigerian naira has fluctuated greatly in recent years, and this has made it difficult for investors to predict how their investments will perform in the future.
Political Instability
Another challenge facing real estate investors in Nigeria is the country’s political instability. Nigeria is a young democracy, and its political system is still evolving. This can make it difficult to predict how government policies will affect the real estate market in the future as the legal and regulatory framework governing the Nigerian real estate market still needs to be developed.
Corruption
Corruption is another major problem in Nigeria, and it can make it very difficult for investors to get fair treatment from government officials. Corruption often leads to cronyism, which means that friends and family members of government officials are often given preferential treatment when it comes to real estate deals. This can make it very difficult for outside investors to compete.
High Crime Rate
Finally, the high crime rate in Nigeria is another major challenge facing real estate investors. Currently, Nigeria has a very high rate of crime, and this can make it dangerous for investors to visit their properties or even show them to potential buyers. As mentioned earlier, land fraud from ‘omo onile’ and illegitimate real estate companies also constitutes this.
FAQs For Getting Started With Real Estate Investment in Nigeria: All You Need to Know
How Real Estate Investment Works in Nigeria?
Real estate investment in Nigeria involves researching the market yourself or through a real estate company to understand current trends and potential opportunities, to identify which investments have the most significant rewards, and connect with experienced investors to select suitable properties.
How Real Estate Investment Works in Nigeria?
Real estate investment in Nigeria involves researching the market yourself or through a real estate company to understand current trends and potential opportunities, to identify which investments have the most significant rewards, and connect with experienced investors to select suitable properties.
Why Is Real Estate a Good Investment in Nigeria?
Nigeria has a population of over 200 million and a 17–21 million housing deficit. With its ever-increasing population boom, Nigeria is a prominent investment location, a ready market for real estate investment.
What Is Considered a Real Estate Investment?
Real estate investment can include land, residential properties like single-family homes and multi-family homes, commercial spaces like office buildings and shopping malls, industrial properties like factories and manufacturing plants, agricultural real estate like farmland or ranches, mineral rights to extract minerals from the ground for profit, and any other property used to make money.
What Is Real Estate Investment, and How Does It Work?
Real estate investment is the buying or leasing of a property for the purpose of generating income. It entails acquiring, managing, and selling or leasing real estate for profit. In Nigeria, real estate investments can range from residential to commercial and industrial properties, depending on what fits an investor’s needs best.
Can You Get Rich From Real Estate Investing?
Yes, a lot of people have. Although real estate investment is not a get-rich-quick plan. Over the years, it has proven to be one of the most effective ways to build wealth steadily and consistently when done right.
Conclusion
Real estate investment is definitely one of the most reliable forms of investment, and it would be best if you took some time to learn everything you can about it before taking the plunge.
With that being said, we hope you found this blog post informative and helpful. If you’re planning to make a real estate investment or have any questions or concerns, please feel free to contact us. We would be more than happy to assist you in any way possible. Thank you for reading!
