For investors globally, real estate investment has long been a profitable alternative. Investing in Nigerian real estate can be a terrific way to generate passive income and accumulate long-term wealth, as it is one of the fastest-growing markets in all of Africa. But it might be difficult to know where to start in Nigeria when there are so many real estate investing possibilities accessible. We’ve listed the top strategies for real estate investment business in Nigeria in one blog post. We cover every crucial investment choice in the Nigerian real estate market, from rental homes to commercial real estate.
What is Real Estate Investment?
Real estate investment originated with man’s cultivation of land and delineation of territory, as well as the ensuing commerce centered on using that portion of the planet for profit and all the activities conducted on it. Real estate is as old as God’s green earth.
Returning to the fundamentals of economics will help you understand the four components of production:
- Land
- Work
- Capital
- Entrepreneurship,
seated on the highest island. In the past, you needed land to establish any kind of business or engage in trade.
The most important points to note about Real Estate Investment in Nigeria
Similar to other Nigerian industries, the real estate market too requires ongoing literary adaptation to reflect local conditions. The following are crucial details regarding real estate investment in Nigeria that you should be aware of:
#1. Take Advice from Nigeria’s Top Real Estate Firms and Developers
It goes without saying that you need to look at some successful Nigerian real estate companies and developers if you want to learn more about how to invest in real estate there.
You must research how they made real estate investments in Nigeria and maintained their success over time. They have triumphed over many obstacles, managing to not just survive but also grow.
You should absolutely keep an eye on what they are doing if you intend to start a real estate business or invest in real estate in Nigeria. I can attest that they are doing a great deal of things correctly.
#2. Selecting the Best Real Estate Investing Approach
In general, there are four (4) main approaches to real estate investing:
Rentals
One of the most established, reliable, and secure ways to make money from real estate is through rentals. Purchasing a home to list for monthly or yearly rental income is known as renting. A few benefits include consistent cash flow, asset appreciation, the ability to use the property as security for loans, and the potential to sell it for a profit in the future.
The drawback is that, similar to many other Lekki phase 1 and Banana Island apartments, you can find that your unit is vacant for extended periods of time.
Dangote has leased more than fifty units, and if you purchase these as rental properties, you will be assured of earning NGN800,000 in rental revenue annually.
You can buy bulk land here and sell it for a reasonable price in a neighborhood like Kubwa Abuja, which is home to people with poor and middle incomes.
Flipping of land and Houses
Also known as land/property banking, this involves buying a property with the intention of selling it as soon as possible for a profit.
Property Development
Land must be purchased, different house types must be built, infrastructure must be developed, and the finished product can be sold to a buyer at carcass (lintel level), fully finished with fixtures, plumbing, and other amenities, or fully finished and furnished.
REITS
In a nutshell, a REIT is a trust that pools money from individual investors and uses it to buy, run, and/or manage real estate that generates income.
Different REITS exist, such as Mortgage REITS and Equity REITS. These REITS are listed on the Nigerian Stock Exchange and pay dividends to subscribers based on the income from their investments and owned properties.
Like stocks, REITs are traded on the Nigerian Stock Exchange (NGX); stockbrokers are the intermediaries for buying and selling REITs.
#3. Recognize the Government’s Role
In Nigeria, the government plays a major role.
Upon the introduction of motorcycle ride-hailing to the market, investments and livelihoods were quickly destroyed with a mere announcement. Businesses raised millions of dollars from investors, and it all ended in a single day.
Even more, the Land Use Act gives the governor free access to all state land, underscoring the role of government in this sector. Therefore, for any land transaction to be enforceable, the governor must authorize it.
You will run afoul of the law if you don’t comprehend this or the part the government plays in rectification, ratification, granting titles, and authorizing transactions.
Depending on how far you want to go, making friends with members of the government, government agencies, and land bureau officials is one tactic.
#4. Recognize titles and land laws
In light of the foregoing, you should be aware that only properly named properties that are registered with the state registry may be the subject of legally binding property transactions.
The C of O is the major title you should constantly be on the lookout for. A certificate of occupancy is proof that a parcel of land has been leased to a certain person for 99 years.
The titles to other land that you should be aware of include Gazette, Excision, and Governor’s approval.
#5. Selecting the Proper Site is Crucial.
As the phrase goes, location, location, location is everything when it comes to real estate!
Here in Nigeria, there is no difference in this reality.
The site would be the most crucial choice, regardless of the approach you take!
#6. Observe areas of federal concern
The 1976 docudrama “All the President’s Men” popularized the expression “Follow the money,” which implies that political corruption might be exposed by looking into money transactions between parties.
As a result, in order to succeed in the real estate industry and make investments in Nigeria, one must closely monitor the policy direction and areas of interest of the government.
#7. Make the most of cities
As a result of the aforementioned, Lagos State has designated Ibeju Lekki as an urban area. This indicates that the government has an interest in the area and intends to carry out significant infrastructural improvements.
The government “commits” a sizable amount of land in major urban areas for its use either now or in the future, in accordance with the Land Use Act.
The remaining portion is free, and ownership of these free pieces can be transferred to ancestral land owners for any purpose they see fit through a process of regularization, ratification, or excision.
Due to this, Ibeju Lekki, a hitherto isolated area, has transformed into a residential and commercial hub and an eldorado for billion-dollar investments, including the Dangote Refinery, Alaro City, and Free Zones, among others.
#8. Benefit from GRAs
Government Reserved Areas, or GRAs as they are known in Nigeria, are a euphemism for wealth and a higher standard of living. These upscale neighborhoods were first developed to serve the needs of white colonial officials.
But following independence, Nigerians started to hold prominent administrative positions that were previously only held by their white rulers, including their upscale and exclusive GRA home.
These days, GRAs are typically well-maintained, well-serviced areas with a decent road network, well-maintained estates, and occasionally the state capitol building, along with politicians, celebrities, and other prominent figures in the nation.
Lagos is home to the lone GRA on the island, Abijo GRA, as well as two GRAs on the mainland, Ikeja GRA and Ogudu GRA.
Purchasing real estate in a gated community (GRA) is a wise decision since, depending on your approach (construction, flipping, or rentals), you can expect enormous returns because these communities are exclusive and hence demand premium pricing.
#9. Benefit from Beachfronts
Lagos, Nigeria, has the Atlantic Ocean and the Lagoon on either side. With hectares of gorgeous coastline, you can utilize this prime real estate for your beachfront properties in Lekki, Oniru Beach, and VI.Popular beachfront estates in Lagos are Pinnock Beach Estate and Banana Island Lagos.
#10. Utilize the infrastructure development plan locations.
Lagos is making an effort to improve the value of real estate through construction, developments, and infrastructure projects—all of which have a good impact by Nigerian standards! involves advancements in infrastructure, at different phases of completion.
#11. Take advantage of Free Trade Zones
Free zones are areas designated for unique economic development within a nation where municipal, state, and federal governments have little to no influence. Due to the private sector’s strong influence, many of the bureaucratic obstacles that arise in trade, including imports, exports, and local trade, are avoided.
Because of this, free zones attract a lot of foreign direct investment (FDI) from both domestic and foreign investors.
Nigeria has a few of these free zones, including
- Eko Atlantic
- Alaro city
- Free Trade Zone by LFZDC (Lekki Free Zone Development Company)
- Dangote Refinery
#12. Invest early in megacity projects
Lagos is a thriving real estate center, home to hundreds of new projects that open every other month.
However, a few of these initiatives often stick out. These real estate projects almost seldom happen without notice—perhaps it has more to do with the scope, ambition, services and amenities to be offered, and the planning!
Similar to Banana Island, these communities begin extremely modest and grow over time to become upscale, exclusive communities that offer substantial returns to investors.
How to Fund Real Estate Investments in Nigeria
Considering the Real Estate Investments mentioned above, how are these projects funded? There are other techniques you can use, such as:
#1. Out of pocket
The most popular and user-friendly option in this region of the world, real estate projects can be readily funded with a combination of savings and salaries, depending on the size and suitability of the project.
#2. Take Advantage of Payment Plans
Even while you might not have the money to pay millions of dollars all at once, you can still benefit from a variety of payment options.
Following a down payment of a predetermined amount, which is only a portion of the total cost, you can spread out the remaining payments over a period of one to two years.
After the third month, these often have a little interest charge, but some are interest-free for up to four years! similar to Landwey’s growth at Oworonshoki.
#3. Bank Loans
While this approach may not be as well-liked by everyone, many real estate developers and businesses use it. It ultimately comes down to using OPM, or other people’s money, to finance real estate endeavors.
Even in this region of the world, banks that are typically hesitant to lend money to individuals or companies happily open their checkbooks for real estate ventures and improvements.
Even after collecting earnings from their real estate investment ventures, most companies still get together to discuss matters such as interest rates.
#4. Partnerships
In Lagos, this is highly common as groups of people, businesses, and organizations band together to pool money and finance real estate projects. The terms of payment are flexible, and instead of buying land one at a time and starting construction simultaneously, they can buy it all at once and protect the land as a group rather than as a lone ranger amid many wolves!
The Chevron cooperative is a well-known co-op in Lagos. Their real estate portfolio includes a number of properties, including Nicon Town Estate, Chevron Drive, Northern Foreshore Estate, and a few estates in Abijo GRA and across from Fairfield Apartments Abijo.
#5. Sponsorship deals
Often without the funds to develop, ancestral land owners (also known as omo ni ‘ile) who hold large tracts of land occasionally collaborate with sponsors and developers to develop and sell their land in order to generate funds for themselves.
This approach is known as sponsorship. Plots that correspond to the amount of land you work on are offered to you in exchange.
Large corporations including as Landwey, Pwan, Veritasi, Revolution Plus, and others acquire bulk land in Ibeju Lekki and Epe in this manner.
#6. Joint Ventures (JVs)
Another method for financing real estate ventures and businesses is through joint ventures. Usually, there are two, three, or more participants;
The landowner (typically one who owns a large tract of property in a desirable area). The developer with the intention of creating and installing infrastructure on the land. The investor is typically the same as the developer, but on other occasions, the investor pools funds to carry out the project or contributes to it in exchange for a projected return on investment from the sale or rental of the property.
Things To Consider Before Investing in Real Estate in Nigeria
Just 37% of Nigerians were property owners in 2011. For the general public and potential investors, information is the key to bridging this divide. Additionally, the obstacles to investing in the industry can be removed by streamlining the procedure.
These are eight steps that you should think about if you want to invest in real estate.
#1. Do Your Research
There are several places to obtain the knowledge you require if the real estate market interests you. Speaking with locals and using the media, both offline and online, are a few of these outlets. For search phrases on Google and other pertinent Nigerian real estate websites, you can set up Google alerts. This way, you’ll always be current.
#2. Select The Particular Real Estate Market
Based on your objectives, select the industry that will help you the most. It might be a retail establishment, apartment building, office building, or industrial facility. For example, investing in residential real estate might not be the ideal choice if you’re looking for a speedier return.
#3. Recognize the Hottest Real Estate Markets
Even while the market may not be booming right now, that could soon change due to infrastructure development and convenient access to core business districts. It makes sense to build high-rises to rent to the working class because building a freeway eases traffic and they tend to relocate in that direction.
#4. Select the Location and Method of Fundraising
The financing source may differ based on your current stage of life. It could come from relatives, close friends, or financial organizations. Alternatively, you may possess the funds directly. Ensure you are well-versed in your actions before approaching the bank or other establishment. It must make sense for them to grant you the money based on your plan.
#5. Make sure the details are correct.
Take caution not to do business with untrustworthy individuals. Make sure everything is worked out properly, from the owner’s worries to the government obligations by consulting a specialist or a lawyer.
#6. Recognize the law
One of a Nigerian’s rights is the ability to own property. States, however, retain authority over land that is located within their borders thanks to the 1978 Land Use Act. They then go through a lengthy and bureaucratic process before making it available to you. A certificate of occupancy will be given to you so that you can sell or develop the land.
#7. Consider The Future
You cannot go wrong if your property of interest is in the path of the ever-expanding urban regions, even though it may not now have basic infrastructure. You might sell it for millions of dollars more when you sell it a few years later than you paid for it. Take care not to overlook the larger picture.
#8. Utilize Internet Promotion
You cannot afford to disregard the Internet as a real estate investor in the Nigerian market. When your business is just getting started, the Web is a cheap way to drive visitors to it, regardless of whether you have a website or stay active on social media. Using internet marketing to draw in consumers or sellers may be beneficial.
What is the Best Way to Invest in Real Estate in Nigeria?
Rental properties, commercial real estate, house flipping, real estate investment trusts (REITs), real estate crowdfunding, real estate development, buy and hold strategy, and joint venture investing are the top eight methods to invest in real estate in Nigeria.
Is Real Estate Investing in Nigeria Profitable?
Indeed, it is advantageous to invest in real estate in Nigeria. Nigeria presents a potentially attractive market for real estate investors due to its expanding population and high demand for homes. But there are hazards associated with real estate investing in Nigeria, so prospective buyers should do their homework and analysis first.
What are the Risks of Investing in Real Estate in Nigeria?
Investing in real estate in Nigeria carries some dangers, such as a dearth of transparency, unstable political and economic conditions, and security issues. Certain real estate investment options can have hazards, such as problems with property management, changes in the market, and tenant turnover. Before purchasing real estate in Nigeria, investors should carry out appropriate due diligence and consult a specialist.
What is the Minimum Amount Needed to Invest in Real Estate in Nigeria?
Depending on the investment type, a minimum investment amount may be required to purchase real estate in Nigeria. Commercial and rental properties, for instance, could need a bigger initial outlay than real estate investment trusts or groups. When creating their investment budget, investors should also take linked expenses like taxes, property management fees, and upkeep into account.
In Conclusion
The greatest choices for real estate investment in Nigeria are those that benefit you, the investor. Think about your resources—time and money—and if you want to handle household problems on your own when they come up. Read our article on the “Fastest way to make money online” as well.
- LOAN FOR LAND PURCHASE: All you Need To Know
- HOW TO START INVESTING: Beginners Guide
- The Best 2023 Paying Jobs in Real Estate Investment Trusts
- REAL ESTATE REITS: How They Work and How to Invest
- REAL ESTATE STOCKS: Residential, ETF & Cheap Stocks With Dividends
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