Guide to Investing in Real Estate in Nigeria 2020 - All you need to Know

Real estate in Nigeria? Real estate is a good investment, but how do you get started with investing in it this 2020, how do you start a good real estate business in Nigeria and make profits with it?
After reading this post you would find answers about investing in real estate in Nigeria including the advantages and disadvantages or risks of investing in real estate in Nigeria using our comprehensive guide.

Investing Real Estate in Nigeria in 2020


Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development. Real estate is an asset form with limited liquidity relative to other investments, it is also capital intensive and highly cash flow dependent. If these factors are not well understood and managed by the investor, real estate becomes a risky investment.


Real estate markets in most countries are not as organized or efficient as markets for other more liquid investment instruments. Individual properties are unique to themselves and not directly interchangeable, which presents a major challenge to an investor seeking to evaluate prices and investment opportunities. For this reason, locating properties in which to invest can involve substantial work and competition among investors to purchase individual properties may be highly variable depending on knowledge of availability.


Real Estate is one of the most profitable investment opportunities currently available in Nigeria. One good thing about real estate business is that the investment opportunities it presents are so diverse, there is open to everyone. The population of Nigeria is on the rise and the demand for housing and work spaces will also rise with it. The real estate industry is the fifth largest contributor to the Nigerian economy and a potential goldmine for investors. The growing interest in the Nigerian market is as a result of huge demand buoyed by increasing urban population.


According to Federal Mortgage Bank of Nigeria, the housing deficit is estimated at 17 to 20 million housing units and will be increasing by 900 thousand annually. It is estimated that there are about 10.7 million houses in Nigeria and this statistic is highly inadequate when compared to the size and population. The World Bank also estimated that it would cost as high as N59.50 trillion to bridge Nigeria’s 17 million housing deficit. This huge deficit figure may also be viewed as a vast and untapped investment potential of the country’s real estate sector.

How does Real Estate work?

Real estate investing works best with strategy. In determining how you would like for real estate investing to work for you, it is important to first determine the results that you desire from real estate investing. For example, are you looking to build wealth or to create quick cash or both? Depending upon your desired results, you can choose a short term strategy, a long term strategy or a combination of the both.

Some investors are not sure of the right time to invest. However, intelligent investors consider higher-risk lending in real estate, debt financing and a lot of irregularities that may be happening in the real estate market but it does not stop them from hunting for good deals in this sector.

Ways to Invest in Real Estate

1. Real estate investment trusts, or REITs, are particularly popular in the investment community. When you invest through a REIT, you are buying shares of a company that owns real estate properties and distributes practically all of its income as dividends.
Other ways include

2. Buy a rental property.

3. Participate in a real estate crowdfunding opportunity.

4. Buy a vacation rental.

5. House hack your way to a real estate portfolio.

6.Rent out all or part of your own home.

7. Fix and flip a house.

How To Start A Real Estate Business in Nigeria

Real Estate business is very lucrative and extremely profitable in Nigeria. Most top billionaires in Nigeria are real estate investors. The business is a money spinner to the highest level.

One good thing about real estate business in Nigeria is that the investment opportunity is so diverse that there seem to be something for everyone. Anyone who wish to invest can invest whether he has thousands or billions of Naira, you can even invest without a dime in your pocket. Below are some steps that show you how to get started with real estate investing.

1. Identify Your Financial Stage

2. Choose a Specific Real Estate Investing Strategy

3. Pick a Target Market

4. Decide Your Investment Property Criteria

5. Build Your Team

6. Line Up Financing

7. Raise Cash For Down Payments & Reserves

8. Create a Plan to Find Deals

9. Schedule Your Time & Prioritize Next Actions

Investment Opportunities in Real Estate

Investment opportunities abounds in real estate. Start with what you have. As you grow in the business, you can expand your portfolio. Or you can start big straight away if you have access to capital. Here are some of the areas you can invest and make your own money without tears as a beginner.
1. Land Flipping. This means buying of land and quickly reselling it for profit. This is a good way to start investment in the industry and requires no much effort whatsoever, just your money and knowledge. You will need substantial amount if you want to make millions but you can start small by buying just one plot and grow to buying more plots and acres of lands and keep selling all year round.

2. Open Space Leasing. This works in a simple and unique way. Buy a property in a good location and lease it out for makeshift use. You can lease it to churches or business that wants to develop a makeshift outlet such as car wash and mechanics, Civic and event centres. They will be paying you monthly or annually while the property still appreciates for future sell.
 
3. Real Estate Agency. This one is the oldest, simplest and easiest of them all. It is not investment per say but service rendering. It involves going round and looking for properties to let and for sale, advertise your service and help secure clients for the property owners, you will be paid percentage as commission base on the amount the property is sold or rented. You can start with little or no money and if you creditably well, you can grow to become a giant realtor.

4. Property Development. This is where the millionaires in the industry are involved. They acquire properties in nice locations, develop it into luxury apartments, commercial structures, etc and sell at a very high profit margin.

5. House/Office Rent. Build a house and put it up for rent, get paid all year for a life time. That is exactly how this works

Categories of Real Estate Investments

Residential

Residential structures are properties such as houses, apartment buildings, townhouses, and vacation houses where a person or family pays you to live in the property. The length of their stay is based upon the rental or lease agreement. Most residential leases are on a twelve-month basis.

Commercial

Commercial properties consist mostly of office buildings. If you were to take some of your savings and construct a small building with individual offices, you could lease them out to companies and small business owners, who would pay you rent to use the property. 

It is not unusual for commercial real estate to involve multi-year leases. This can lead to greater stability in cash flow, and even protect the owner when rental rates decline. One consideration is that markets do fluctuate, and rental rates could increase substantially over a short period of time.

Industrial

Industrial real estate consists of everything from industrial warehouses, storage units, car washes, or other special purposes real estate that generate sales from customers who use the facility.

Retail

Retail properties consist of shopping malls, strip malls, and other retail storefronts. In some cases, the property owner also receives a percentage of sales generated by the tenant store in addition to a base rent to encourage them to keep the property in top-notch condition.

Mixed-Use

Mixed-use properties are those that combine any of the above categories into a single project. Mixed-use real estate investments are popular for those with significant assets because they have a degree of built-in diversification, which is important for controlling risk.

Advantages of investing in real estate business

Steady cash flow. The rental income received from property allows to borrow and get the benefits of leverage by helping pay the interest on mortgage.

Control. Direct control over the returns from an investment. Assets are managed by the owner, rather than a large corporation or fund manager.

Leverage. Banks lend up to 80% of the value of the property, enabling to use other people's money to buy larger amounts of investment.

Tax benefits. Investment properties offer large tax advantages including depreciation and the possibility of negative gearing.

Reduced volatility. Real estate offers the firm security, because houses don't depreciate like companies or shares do. Even if the worst property was bought at the worst possible time, chances are it will still go up in value over the next years.

Insurance for many of the risks is available.
Investors can take out building and landlords insurance to protect their interests.

Disadvantages

High entry and ongoing costs. While buying shares of stock requires a minimal cash outlay, real estate investing requires large sums of money - a down payment, closing costs, money to repair and update the property, property taxes, insurance, mortgage payments, property maintenance.

Non-liquidity of property. Selling a property usually takes time, there is no way to sell off one part of a property and convert it to cash. The transaction costs are higher than selling stock shares.

Tenant problems. Periods of rental vacancy while looking for a tenant, renting to a tenant who doesn't pay or leaves the property in poor condition.

Unique risks. Changing interest rates, unexpected repairs, increased liability for accidents that may occur on the property, getting over-leveraged.

Why you should invest in real estates

  • It is as safe as owing a home
  • Does not need special knowledge
  • Technology has made it easier to invest in real estate
  • It is a remarkable easy investment
  • You have full control over your investment
  • Has investment for each budget



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