Investing in Nigerian real estate has become increasingly popular and may even be considered as some kind of an investment trend. But while there is no shortage of opportunities to make enormous profit, the process isn’t always simple.
The rental property business is about as ancient as the practice of owning land. You buy a property and then rent it out. You will become a landlord, who is responsible for the maintenance of the said property. To cover the costs of doing so, you would charge your tenant a monthly amount that is enough to give you a decent profit at the same time. By owning a rental property, you automatically have a fixed rental income ever month or every year. Properties generally appreciate in value as time goes by, meaning your asset as a landlord will increase its value.
Real Estate Investment Trusts
Only a few Nigerians have heard about Real Estate Investment Trusts (REITs). REITs are a collective investment scheme under the regulation of the Securities and Exchange Commission (SEC), where capital is pooled from investors and he money is used to acquire real estate properties, mortgage loans, or a combination of the two. The portfolio of underlying assets is handled by a team of professionals whose job is to maximize the profits of investors, who will be able to hold an indirect interest in real estate following by way of a flow-through set-up, and it will be as though the property were a direct investment. REITs, just like other stocks, may be bought and sold on the key exchanges.
Land flipping is the business of buying of land and reselling it fast for a profit. This is probably one of the smartest ways to invest in real estate in Nigeria because it turns in a huge profit without requiring too much from the investor. You just need a good understanding of the buy/sell process and land ownership, and of course, capital. Naturally, the more capital you have, the more properties you can buy and sell for profit, and the faster your initial capital grows.
There is probably no real estate investment type that is as capital-intensive as property development. You must purchase properties in prime areas and put up apartments, commercial buildings and the like, before selling them for huge profits. In most cases, property developers in Nigeria sell their properties at twice their capital expenditure. If you’re interested in property development, take note that location is key.
These are only the four most common types of real estate investment opportunities in Nigeria, and this is only the tip of the iceberg. Under any of these examples, there can be so many other variations. Best of all, Nigeria’s real estate investment industry carries huge potential, but as an investor, you have to be careful with your choice, carry due diligence, and strike that perfect balance between cost and benefit.