Real estate investment in Nigeria is a very lucrative and profitable type of investment. And the most interesting part of investing in Nigeria real estate is its diversity; having something for everyone irrespective of your budget.
You can then expand your real estate portfolio further as you grown in it.
If you have not been thinking of investing in the Nigeria real estate sector, now is the best time as real estate investment in Nigeria is becoming popular and currently booming as we speak. It is a known fact as people are making millions of naira in it irrespective of the economic downturn.
Real estate investment goes beyond owning a home and it is not as simple as investing in stocks.
As a real estate investor, there are different ways you can venture into real estate investment.
In this yet-another-eye-opening article from LandiconRealtors.com, I will be sharing with you 5 ways you can turn real estate to investment that could bring in huge returns for you, and not just the buying of a dream home for you and your family alone.
5 Lucrative Ways to Invest in Real Estate in Nigeria
The popular belief is that you need to have hundreds of millions of naira in order to start real estate investment. But the truth is, you can actually get started with the little you have, it thus takes time though.
See below for ways you can venture into real estate investment with what you have right now.
#1 – Rental Properties
Making a passive income from rental properties as a means of real estate investment is as old as the practice of land ownership itself.
You buy a property or buy a land and build from scratch, then rent it out to those interested (tenants).
As the owner (landlord or landlady) of this property, you make unending rental income from renting of this property, which could be residential and/or commercial.
Whether to choose residential or commercial properties will depend on the location you intend to site your property. For properties in a well-developed and highly commercialised area, erecting a structure for commercial purposes would be a smart idea as commercial properties do better than residential in terms of rental returns.
Landlords grow rich in their sleep without working, risking or economizing. – John Stuart Mill
Whether you own a residential or commercial property, you are still having a form of fixed yearly or monthly rental income. And in addition to this, you gain from the capital appreciation of your property. This comes in a way of rental increment for your tenant.
However, like any other investment, there are cons in rental properties as an investment option, especially in Nigeria.
It varies from having bad tenants to not having tenants to occupy your property. Having bad tenants might make you spend a lot in the maintenance and running of your property. The latter can be avoided if you have the proper and right understanding of the real estate sector.
#2 – Land Flipping
Another way to make a lot of money investing in real estate in Nigeria is by buying landed properties and quickly reselling for profit.
This method, just like any other, requires you have a huge amount of money to start with. However, the good side is, you will be having huge returns on your investment if done right.
For those looking to start with little money, you can start small by buying at least one plot of land and then grow to buy acres of land as you recoup on your investment.
With this method of real estate investment, just like other methods, location is the most very important factor. This will determine your success in reselling the property. And with today’s technology, selling a property is easier using the internet as there are a lot of free property listing websites where you can buy and sell landed properties.
The best way to determine a good location is to find a well-developed area where there are good commercial or industrial activities and, buy land or property there and then resell at a higher price to eager buyers.
#3 – Long-Term Buying, Reselling or Developing
This method of real estate investing in Nigeria is one of the most profitable of all but it requires a lot of patience. So I will be writing extensively on this method of investment.
Long-term real estate investing simply means buying land in a fast developing area and wait for the area to become developed, then you resell. You can as well wait, develop and then resell the property or use it as a rental property.
This method of real estate investment can be extremely profitable if done right.
To determine a fast-growing area or an area at the fringe of development, you need to look out for;
- government policies
- proposed government projects
- great projects and developments
- new major road construction
- new major market
These are economic indicators projecting that a particular area is going to be well developed and it is only wise to buy land in this location before people start trooping in, then wait for huge capital appreciation. This is why I said this method of real estate investment requires a lot of patience and at the same time is very profitable.
Take an example of those that invested in the then Maroko (now Lekki). In the late 90s, a plot of land at Maroko was selling for around N50,000 a plot. Today, a plot there (now Lekki Phase 1) do not go below N100m. The reason for this huge capital appreciation is as a result of government plan for that axis and the close proximity to established developments and city like Ikoyi.
The best way to determine a good location is to find a fast developing area where you know people will be rushing to in a few years time, buy land there before they get there.
This is why location is the most important factor you need to consider while investing in real estate in Nigeria.
The President of United States, who is also a real estate tycoon, Donald Trump once told a story of how he bought a property in the 80’s when it was actually stupid to do so because of the location and condition of the property. According to him, he bought the property for $1 million and as at the year 2000, people offered to buy that same property for $450 million.
A property worth $1 million about 20 years ago now worth $450 million – that is huge!
Though it actually looked stupid to others for buying a property at the location for $1 million, Donald Trump saw what they were not seeing and that is how this method of real estate investment works.
To make so much money in real estate investment in Nigeria with this method, you must learn how to see good properties, even before they appear good.
One awesome place to invest in real estate in the world right now is Lagos state, Nigeria. And even when you intend to invest in Lagos real estate, you still have to be picky in your choice of location.
A location that is about to experience a huge influx of development soon is Ibeju Lekki Local Government Area of Lagos State. If you haven’t been to Ibeju Lekki and you are looking to invest in real estate in Lagos Nigeria, I’ll advise you visit Ibeju Lekki very soon.
Yes, there are well-developed areas like Ikeja, Lekki, Ikoyi, Victoria Island, Victoria Garden City, Banana Island, etc where you can invest in and resell quickly for some profit. But capital appreciation of land and properties in this locations have reached its prime, thus yielding only about 2 to 3% in years. If you are looking to start land flipping as a way of investing in real estate in Lagos, then investing in these well-developed locations is not totally a bad idea.
However, if you are looking for huge returns on investment in Lagos real estate right now, go to Ibeju Lekki.
Because what happened to Donald Trump’s $1 million property that shoots up to $450 million in 20 years is going to happen to Ibeju Lekki properties too.
Many people don’t know this but let me quickly give you a few reasons why I said so.
You remember the economic indicators I wrote about up there right… government policies, major road construction, mega projects, etc? All are present at Ibeju Lekki and they are;
- Lekki Free Trade Zone (Lagos state government project in partnership with some Chinese consortiums)
- Lekki International Airport
- Lekki Deep Seaport (a $1.5b project flagged off in March 2018 by V.P Yemi Osinbajo)
- Dangote Oil Refinery (biggest private refinery – 8 times bigger than the whole of Victoria Island)
- Dangote Fertilizer Plant
- Dangote Jetty (already operational – berthed the first ship 25th September 2018)
- Expansion of the LFTZ Road to 8 lanes.
- Construction of an alternative road linking the Lekki Free Trade Zone Road with the Lekki-Epe Expressway.
- Power Oil (maker of Indomie – already operational)
- Kelloggs (a UK company, maker of Coco Pops – already operational)
- Eleganza Industrial City
- Coscharis Motors Head Quarters
- Pan Atlantic University (permanent site of Lagos Business School)
- Computer Village (quietly well positioned)
- Shoprite (quietly well positioned)
- Lagos Smart City (Lagos state project – proposed)
- 4th Mainland Bride (proposed)
- La Campagne Tropicana Beach Resort, Awo Museum, Eko Tourist Center, Eleko Beach and other relaxing and resorts.
Can you imagine all these projects and happenings in Ibeju Lekki alone?
Tell me what Lekki Phase 1 has that made it rose from less a million 20 years ago to over N120 million today. Nothing. In fact, it was a slum.
Ibeju Lekki has it all!
No wonder it was estimated that by 2025, over 70% of Lagos internal generated revenue (IGR) will come from Ibeju Lekki.
With all these indicators, who wouldn’t want to invest in Ibeju Lekki real estate?
Investing in real estate in Ibeju Lekki is simple – buy a lot of plots of land in Ibeju Lekki, then wait for 5 to 15 years and your landed properties would have risen to an unbelievable price.
Just like any other method of investment, knowing the ropes in and out is very crucial in Ibeju Lekki real estate investment. This is why it is very important to make use of the service of a genuine and trusted realtor who is well informed.
#4 – Property Development
You can also invest in real estate by venturing into the property development option.
Unlike the long-term investment method, this method requires you choose a well-developed location.
Investing in this type of real estate investment is really capital intensive. It involves buying properties in a good location, developing them into luxury apartments or erecting commercial structures and sell at a very high profit margin.
If you spend N200 million to develop a property in a well-developed location, for example, you are surely going to sell the property for around N350 million to N400 million.
The only downside of this method is if you got it wrong with the location. But if you carefully and wisely choose a nice location, people will be begging to have your property sold to them.
#5 – Estate Development
Although this method should be in the same category as property development, I decided to give it a separate point because this method is more trickish.
This method of real estate investment requires you know the ins and outs of the real estate sector and most importantly the location and indigenous families that own the land.
You simply find a good location where you can acquire a very large expanse of land, meet the Baale (community leader) or the indigenous family that owns the land, bargain with them and buy from them (but do your due diligence before paying anyone).
Then make a private, secure community (estate) out of it.
People want to live in a well-organized, serene, secure and clean environment where major amenities like good roads, potable water and electricity are readily available. So if you have the budget, venture into estate development but do your due diligence to ascertain the status of the lands you’re buying, whether it is free from government acquisition and does not have an unsettled case in court.
If the land doesn’t have a title, you are going to be the one that will process the land title documents like survey, excision, C of O or Governor’s Consent.
In as much as this method requires you to be very careful (because some of the so-called Omo oniles are dubious), it is highly profitable if you are a genuine and trusted developer.
With all the above-listed methods of real estate investment in Nigeria, there are still several variations of real estate investments. Like any investment, there is much potential in the real estate sector, however, make careful choices, carry out due diligence and weigh the cost and benefits of your investment choice before diving into it.
Although real estate investment is termed the sweetest type of investment, doing it the wrong way could make a negative impact on your bank account.
My advice for you is to always make use of the service of a trusted and informed realtor who could help you through the processing of acquiring landed properties without any hassle.
Click here to see my list of recommended landed properties you can invest in right now for a high return on investment.