Dissecting the Real Estate Investment in Nigeria
There are hundreds of real estate companies in Nigeria. Some companies have been in business for more than 50 years. On the other hand, new companies are being born in the industry every day.
Irrespective of when a company enters the real estate industry, there is always enough service to go around. As long as the company is fully licensed and delivers quality services, getting buyers for their properties becomes seamless.
The birth of the internet has made real estate investment in Nigeria more prominent. Irrespective of your location, you can now get properties in any city, town, or village in Nigeria.
This article will expose you to affordable real estate investment in Nigeria and how you stand to benefit by joining the moving train. We will discuss the available investment options and their benefits. Are you ready? Let us dissect the real estate industry.
Four Types of Real Estate Investment in Nigeria
There are different types of real estate investment in Nigeria that you should consider. The four mentioned here are the top options.
- Residential Real estate
Residential Real estate refers to properties meant for residential purposes. They are not used for business or other purposes aside, strictly for residential sake. Properties that fall under this category include detached houses, single-family homes, condos, duplex, co-op, townhouse, etc.
- Commercial Real Estate
Commercial Real estate refers to properties used for business purposes. They include lands and buildings that are devoted to business activities. Examples of commercial real estate properties include shopping malls, hotels, stores, shops, parking spots, hospitals, theatres, office spaces, etc.
Properties not developed around us are under the land. Bare or vacant land is another type of affordable real estate investment in Nigeria that is most popular. Such vacant land can be acquired and developed. Upon developing the land, owners can use them for residential or commercial purposes. The development of vacant land can help increase the value of the land both in the short and long term.
- Industrial Real Estate
Land and buildings used for industrial purposes are under industrial real estate. Unlike commercial real estate, industrial real estate serves manufacturing and production purposes only. Manufacturing plants, production plants, storage facilities, research and development buildings, etc., fall under industrial real estate.
Understanding the Real Estate Investment in Nigeria
Entering the real estate industry in Nigeria promises to bring rich results. Nonetheless, you should make your real estate investment decision on two vital factors.
- Aim for higher returns (Maximum Return)
- Lower risk (Minimum Risk)
Your goal is to get maximum return on your investment. But you have to be careful when deciding on your investment. Ensure that the risk is minimal. Otherwise, the investment will not be worth your effort.
What does it mean to invest in real estate? When you acquire a real estate property for investment sake, you are investing in real estate. When investing, the sole goal is to generate income from the property rather than use it for personal purposes.
Can I have more than one real estate property?
Yes! There is no rule on the number of real estate investments you can own but if you can get affordable real estate in Nigeria the better. For some, they have properties for their personal use and others that fall under their investment.
Those that fall under their investment are often rented out or used for other purposes that generate income, either from the user’s payment or through price appreciation.
One of the risks you have to evaluate is the tax requirements of the investment. Commercial and industrial real estate has different tax levies and requirements. Since they generate income, you may have to pay more tax than you would for residential real estate or bare lands. To keep generating income from the investment, you must ensure that you regularly pay your tax and document your payment.
Law guiding real estate investment in Nigeria for Foreigners
Several laws guide the investment process in real estate in Nigeria. You must understand these laws to prevent the forfeiture of your investment and properties.
While Nigerians can freely invest in real estate, the same does not hold for foreigners. Foreigners, under Nigeria law, cannot directly invest in real estate unless they satisfy some conditions. The goal of such a law in Nigeria is to prevent the monopolization of land. To acquire land or property, a foreigner must:
- Acquire land from a Nigerian citizen with the approval of the state governor.
- Acquire land from an incorporated corporate body in Nigeria.
Aside from these two means, no foreigner can get properties or investments in the real estate industry in Nigeria.
Why Consider Real Estate Investment in Nigeria
There are loads of benefits that originate from investing in the real estate industry in Nigeria. Note that the benefits often depend on the goal and desire of the investor. Nonetheless, the benefits are matchless.
Rental income is one of the best sources of stable income in Nigeria. Individuals or organizations that use your real estate properties will pay monthly rents for the property. Aside from the maintenance fees, an investor does not spend much on such investments. Such investment will continue to generate funds for as long as you desire. It only stops generating funds when you sell the property.
In Nigeria, you can only expect the value of your real estate investment to increase. You can buy vacant land for N100,000 and see the value rise to N500,000 or more within a few years. The chances of the land value reducing are low, unless in the case of a natural disaster destroying the property.
Capital appreciation is a game of the patient dog eating the fattest bone. The longer you hold the property, the higher your chance of selling at a higher fee later. Yes, you can only earn after selling, and the longer you wait, the higher the value grows.
The cushion against inflation is another top reason why investing in real estate is a good option. Inflation is unavoidable in the present economy in Nigeria. Hence, upward movement in the price of goods will increase the income generated from your investment.
If you rent your property out, you will have to significantly raise the price to meet the market standards from time to time. You will not need to worry about the rising cost of living as your income increases automatically.
Control of resources
Another top benefit you get from real estate investment is the chance to be in control of your financial life. Owning real estate property makes you the boss of your time, resources, and activities. The entire decision-making task lies in your hand, leaving you with more responsibilities and income. You can decide to hire people to help you manage your properties while focusing on other aspects of your life.
Investing in The Real Estate Industry in Lagos Nigeria
We have briefly discussed how foreigners can invest in real estate in Nigeria. We will switch attention to how Nigerians can tap into affordable real estate investment in Nigeria.
Buying a property should not be for long-term use in all cases. One strategy to make a quick profit on your investment is to purchase and dispose for profit within a short period. Such action is termed property flipping and helps you earn more within a short period.
You can buy vacant land, let’s say in Lagos, and sell to companies that come calling for such properties within a short period. You can also buy a building, repair or renovate the building, and sell for more profit. Remember that the property should be in your care for a short period. Otherwise, you might not hit your target profit.
House hacking is a popular real estate investment method in Nigeria. An investor will buy a property for both personal and rental purposes. An investor can buy a duplex and reside in one section of the duplex while he rents the other sections out. In such a situation, the investor can generate money to augment their income and reduce the financial burden for maintaining the property.
At one point or another, you may have used or benefitted from rental properties. You may live in a rented apartment, sell goods in a rented store or shop. Renting properties is one of the oldest affordable real estate investment practices. All you need to do is invest in a property you desire and rent them out to tenants. Tenants will pay on a yearly or monthly basis.
When you rent a property out, you become a landlord and will have to cover the maintenance and management of the property. You have the opportunity to charge the maintenance fee on the property to reduce your financial commitment to the property.
Investing with Real Estate Investment Trusts (REITs)
Investing with a Real estate investment trust (REIT) means you can buy and sell properties as done in the stock market. You do not own, manage, or finance the property. The Real Estate Investment Trusts owns the properties, and you can only invest and earn dividends from such properties. Another option is to invest in a Real Estate Investment Group. They have properties like a set of buildings that you can buy part of as an investor. The company will monitor and manage the property and take a percentage of the monthly rent.
We have discussed in detail information about affordable real estate investment in Nigeria. We have identified the benefits, type, and how you can become an investor. Are you interested in becoming a real estate investor or agent in Nigeria? At Landshop, we are ready to help you actualize your dreams. We will assist you with the property of your choice and help you reap rich rewards from your investments. Consult us today!