Investing in Nigeria’s real estate sector in Nigeria is now very popular and has even become an investment trend of sort. 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 purchase a property that you eventually rent out. You will assume the role of a landlord and will thus be responsible for maintaining the property. To cover the costs, you would charge your tenant a certain amount that is going to give you a good profit at the same time. A rental property automatically gives you a fixed rental income on a monthly or yearly basis. In general, properties increase in value over time, which means you will have a more valuable asset as the landlord.
Real Estate Investment Trusts
Only a few Nigerians have heard about Real Estate Investment Trusts (REITs). REITs are a kind of collective investment scheme which is regulated by the Securities and Exchange Commission (SEC), where capital is collected from different investors and used in the acquisition of income-generating real estae and mortgage loans, or both at the same time. 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. Like any other stock, REITs are bought and sold on major exchanges.
Land flipping involves purchasing land to be resold quickly to make a profit. This is actually one of the smartest types of real estate investment, which turns in a nice profit without requiring a lot of effort the investor. All you need is your capital and a good understanding of land ownership and the buy and sell process. With more capital, you can “flip” more properties and increase your profits faster.
Investing in property development is capital-intensive. You need to purchase properties in prime locations and develop them into attractive apartments, commercial structures, etc. In most cases, property developers in Nigeria sell their properties at twice their capital expenditure. When it comes to property development, keep in mind that location is critical.
These are only the four most common types of real estate investment opportunities in Nigeria, and this is only the tip of the iceberg. There can be countless variations under any of these. 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.