If you’re just starting to invest in real estate in Nigeria, you’ll find out that you have a lot to learn. There are many “dos and don’ts“ and many unwritten rules about real estate investment in Nigeria.
Unlike other investment options like stocks, agriculture or even cryptocurrency, real estate investment in Nigeria is a lot more complicated. There’s the financial requirement, understanding the legal aspect of real estate and due intelligence on your own part.
With a population of almost 200 million, increasing rural urban migration, increasing demand for both luxury and affordable housing, investing in real estate is the perfect investment for both new and experienced investors in Nigeria.
Real estate investment in Nigeria is a long term investment and not some get rich quick scheme. Your returns on investment may not be as fast as investing in other businesses but, you can be sure you’re guaranteed huge recurring returns on your investment. This is why you need a solid education before you make your first real estate investment.
Nigeria’s population is currently at 180 million and it still expected to increase(with a yearly average growing rate of 3% ).With the increasing population comes the increasing demand for affordable apartments, office space, shops and landed properties.
According to the world bank, over 16 million new houses need to be provided to solve Nigeria’s housing problem.
With the federal government doing next to nothing to help solve the increasing demand for affordable housing, real estate developers, private investors, high net worth individuals, entrepreneurs and ordinary people like you and I have a role to play in solving the increasing demand.
Rural Urban Migration is at an all-time high
More Nigerians are moving to the city. Thousands of Nigerians are leaving the rural areas in search for higher education, good jobs and better life in the cities.
According to world bank data, the rural population in Nigeria as decreased from 85% in 1960 to 51% today and it’s still expected to decrease in the coming years
Over the coming years, many more Nigerian will need a roof over their heads in the city. The increasing rural-urban migration will bring out an increasing demand for accommodation and real estate properties across cities in Nigeria.
The Nigerian Real estate industry is still growing
Despite recording negative growth in 2016, the Nigerian real estate sector is expected to grow at an average rate of 5.39 percent.
Experts predict that, the growth would depend on the support from private and public investments in the sector , agricultural revolution, favourable oil prices and increase in volume of oil production.
Why you should invest in real estate in Nigeria
Below are the benefits of investing in real estate in Nigeria.
Real estate guarantees steady income
Most Nigerians investing in real estate do this because of the steady flow of cash through rental income. Depending on where your property is located, you can rake in millions in rental income monthly or yearly (depending on your rental agreement)
Long term financial security
In addition to steady income, investing in real estate brings financial rewards for a long time.
Real estate appreciates over time
Think about the cost of a plot of land in your area a few years ago and now. Or the cost of a plot of land in ibeju lekki a few years back and today. It’s a well-known fact that the value of real estate generally increases, any no matter the amount you paid for it today, it’ll still be worth more in years to come.
Your property can be used as loan collateral
we all know how difficult it is to get loans to start a business in Nigeria, banks will usually require collateral that is equal or greater in value to the loan amount you are asking for. And in most cases your car and furniture doesn’t qualify even though they fit the description of what a collateral is Banks usually prefer real estate as a collateral because of the known fact that real estate will continue to increase in value.
Tips for Investment
Before you buy your first property, here are some tips you should remember:
Location matters: Before making payment for that property, make sure it’s in a good location. Paying millions for a property in a good location is a better investment decision than paying thousands for a property in a bad location (except there’s a speculation)
Hire the services of a professional: So you don’t get scammed, it’s advisable to hire the services of a trusted and reliable real estate agent or company.
Educate yourself: don’t just leave it all to the agents. Get to know the ropes too. Read books by real estate moguls, watch videos, attend real estate seminars and read real estate blog and news articles too.
Decide on which aspect of real estate you want to go into for a start.
There are various ways you can approach real estate investment. For a start, you’ll have to decide which aspect you want to go into. Are you going to start acquiring plots of land for a future sale, buying old buildings and renovating them, acquiring rental properties, developing shops, malls and offices spaces? You can start off with one aspect and later grow into other aspects.
For a start, you can consider investing in rental properties, since rent is usually paid in advance, so there is little risk involved.
Real estate Investment opportunities in Nigeria
Low cost Housing
At a staggering cost of $350 billion needed to provide 16 million houses to solve Nigeria’s housing problem, real estate investors have huge role to play in solving the housing crisis in Nigeria.
The housing deficit provides real estate investors a big opportunity for profitable investments in low cost housing.
Over 1.8 million students wrote the 2017 Unified tertiary matriculation examinations (UTME) and the number has been on the increase every year.
Sadly, the growth in the number of students in tertiary institutions across different states in the nation doesn’t correspond to the student accommodation.
The gap can be filled by investors building houses close to a student population and constructing hostel accommodations for students. Investors not only get to solve a problem, but also realize steady income.
Despite a large number of shopping centres littered across the country, there’s still a great opportunity to invest. Modern retail in Nigeria is underdeveloped, despite the significant size of the upper and middle classes.
Owning a rental property is not just a great investment, it’s one of the best ways to invest in real estate. You can either buy or build and then rent it out to tenants.
With your rental property, you’re automatically guaranteed a fixed rental income monthly or yearly (depending on your rental agreement)
The only downside to this is dealing with tenants. At one point, you’re bound to hear stories from your tenant, delayed payments or damage on your property.
This process is quite easy: buy plots of land in up-coming areas where you foresee future growth and price appreciation and wait.
It takes years to get returns on your investment, but it’s usually worth it in the end.
Today, most landed properties around Ibeju lekki have been bought off, though still undeveloped. Many of the owners have no ultimate plans to develop and are merely waiting for the right moment to sell.
Please note: If you plan on taking this route, ensure you involve a good lawyer with adequate knowledge in land matters. This is just to help you safe guard our property from disputes, land grabbers especially if you have no plans to develop the property yet.
Real Estate Investment Trusts (REITs)
Real Estate Investment Trusts (REITs) are corporations or trusts that use the pooled capital of many investors to buy and manage income property and/or mortgage loans. REITs are traded on Nigerian stock exchange just like stocks; you can buy or sell REITs through your stockbroker as with other types of shares.