The Ultimate Guide: How to Invest in Real Estate in Nigeria
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 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 and due intelligence on your own part.
With an estimated population of 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.
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.
Why you should invest in real estate in Nigeria
According to world bank, at least 720,000 housing units new need to be provided annually to solve Nigeria’s housing problem. With the federal government doing next to nothing to help solve the increasing demand for affordable housing, there’s an opportunity for 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.
With rural population having decreased by 34% from 1960 till date , over the coming years, many more Nigerians will need a roof over their heads in the city. Thus increasing demand for accommodation and real estate properties across cities 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 generate millions in rental income monthly or yearly (depending on your rental agreement) or by flipping houses.
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.
Things to Know before investing in real estate in Nigeria
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 or a location with good prospects. Paying millions for a property in a good location is a better investment decision that paying thousands for a property in a bad location (except there’s a speculation).
Educate yourself: don’t just leave it all to the real estate agents, get to know the ropes too. Read real estate books, watch Youtube videos, attend real estate seminars and read real estate blog, news and articles. Also, educate yourself on Nigerian property laws. Understand all the terms involved in the space like tenancy laws, tenancy agreement, landlord rights etc.
Hire the services of a professional: Especially if you’re buying your first property. It is advisable to hire the services of a reputable real estate company so you don’t get scammed
Which aspect of real estate?: There are various ways to approach real estate investment in Nigeria.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 remodeling them? Acquiring rental properties ? developing shops, malls and offices spaces? You can start off with one aspect and later grow into other aspects. If you get confused , you can always speak to your agent..
Real estate Investment opportunities in Nigeria
Low cost Housing
Nigeria has about 28 million housing deficit as at January 2023 and billions of dollars will be needed to provide houses to solve Nigeria’s housing problem. With this, real estate investors have huge role to play in solving the housing crisis. The housing deficit provides real estate investors a big opportunity for profitable investments.
Over 1.5 million candidates registered for the 2023 unified tertiary matriculation examinations (UTME) and the number is expected to increase in the coming years.
Sadly, the growth in the number of students in tertiary institutions across different states in the nation doesn’t correspond to the available student accommodation. The gap can be filled by investors building houses close to student populated areas 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 centers 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. There are still opportunities to build shops, cafe’s and shopping malls in different cities in the country
Owning a rental property is not just a great investment, it is one of the best ways to invest in real estate in Nigeria. You can either buy or build your property 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 and you might need to evict them
Investing in land is quite easy. Buy plots of land in up-coming areas where you foresee future growth and wait. It could take years to get returns on your investment, but it’s usually worth it in the end.
Today, almost all landed properties around Ibeju lekki have been bought off by real estate developers and private investors. Many of the new owners have no ultimate plans to develop and are just 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 and 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.