real estate investment trust in Nigeria for beginners

Real Estate Investment in Nigeria: The Perfect Real Estate Investing Guide for Beginners

Real estate investment is a stable and profitable investment types in Nigeria. It is one of the few business industries with High Return on Investment ROI.

The rich preserve their wealth by investing in real estate. They may make money via other businesses, but store up and grow their gain with real estate investments.

It is common to read stories on the web about someone who made a fortune investing into real estate properties. What are you waiting for?

Majority knows about or may have heard about real estate but very little knows about the investment side of it.

If you desire to build passive incomes portfolio and become financially free, I advise you look into investing into real estate.

But before then, let’s get to know more about the real estate industry itself.


Real Estate Meaning:

Real estate is physical (real) property, land, along with any improvements attached to the land which include buildings, roads, structures, natural and man-made resources.

Real estate property rights give you exclusive ownership to the land, and every natural and man-made resources such as minerals, trees, fences, water found on the land.

In Nigeria, real estate is among the top business industry with an ever rising growth of 30% every 10 years.

The speedy growth of the real estate sector is because of the increasing demand of the urban for corporate offices and the rural for housing.

The overall regulatory body of the real estate industry in Nigeria is the Ministry of Works and Housing.


Types of Real Estate In Nigeria

  • Land
  • Residential
  • Commercial
  • Industrial

But so you may understand what each of these real estate types means and how they work, I have explained them below.

 1. Land

The first among them all is land. I call it the mother of real estate types. Everything starts with a land.

When you hear the word, “Land”, it typically refers to a vacant land or undeveloped property. A vacant land on its own does not offer much value to investors.

For this reason, developers buy land and combine it with other properties (called assembly) and they developed it for increasing the value of the property.

2. Residential

Residential are types of real estate comprising housing for individuals or group of persons – family.

In Nigeria, it comes in different types: One room, Bedsitter, self-contain (or 1 bedroom flats), bungalow, 2, 3, 4, 5 bedroom flats, duplex, mansion.

Residential remains the most popular real estate type since we all live in it and so are familiar with it.

3. Commercial Real Estate

Commercial are real estate property types, which includes lands and gigantic buildings used by organisations to carry out various business operations.

Example of commercial are physical stores, shopping malls, offices, parking spaces, events centre, multipurpose hall, and hotels.

Commercials are expensive to rent or buy because of its outrageous demands and the part of the country where they are located – cities.

4. Industrial

Industrial real estate types refer to lands and building used by heavyweight industrial businesses operations.

This includes mining, drilling, construction, warehousing, transportation and logistics, mechanical and electrical productions.

We can see industrial real estate in the urban but mostly in secluded (rural) areas because of its heavy duty activities.

It’s time to check out the various examples of the real estate types present in Nigeria.


Examples of Real Estate in Nigeria

1. One Room

This is a single room with toilets, bathroom and kitchen outside the room. Common in the rural.

2. Bedsitter

This is also a single room but with the toilets, bathroom and kitchen inside the room. Popular among students.

3. Room and Parlour

This is a two rooms in a house with one serving as the bedroom and the other as sitting/living room. For room and parlour, the toilet, bathroom and kitchen are outside.

4. Self-Contain/One Bedroom Flats

This is also a house with two rooms with one serving as the bedroom and the other as siting/living room. But this real estate example has its toilets, kitchen and bathroom inside the house.

5. Flats

This is a house with a standard living room and two or more bedrooms. Flats comes with a central kitchen and one bathroom and toilet for each bedroom.

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6. Condominium (Condo)

A building with each unit owned by individual people, but the grounds structure is owned jointly.

7. Detached House

This is a house not joined to another house on either house. It’s called free-standing houses.

8. Mobile Home

This is a building manufactured in advance in a factory rather than on site and then fixed on the place where it will occupy.

9. Villa

This is large and more expensive than a normal house in mostly rural areas. They often used it as a retreat.

10. Hut

A small building built with raw materials such as bamboo, clay, and wood.


How the Real Estate Business Industry Works

This industry comprises different areas:

  • Development
  • Sales and Marketing
  • Brokerage
  • Property Management
  • Professional Services

In details…

 1. Development

This is a process involving the buying of lands, the construction and renovations of buildings, rezoning and the selling or renting of the properties to buyers.

Real estate development companies take the risk of creating new products, which we consider the primary stage of a new market.

The entire process of the renovation or building on the land is to add value to it so the developer sells higher and earns more.

2. Sales and Marketing

As the developers work on the real estate projects, sales and marketing team begin the promoting of the buildings and units it contains.

So, once the projects are ready, they sell and earn a commission which covers up for their marketing expenses and cost.

The commission earned by the sales and marketing team comes in percentage of the total sales price or on fixed price.

3. Brokerage

A real estate brokerage company employs real estate agents who help to facilitate the transaction between buyers and sellers of properties.

They oversee the entire transaction and ensure both the seller and the buyers are satisfied.

We also call real estate agents realtors.

 4. Management

Property management companies help real estate owners manage their buildings and lands.

This includes promoting of property, collection of rents, fixing building problems and repairs, and managing tenants’ complaints.

They also charge a fee from the property owners, which comes in percentage of the total rent.

5. Professional Services

Real estate professional are people who work in various aspects of real estate industry to keep it running and functional.

They include but not limited to lawyers, administrators, designers, digital marketers, contractors, accountants and more.


What is Real Estate Investment?

If I ask you what you know about real estate investment, you will tell me about your house. You are not wrong.

The real estate investment started as far back in the early years with buying and selling of houses or rental properties.

Today, real estate comes with different investment you can choose from and they are not even all physical properties.

It is no longer news that real estate investments come with many benefits.

So, you want to do your homework before you consider it as an investment you want to add to your portfolio.


What Types of Real Estate Investment Are Available?

We have:

  • Rental Properties.
  • House Flipping
  • Real Estate Investment Trust
  • Online Real Estate Platform

1. Rental Properties

If you have had a good thought and feel comfortable becoming a landlord, you can choose rental property as your real estate investment type.

But what you should know is, as the landlord, you will take up the role of paying the property tax, insurance, and maintenance.

You also look for tenants and deal with problems that may arise from these tenants.

Being a landlord is a hands-on investment and can stress unless you hire a property manager.

Another way to reduce the landlord stress syndrome and lower the risk of having problems, is choosing your properties and tenants carefully.

So as landlord with real estate investment in rental properties, “How do you make your gains?”

It is by collecting rents.

And various factors like location, space, demands and the rest can determine the amount of money you can collect as rent.

A common problem with rentals real estate investment is knowing the best rent to charge.

If you charge too high, tenants will leave for other rental properties. And if out of fear you charge too low, you stand the chance of loss of investment.

Your best investment strategy will be to charge enough to cover all expenses for the specified time and still get your profits.

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Also, another real estate investment strategy to make money on rental properties is to sell your property when it appreciates.

But the question, how sure are you your rental property will appreciate.

2. Houses Flipping

In real estate investment, there are those who buy-and-rent and those who buy-to-sell.

House flippers buy properties with the goal of selling them for profits after holding them for a short period – one to three months.

They may be similar yet different from landlords who buys holds and rent for years before considering selling (and still may not).

But how do you flip a property, there are three ways to doing so:

Buy

The first step is to buy a property you will feel will appreciate in value after doing your research.

In your search, look out for a house that needs little to no repairs to save your cost.

  • Repair

The nest is the stage of maintenance. After your buying of the house, you will need to make a lot of changes to make the house look it worth.

Some of these repairs may be in changing the painting, toilets seats, flowers, doors and more.

  • Sell

As soon as you finish or even before with the repairs, you sell.

Your challenges will be to get a buyer. When you do, what makes you think they will agree to your price.

So, it’s always best to buy a house with minimal repairs.

House flipping is a lucrative type of real estate investment if you do it right.

If you need a help with this, do well to reach out to me.

3. Real Estate Investment Trusts REITs

Wonder what a real estate investment trust is?

It is when a company get money from investors and uses it to buy, manage and sell income properties or other income generating investments.

You invest into REIT same way you do with stocks, bonds and other securities.

Unlike regular company, real estate investments trust, REITs, avoid paying corporate income tax.

The reason is its mandatory they pay out up to 90% of its taxable profits as dividends to its shareholders.

So, if you are the type who wants regular passive income with no operations from your end, go with the Real Estate Investment Trust.

Most REIT serve as conglomerate as they invest in different sectors like oil and gas, finance, fashion, agriculture and more.

And they have profit making flow.

Do you want to invest with Real Estate Investment Trust? Contact me today as I have something reliable for you.

4. Real Estate Investment Groups

If you want to own a rental property and be a landlord but don’t want to go through the stress of managing the property, a real estate investment group is for you.

They are companies charge with the responsibilities of managing rental properties.

You can own one or multiple flats but the real estate investment group takes care of the maintenance, advertising, getting tenants and other problems.

They perform the management operations for certain percentage of the annual rent.

You are the owner; they are the manager.

It is safe to do business with real estate investment groups if you can afford to pay their commissions.

But in choosing the investment group you want to work with, you need d your research.

Because how well your investment in properties becomes depends on the quality and management culture of the group you are using.


How to Invest in Real Estate With Little Money

I was a month to 24 years when I begin as a real estate investor. As a beginner with no prior knowledge of how the real estate investments works, it was difficult.

So the best thing I could do then was to read books and attend trainings upon trainings.

Also, thanks to real estate courses and books. They were helpful, but not as much as I expected.

If I could go back in time, I will work with a definite plan from the viewpoint of knowledgeable mentors and real estate investors.

This plan and strategy will help me sweep out the unnecessary and stay focused on the vision.

You can follow my step-by-step plan on how to invest in the real estate business industry.

I have listed steps to help you get started in the real estate investing.

1. Choose Your Real Estate Investment Market

Do you want to invest in rental property, flip house, or with investment trust firm?

Would you like to invest in shops, halls, flats, one room, self-contain and more?

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This is very crucial, you know.

Oluboba, what real estate investment type is best for me?

If you are available to do the work, go for rental properties, but if you want others to do the work, choose the investment trust.

But if experienced in the real estate business, you can go for house flipping. The choice is yours.

If you choose rental property, I encourage you to start with the locals. They are less stressful, cheap, easy to manage and have minimal risk compare to the urban.

What if you stay in the city? You can Invest in rental properties one-hour drive away.

What if you choose the invest with real estate investment trust? Choose a company with investments not only in the urban but also in other business sectors.

If profits don’t come out from real estate, they have other sources of income to pay your dividends.

2. Know Your Budget

Real estate investing is an additional vehicle to get you to your financial dreams.

This makes it important you have a look at your overall financial status.

It’s a good thing to aim high where you no longer have to worry about money.

But that would only be possible in real estate or any other investment platform if you save more of your current income.

You can then invest those savings into any types of real estate investment mentioned above.

3. Get a Real Estate Investing Strategy

You need a real estate investment strategy to help you move from where you are now to where you want to be.

Even as you use this strategy, be flexible and open to change as some things are beyond your control.

So, what are this strategy? In nuggets, they are:

  • Get a part-time or remote job that requires your presence only 3 days a week. If you can get one, start a side non-real estate business that can help you meet basic needs and still have some to save.
  • If you have a house, rent out your unused rooms. If you don’t have rent don’t buy. Make sure you get an affordable one that will reduce your expenses.
  • You don’t have enough to buy a property of your own, instead connect tenants with landlords and receive commission. I did this in y undergraduate years. It was really helpful.
  • Look for a nearby real estate investment firm and apply as their investment and sales executive. You will earn a lot from their trainings and programs.
  • If you have an already equity in real estate, turn it into investments and earn more income with little to no headaches.
  • When you make your returns, reinvest into other types of real estate investments. But if you have done, then diversify into other income-generating assets.
  • Don’t become overwhelmed by all the strategies listed above. I could not go into details for some limitations.

You can always contact me on how to go about investing in real estate.


FAQs on Investing in Real Estate

Must I Use My Name Investing in Real Estate?

Before I explain the types available, I want you to know that you may choose not to buy real estate investment in your own personal name.

Your reasons may be for assets declaration reason or personal assets protection.

If tomorrow you find yourself in a legal case demanding expenses beyond your current capital and insurance can carry, you won’t lose your investment in real estate.

As a real estate investor, you can use an LLC or a Limited Partnership as a major tool in managing your affairs. You can use a different LLC for each real estate investment you have.

Also, forming an entity to hold your real estate investment allows you to place your personal property risk free during bankruptcy.

We know this method as “asset separation”. It protects you and your investments.


Conclusion on Real Estate Investment

Major problem beginners in real estate face is analysis paralysis. When you consume too much, you know too much; you doubt your own decisions.

I hope the knowledge you gained reading this article will forever be of excellent help to you.

As I conclude my guide on real estate investment for beginners, I want you to know my goal is to save you time and help you make the right decision.

What is your favourite real estate investment type? When do you intend to invest?

You can contact me; I will love to hear from you.

 

Oluboba Ayodeji
Oluboba Ayodeji teaches business owners on how to build, grow, and scale a successful ecommerce business. He shares proven strategies and expert insights to help you avoid losing your customers, time and energy on the web. Wants to reach him? Email Olubobayo@gmail[dot]com