The question “How do I invest in real estate?” has been asked several times by a lot of people, who by virtue of news or information have learned about viability of the Nigerian real estate sector. I know your adrenaline is pumping very fast now but relax and carefully peruse the article so you can be informed and as a result make better decisions.
According to Northcourt 2021 Nigerian Real Estate Market Outlook, the Nigerian real estate sector is currently experiencing a boom and it can be said to be doing pretty well with regards to input-output ratio or investment-returns ratio. Despite the fact that the Nigerian property market has a very cloudy nature and property prices may not actually reflect the real price due to forces of demand and supply. The major reason is because of the high level of corruption which unnecessarily add to the supply of properties and in the same vein make bid prices higher than necessary.
This article will focus more on some aspects of real estate investments more than others purposely because, some of these investments are what we know already but we do not harness. In no particular order, below are 4 investment opportunities available for you in the Nigerian real estate sector:
- PROPERTY DEVELOPMENT
You might be thinking you are familiar with property development but it’s not as simple as it sounds. Property development is really capital intensive and requires some important steps even before one is committed financially. There are several opportunities for investment in this line:
- You could buy a property with redevelopment value (a property which shows that upon injection of money, could yield more rental value or increase greatly its sales value).
- You could buy a bare land, build on it, and then let it out to get annual or monthly returns on your investment.
For this kind of investment, LOCATION is a very important factor to be considered. It will be highly important to note here that FEASIBILITY STUDIES AND VIABILITY APPRAISALS are important to be carried out before any property is developed so as to avoid loss eventually.
- ESTATE AGENCY
Many people have benefited immensely from this aspect of real estate because there are no laws stating that real estate agency is an exclusive reserve of Estate Surveyors and Valuers. You may just stand as a middleman in a transaction and earn your money by getting your own portion of the agency fee (interesting, right?)
This form of investment may not necessarily involve financial input and perhaps you’re wondering how it qualifies to be an investment method; this is by investing your time in getting information about vacant properties or properties for sale. Conversely, you might know someone who has the finance and wants to invest in buying a landed property, you can invest your time in the search for a reputable estate firm who has a good knowledge of the local property market and you can be sure that by being a link between them and the prospective buyer (and you play well, you can earn yourself a commission based on your negotiation skill).
Also note that there are firms who even gladly advertise that whoever refers a client to them, they have a certain percentage/commission for the referrer.
It’s however very important to stress at this point that buying and selling of properties is not a simple process so do not go ahead to buy a property for someone all by yourself because of the fee. It’s advisable that you get an Estate Surveyor and Valuer who has the requisite knowledge to handle the whole process so you don’t find yourself behind bars. There are many confirmations to be made by the experts (Estate Surveyors and Valuers) before paying for a landed property. So be cautious because you might sight documents and still be involved in a dubious deal.
3) LAND FLIPPING
This is one of the popular investment methods in real estate. Land flipping is a practice of buying land at a relatively low price and selling at a higher price for profit. The whole idea is to buy the land while it is relatively cheap and sell off after some time when the price has increased considerably to a desired level. This is entirely up to the investor. The amount of money at hand determines the location and the size of land to buy.
4) REITs (REAL ESTATE INVESTMENT TRUSTS)
Another method you can use to invest in the Nigerian real estate sector is through real estate investment trusts. It’s not a common investment in Nigeria, but it is one of the quickest and easiest ways of earning money in real estate. Taking a closer and more critical look, we have had this in existence for a while in Nigeria as part of our socio-investment practices.
Real Estate Investment Trusts (REITs) are corporations or trusts that use the pooled capital of many investors to purchase 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. Members of a group pool funds together to buy/manage/build properties and either hold it to get rent from their collective investment and share the returns yearly or speculate using the flipping method discussed above.
There are three principal types of REITs:
Equity REITs – purchase, hold and manage commercial and rental properties. Though they will finance these properties in many cases, their primary focus is on profits through acquisition and management.
Mortgage REITs – do not purchase, own or manage properties. They invest in mortgages on real estate properties. Though these properties serve as collateral for the loans the mortgage REIT invests in, the REIT has no ownership position in the property itself.
Hybrid REITs – combine the investment strategies of equity REITs and mortgage REITs by investing in both properties and mortgages.
So whichever method one chooses, one thing is sure: with the right information and guidance, one is certain to make profits in investment in the real estate sector. If you have a huge sum there are investment methods for you and if you do not have, there is also REITs where you can join your resources with others and get your return on investment. Whichever way you follow, it is a win.
AWOWOYE Oladayo A.
THE GUIDE REAL ESTATE 
Wow! This is indeed an eye opener
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