How To Invest In Real Estate In Nigeria: A Complete Guide

One major question that is often asked, especially by Nigerians, is “how do I invest my money?” Unfortunately, whenever real estate investment is suggested, people usually shy away. Not necessarily because of the amount required to start, but usually due to fear and a lack of knowledge on how to invest in real estate in Nigeria.

If you ever wondered or sought after additional ways to create or build wealth, or you are seeking a solid venture to put the spare funds you have, or you are simply worried about expending your funds without any substantial value added to you? 

If you haven’t considered real estate investment yet, or if you have but have decided against it, this article will change your mind about why you should.

In this article, you would be learning: How to invest in Real Estate in Nigeria, I.e. Different real estate investment strategies in Nigeria which shows you ‘how’. Also, this article would give you a better understanding of Real Estate Investing which tells you the ‘why’.

Learning how to invest in Real Estate in Nigeria, gives you an edge in your wealth-creation journey. Mind you, this is not a get-rich-quick scheme. It requires discipline and commitment on your part.

The best way to build wealth is to have your money work for you. As cliché as this sounds, it is true. Wealth works best in systems, and real estate investing provides you with exactly that.

First and foremost, a brief overview of real estate investing in Nigeria. 

Investing In Real Estate In Nigeria: Meaning 

Real estate investing in Nigeria involves the buying, selling, managing, and renting of property (lands, buildings) for profit. In real estate investing, the primary aim is profit-making.

A person who is actively involved in developing, improving, or renovating properties to increase their value and make more profits is called a real estate investor or entrepreneur.

Also read; Complete Guide To Starting A Real Estate Business In Nigeria

A real estate investor can either be an active or passive investor. Examples of active real estate investment include flipping, rentals, etc. While Passive real estate investment includes REITs 

As a real estate investor or entrepreneur, there are certain skills one must possess before one considers going into real estate investing. 

6 Skills Every Real Estate Investor Must Have 

1. Effective communication skills

Building relationships is the framework for every successful business. Every real estate investor must have the ability to build a solid network, and effective communications skills make that easy. You should be an active listener, be able to properly convey ideas, and confidently interact with people to get them on board with your plans.

2. Money management skills 

Most successful investors are good money managers. Every real estate investor needs to be financially literate, should know how to utilize funds, budget, plan effectively, know when to be frugal, and set limits to spending.

3. A good people manager 

Dealing with people requires apt emotional intelligence. As a real estate investor, you would come into contact with various people in this field, most of whom would work for you and with you. You need to know how to delegate tasks rightly and handle human conflicts in ways that keep everyone motivated. This ensures that people give their best work.

4. Negotiation skills 

Having good negotiation skills is highly essential for you as an investor. So many transactions would take place and you need to know how to negotiate for the best deals.

5. A hands-on person 

Every Real estate investor should be hands-on. This requires problem-solving skills like Attending to tasks timely and avoiding procrastination. Ensure completion of projects and be willing to carry out tasks.

6. Have an eye for detail 

Paying attention to the slightest details, being able to read people, and understanding their body language would tell you a lot more than they say. You must be alert and demonstrate awareness at its peak.

7. Patience 

It is advisable to have a long-term outlook on your real estate investments.

Real estate investing requires patience. Especially the patience to let your investments yield fruit. It takes a considerable amount of time for your investments to yield results. Being in a haste might cause you to lose out just when the investment is ripe. 

Criteria For How To Invest In Real Estate Nigeria

 Knowing the criteria for how to invest in real estate in Nigeria should be your first guide to property investment. 

There are two major criteria to consider when choosing an investment property.

• The property must be able to appreciate in value 
• The cost of maintaining the property must be at most the property value. 

This means that the endpoint of real estate investing is profit-making.

What To Look Out For When Investing In Real Estate In Nigeria

As a real estate investor, or entrepreneur in Nigeria. You should always be on a look out for

• Government seizures 
• Scams(Red herring investments)
• Troubles with Ancestral land owners (OMONILE)
• How to secure your investments with minimal risks 
• Creating a cash flow strategy that is stress-free 
• Maximizing your profits 

Benefits Of Investing In Real Estate In Nigeria

1. Easier Loan Acquisition From Banks 

Real Estate is the most acceptable form of collateral by banks in Nigeria. By owning real estate, you can effortlessly grow your small-scale or large-scale business as owning property is the surest way to get your bank to grant you a loan.

2. Beat Inflation 

A constantly appreciating asset is your best bet against rising inflation. An asset is anything you own that adds value to you. The land, house, or investment property you bought 2 months ago, 1 year ago, or 3 years ago is never valued at the same price. There is always an increase in its value, good or bad economy. This is due to capital appreciation.

3. Stable Investment Option 

Real Estate is less volatile as compared to other investment options. Your land or house is less susceptible to bullish or bearish markets(highs and lows). It would always be there except if you decide to sell it or give it away. A safer bet for you as compared to stocks, bonds, ETFs, and Cryptocurrency. 

4. Can Be Improved On To Increase Its Value

How? Imagine buying a piece of land whose value in 2022 is #1 million. You can build a structure on it. i.e., a bungalow, and rent it out. Now you have both the value of your rental income and also the value of your 1 million naira land.

That same bungalow can be used as a get-away resort destination, to start a short let chain, etc. It all depends on your investment choice. The possibilities for this are endless.  No other investment option offers an advantage like this.

5. Inheritance 

One thing you’ll notice about the wealthy, most assets left behind after they pass on are in properties. That is because Real Estate is the safest way to hold wealth long-term

 If you have kids or plan to, One of the best ways to provide support for them even in your absence is through real estate.  

You can acquire properties in their names or even yours and leave it to appreciate. This way, they can earn rental income or solve a serious problem from the resale value of the property. You can also leave properties for your loved ones or your favorite causes. Another option is putting the property in Trust till your children are of a certain age.

Types Of Real Estate 

The types of real estate are: 

1. Land 

It can be raw land. The land is usually measured in square meters or square feet. A standard plot in Nigeria depending on the state,  measures between (450sqm-900sqm)

2. Commercial 

Examples are Hotels, malls, Stadiums, Warehouses 

3. Residential 

residential estates for apartment complexes, single-family homes, luxury dwellings(mansions and villas)

4. Industrial 

We have industrial estates for factories and warehouses.

NOTE 

Before starting as a real estate investor in Nigeria, you must consider how long you intend to do it. Either a short-term or long-term investment plan. This enables you to decide what form of real estate investment suits you best.

Also, if you plan to buy a property, either land or a house, always ask for payment plans. This gives you a more flexible investment option. The payment plan could either be in installments or outright payment.

Peculiarities Of Nigerian Real Estate Investing

Knowing the peculiarities of Nigerian real estate investment makes learning how to invest in real estate in Nigeria, easier. 

The most important thing when going into a business of any kind is understanding the markets. 

Markets in this sense is an Organized place or system for trades that involves the buying and selling of either a particular or several commodities (product/Service) through various authorized methods. 

In Nigeria, there are several laws governing Real Estate transactions in Nigeria.

Asides from The Constitution of the Federal Republic of Nigeria, another really important law governing Real Estate transactions is the land use act.

Land use act: This is applicable throughout the federation, the act vests ownership of all lands in the governor of that state to hold in trust for the people (Section 2 LUA)

This is why it is important to approach property investment in Nigeria by locality. Depending on what state you choose to invest in, you must know the laws governing the state on Real Estate transactions.

Examples of other things peculiar to Nigerian Real estate:

• State laws concerning land acquisition
• Documentation procedure 
• Licensing and permits
• Tax 
• Mortgages and loans 

When it comes to the Nigerian Real Estate sector, accessing things like mortgages and loans is often not easily accessible to a vast majority of the populace. You are required to already own property to use as collateral for loans or have a high income. 

Factors To Consider When Investing In Real Estate In Nigeria.

The Real Estate market in Nigeria obeys the rules of ‘follow the money’. You would find out that where development, government attention, and activities are going on, you would tend to make your profits there.

The four major factors that contribute to the appreciation of property(land and houses value in Nigeria are: 

1. Migration

When there is an influx of people to a particular area, the demand for properties increases, which drives up the property value in that area. Following the laws of demand, the higher the demand for a particular commodity, the higher the price of the commodity.

2. Human activity (Trade and commerce)

Take, for example, the lands in Epe and Ibeju-Lekki in Lagos State. Since the Lekki free trade zone has opened up, companies are moving to those areas. More companies springing up in an area translate to more jobs.

This serves to attract more people. And more people in an area attract new businesses to service the people. Businesses like restaurants, resorts, hotels, and stores have opened up to serve the increasing population. Leading to more human activities in the area.

3. Development and Infrastructure 

People always seek comfort, and more social amenities like constant electricity, clean water,  good roads, and security, if available in a place, lead to the urbanization of that place. The urbanization of any area facilitates property appreciation.

Take for example when a new road or a popular mall is built in a particular area, the rent prices increase along with house value. This is because people always want to be closer to such amenities, usually for easy access to convenience.

4. Location 

The weather condition of the place, and the topography of the land in that area. Is it a flood zone? These are questions one must ask before investing in an area. Also, you should know that the location determines how much profit you can make in your investments.

Take, for example, an investor buying a piece of land measuring 100 sqm for 50 million (NGN) in Mowe, and deciding to build apartment complexes.

And another buys a piece of land in Chevron, Lekki for 50 Million (NGN) and decides to also build apartment complexes. First, the land size would be larger in more but the rental value would be priced cheaper as compared to the investor with the land in Chevron Lekki.

6 Best Sources To Find Investment Properties In Nigeria

• Market listings
• Real Estate listing platforms 
• Real estate Agents or brokers 
• Direct Sales by owners 
• Banks 
• REITs (Real estate investment trust): REITs are usually listed on the Nigerian stock exchange (NSX). 

6 Smart Investor Strategies On How To Invest In Real Estate In Nigeria 

Looking for profitable ways to either start or expand your investment options in real estate? Here is a breakdown of the top six strategies you can implement

1. Starting a Short-let Chain 

A short-let involves you buying or renting an apartment, duplex, or bungalow and putting it for short-term rentals, usually with a more flexible payment plan than conventional rentals. Short-let is targeted at mostly travelers (tourists and expatriates).

People who would not spend long periods in that particular place usually stay either for a night, a few days, or weeks. Short-lets serve as an alternative to the hotel business but it offers the comfort of a ‘home away from home’. Short let’s are best set up as affordable luxury getaways.

What Should You Consider Before Starting A Short-Term Rental in Nigeria?

Finding a perfect location 

Location is everything when it comes to starting a short-term rental business. Your location determines your pricing and also your profits. You should look for high-end areas close to landmarks (tourist spots), as this easily attracts tourists, and areas with an easy access route to city centers.

You should also target areas close to commercial activities e.g Mega churches or airports as this help to ensure your property is always booked. The most common short let locations in Nigeria are in the Lekki, VI, and Ikeja areas of Lagos state. Also, consider locations close to you that you can easily access.

Pricing 

Consider how much a short-let costs per night for a room in your preferred investment location. Set your pricing in a way to attract clients, but also in a way to gain profits and recover your expenses on both the renovation and the payment for the apartment without ripping off your customers or running a loss.

For example, renting a short-let per night within Lekki Phase 1, Ikate-Lekki, and Chevron areas of Lagos State ranges between $50,000 and #90,000 for a 3 or 4-bedroom apartment.

Listing 

You have to consider which best ways to find your ideal clients. Asides from referrals, consider using various social media platforms and also listing your property on platforms like Airbnb.

Hiring Help 

Consider if you can be actively present to run and supervise your short let that is why it is important to consider locations that are close to you and can easily access. If you cannot be actively present, consider hiring help.

You would need help in form of active cleaners, real estate agents and property managers to constantly clean, find clients, supervise and attend to immediate customer complaints or needs respectively.

How to start a short let in Nigeria

Depending on the scale you choose to start, You can start by renting one or more apartments in areas that fit the ideal location specification (nearness to tourist spots, city centers, good road network, constant electricity, etc). Ensure the landlord allows for short-let business. Attractively furnish the apartment.

Depending on the location you choose, rents vary at different prices. For instance, you can get a 3 or 4-bedroom apartment in different areas of Lekki ranging from 4Million naira (NGN) annual rent.

Other fees include service charges, agency and agreement fees, and caution. Not every area demands caution or service charge, You would still need to conduct proper research on what fees are paid in your preferred location.

You can also decide to buy or rent either a bungalow, semi-detached duplex, apartment, fully detached duplex, or penthouse. Depending on your budget and how long you are willing to run the business

The pros of Short-let business in Nigeria

• Consistent income flow as running a short let is highly profitable if managed properly.
• You do not have to own a home before profiting from one
• You can start on a smaller scale before deciding to expand

The cons of short-let business in Nigeria

• This far from being a hands-off investment requires constant checks. You always have to be present or you need to employ trusted hands to always be on the ground.
• Another con is your property is not being booked for long periods.
• Management falls solely on you, you would be responsible for anything that gets damaged.

Tips to starting a short let in Nigeria 

• Look for serviced apartments or houses as these provide 24/7 electricity and water.
• Build a clientele using social media platforms 
• List your property on platforms like Airbnb 
• Use an experienced agent 
• Ensure to collect a refundable caution fee that would be refunded back to the client at the end of their stay.

2. Shared apartments 

This is another form of rental investing. It involves renting an apartment, bungalow, or duplex at a price and sub-letting each room to different people. This is for people who cannot afford the full rent of a house and decide to split the bill. 

Usually, each tenant subletting a room has access to common areas like the kitchen and sitting room.

This form of investing requires regular checks but not as frequently as in running a short-let. The day-to-day running is left to the tenants.

You simply schedule inspections to ensure everything is running smoothly. Also, keep in mind that a shared apartment can either be furnished or not. You can decide on any.

How To Start Shared Housing Apartment In Nigeria 

This usually works best in more urbanized areas. Ensure the house owner permits a shared apartment. As an investor, you look for a good house to rent in a good location.

Consider electricity, a good road network, clean water, and a serene environment. You can either list the house yourself or employ the services of a real estate agent to find renters. 

What To Consider Before Starting A Shared Apartment In Nigeria 

Before you decide to start a shared apartment business in Nigeria, you must consider; 

Price 

The going rate of the apartment and the price of each room within your preferred location determine your profits. Ensure to make the right inquiries about the pricing to avoid losses.

Location 

Location is always an important factor in real estate investing. When it comes to shared apartments, serene estates are always the first choice for tenants. Estates with constant electricity, a good road network, and closeness to transportation stand out.

Furnishing 

You can decide to make it a luxury shared apartment or just a regular apartment. Your shared apartment could either be furnished or not.

You decide if you want tenants to come in with their properties like TVs, chairs, bed frames, mattresses, also kitchen appliances. You can also decide to do all that and consider adding it to your pricing.

Tenant Laws 

You need to know the tenant laws. For example how long it takes for a defaulting tenant to vacate your property. i.e. How long before your quit notice comes into effect. 

Pros Of A Shared Apartment Business In Nigeria

• Creates a good income source 
• You do not need to buy a house before profiting from one 
• There is always a high demand for rental homes in Nigeria. As of 2011, only 37% of Nigerians owned a home. The majority of Nigerians are renters.

Cons Of A Shared Apartment Business In Nigeria

• Too many tenants in a place can lead to disagreements 
• You have to be extra cautious about tenants damaging properties 
• Having your shared apartment vacant for a long period.

Tips For Starting A Shared Apartment In Nigeria.

• Look for houses with all rooms ensuite i.e each room having its toilet and bathroom.
• You should address this as a regular rental. 
• You have to screen each tenant thoroughly.
• Ensure to put all move-in conditions in the lease document. 

3. Property Development 

This is usually capital-intensive. Involves redeveloping bare lands by buying them in good locations, erecting buildings/ structures for residential or commercial purposes, and putting them up for sale or rent at high-profit margins. The most common forms of property development are luxury houses and apartments. 

This is arguably the most profitable form of real estate investing

What to consider in Property development in Nigeria

Funding 

Determines what you would build. If it is for residential purposes, it could be a mini-estate or a full-on estate. For commercial purposes office complexes or warehouses 

Location 

Location is essential as it determines how high your profits can be.

Topography of the land 

These determine the building materials used. Determine if it is a low-land or high-land area. Also, consider if the area is prone to flooding, or close to the sea. Is it a recovered land, beachfront land? this would help you when deciding the depth of your foundation, or building a drainage system.

State Standards 

Every state in Nigeria has a standard for each type of building. Ensure to make enquires for the particular state you are investing in.

How To Start A Property Development Project In Nigeria 

Once you have your funding right, you have to decide if you would build a commercial or residential building either a mini estate, full-on estate, or office complex. 

You look for a vast land size, from an acre(6 plots) to a larger land size, depending on the scale you want to start. Usually, property developers look for areas with a waterfront view to further increase their property value. It depends on the effect you want to achieve.

You would need to hire appraisers, surveyors, a construction firm, and real estate agents to carry out the projects on the land.

Pros Of Property Investment In Nigeria 

• A high-profit margin 
• Development drives up property value 
• Steady cash flow

Cons Of Property Investment In Nigeria 

• Not being able to sell off the units 
• Highly capital intensive 

4. Land Banking 

This involves buying and reselling land at a higher price usually within a short time frame. This is often known as flipping. Certain companies offer these opportunities. You buy land from them and they buy it back at a higher price within a year. With as little as 500,000(NGN) you can start land banking. 

What To Consider When Land Banking In Nigeria 

• Verify the company you are buying land from. Check their records. 
• Document: There are various documents in Nigeria to show the legitimacy of the land and prove that it is free from government acquisition. Some examples are C of O, Deeds, Gazette, Power of attorney, etc. 

• If you are not going through a company, Consider hiring an experienced Real estate agent to sell off the land quickly.

How To Start Land Banking In Nigeria

You can start land banking by buying a plot or more in different locations. Just ensure that the locations you pick are good investment areas. Determine how long you want to keep the land either a few months, a year, or more.

Pros Of Land Banking In Nigeria 

• Quick profits 
• Land appreciation.

Cons Of Land Banking In Nigeria

Not being able to sell your land fast enough. This can impede how fast you get your profits

5. Leasing 

This involves buying a piece of land and giving it out for business purposes for several years while collecting annual returns on the land. . You can lease for 2 years and above with a  fixed payment plan. Businesses like farms, warehousing, and semi-permanent residential buildings are the target customers.

Pros Of Leasing In Nigeria 

• Steady income stream 

Cons Of Leasing In Nigeria 

• Not finding subscribers to your land for long periods.

6. REIT 

It is a public company that develops and owns commercial real estate. They put their shares on the Stock exchange. You can buy or sell shares from REIT and it operates like stocks and bonds. Buying shares from REITs is the easiest way for an investor to profit from commercial real estate. 

In Nigeria, REITs are listed on the Nigerian stock exchange(NSX).

Pros of REITs in Nigeria 

• Provision of  a passive investment option 
• They provide a steady income 
• They are regulated.
• Easy to buy.

Ways To Finance Real Estate Investing In Nigeria 

• Personal Financing 
• Benefactors(family, friends, relatives)
• Private investment companies 
• Bank loans
• Government grants

Cautionary Tips For Every Real Estate Investor In Nigeria

• Every agreement must be written down and physically signed by all parties involved.

• Ensure the legitimacy of your investment property by carrying out proper investigations about the owner and the reasons for selling, in order not to buy disputed lands or from illegitimate sources.

• Know the associations to join to stay aware of new trends, especially in government policies.

• Verify all titles and documents with the appropriate body. Depending on your budget, employ a property Lawyer to carry out the process and ensure the necessary property documents are drafted and signed. Irrespective of how close you are to the owner of the property, you must take this step.

Also read: 10 Must-Have Important Property Document In Nigeria

• Every transaction should have a proper record. Avoid giving or collecting cash as much as possible. Instead, opt for Cheques and bank drafts as this would have a transaction history. 

• When using funding options like bank loans or mortgages, know all the criteria involved and as much as possible do not default.

• Ensure to pay a visit to interesting investment areas, and ask locals and also neighbors as many questions as possible.

FAQs  On How To Invest In Real Estate

Conclusion

Real estate is a vast field with a lot to learn. You need to stay updated on new trends and information, and for that to happen, you need a reliable source. Here at Realty Nub, our job is to be both a guide and a reliable information source.

We give you up-to-date, well-researched articles to guide you on your real estate journey. With this, you can create an effective strategy for real estate investing.