You often hear about the Real Estate business, and how highly profitable it is as a venture. You may have even considered starting on your own, to benefit from this seemingly endless goldmine.
Well, as profitable as it sounds, you need to have the right knowledge to fully enjoy the business benefits. As having the right knowledge can both keep you on guard and help you avoid pitfalls in the business.
Some others may have gotten excited about the figures showing its profitability, and jumped head-on to start their real estate business, without doing their due diligence of proper research.
The one thing common with that pattern is they get lost after the initial excitement. Even frustrated, simply because they skipped the first step of conducting proper research.
Proper research shows you how and why. It also tells you the proper model for you, and how you can fit into the business. This way, you are less prone to avoidable errors.
This guide will teach you how to start a real estate business and the tools you’ll need to get started. First, let’s see an overview of what the real estate business is all about.
About The Real Estate Business
The real estate business involves the buying, selling, Renting, Investing, leasing, and management of land/property for profit. It involves all the activities that go on within that land to increase its value regarding human convenience.
A prime example of a real estate business is in estate development. Where a piece of bare land is developed for residential or commercial purposes and sold out or rented out at a high-profit margin.
Real Estate Business In Nigeria
Real Estate Business in Nigeria, is arguably one of the most profitable business ventures in the country with minimal risks. The good thing about it, you can start with varying budgets. It does not have a fixed budget to start with, and it is open to anyone.
In Nigeria alone, according to the National Bureau of Statistics (NBS), the real estate sector out-put accounted for 6. 39% of the country’s GDP in 2020. That is about 2.7 trillion (NGN) or $ 7.3 billion.
An investor can gain as much as 25% capital appreciation per year. It’s quite exciting, but as a smart investor, your first concern should be developing strategies to maximize your profits and reduce risks. i.e., doing it right. This means adequate research on the best strategies for real estate business for you to implement. See how to invest in Real Estate in Nigeria
Categories Of Real Estate Business In Nigeria
1. Raw Land
This type of real estate includes undeveloped raw land, and agricultural land. It could be in urban or rural areas. Or land on the path of future development. The ways to benefit from raw land in Nigeria include land banking and leasing of land.
2. Residential Real Estate
This involves real estate used simply for residential purposes. Examples of residential real estate include Single-family homes, apartment buildings, terraced houses, and bungalow units. The best way to benefit from residential real estate is by capital appreciation and rental income.
3. Commercial Real Estate
Commercial real estate also called investment property is real estate(land/buildings) intended for profit either by capital gains or rental income. Examples of commercial Real Estate include shopping malls and centers, office complexes, etc.
The best way to benefit from commercial real estate is by capital appreciation, resale value, Rental income, and leasing.
4. Industrial Real Estate
This refers to any type of real estate used for production, manufacturing and distribution, storage, research, and development purposes. Examples include Factories, Warehouses.
5. Special Use land
This type of real estate involves property mapped out for special purposes to be used by the public. Examples include government tent buildings, public libraries, public parks, cemeteries etc. ,
Types Of Real Estate Business In Nigeria
In the real estate business, you are either providing the product(house/land) as a landlord, investor, etc or rendering a service either as a consultant, Realtor, appraiser, etc.
The types of real estate business in Nigeria include:
1. House Flipping
This involves buying distressed houses, making a few repairs, and improvement to the house. Then quickly re-selling it at higher prices for profit. The best ways to find distressed properties in Nigeria is through market listings platforms, market listings by owners or agents, and bank short sales.
2. Real Estate Brokerage/Agency
This involves offering services to help real estate investors buy or sell properties. This usually involves you having a license and in-depth industry knowledge in order to guide the investors on the best deals to take.
3. Short-term Rental Business
In recent times, short-term rentals have become increasingly popular in Nigeria. Examples are short lets. You can take advantage of this by putting up your house for rent within a short period and offer a more flexible payment option like weekly or monthly payment plans. See how to invest in real estate
4. Real Estate Appraisal
As a real estate appraiser, you help determine the worth of a property by examining its value. You can offer your services to real estate investors, would-be homeowners, and private lending institutions who want to know the actual value of an investment property before buying or selling.
5. Property Management
You can start a property management firm where you help real estate investors or companies that own real estate properties to manage their property effectively. As a property manager, you would be involved in rent collection, maintaining and securing property premises, enforcing leases, establishing rental rates, and handling maintenance requests.
6. Real Estate Photography
When it comes to real estate listings, there is always the need to have eye-catching and attractive pictures that can attract clients. As a real estate photographer, you can offer your services to realtors and property owners looking to sell. You take pictures that highlight the best features of the property in a more professional setting.
7. Property development
Arguably the most profitable form of real estate business that offers the highest profit margin. This involves looking for bare land and actively developing I.e. Building structures, either commercial or residential purposes, and selling it at high prices. You can carry out the development projects individually, or you can pattern with other investors.
8. Land banking
A form of property flipping that involves buying cheap land and re-selling them at a higher price, usually within a short time frame.
The conventional method of earning rental income. It involves renting out residential or commercial buildings for annual revenue.
10. Loan Servicing/Financing
You can offer to service / give loans to real estate developers and investors at an interest.
See how to invest in Real Estate Nigeria
Benefits of Starting a Real Estate Business in Nigeria
- Boost your monthly income
- Highly profitable
- Flexible work hours
- Can be a passive income stream
How to Start a Real Estate business in Nigeria
These are the steps required before starting your real estate business in Nigeria. A good understanding of what you want when starting a real estate business in Nigeria can help you in achieving what you plan. It also helps you structure your business and keeps you focused.
1. Do Your Research
Before venturing into the Real Estate business. You must do your research on;
- The markets: How saturated is it, how to leverage on competitor’s weaknesses, and also how can you dominate the markets
- The area you choose to invest in: How feasible it is to start that particular venture in the location, also area acceptability, and indigenous laws governing the area.
- The benefits of your business venture when compared to the risks involved
2. Decide Your Area of Specialty
You have to decide which of the real estate investment or business models suits you. There are various types of Real Estate businesses, Most requiring different ways of management and funding.
There are also various scales to start; From large to medium scale.
3. Create a plan
It is important to plan Real Estate investing. Having a plan ensures the effectiveness of your projects. In planning, you can consider if the business would be a long-term option for you or a short-term one. Then you carefully set a target that is time-based for each project execution. You can also have certain criteria mapped out when investing
4. Consider Your Funding Options
When going into the real estate business, considering your funding option is a very important step. As your funding determines what scale you can start. There are several funding options, it could either be self-funding, mortgages, or loans from banks and private institutions or through a benefactor.
5. Register / Legalize Your Business
Once you have created a successful plan and have your funding ready. The next step would be registering your business. In Nigeria, this is done with the Corporate Affairs Commission (CAC). Once you do this, you get your Tax Identification Number (TIN) among others.
Also read: 7 Ways to Verify Genuine Lands in Epe, Lagos
With this, you can easily apply for loans and grants as a legal entity. This also ensures that your business is recognized by the Federal Republic of Nigeria, and no other business entity can conduct business using your name. This also shows a level of professionalism to potential clients and investors.
6. Hire Capable Hands
To fully run your Real estate project, you would need a team of trusted hands. From Real Estate lawyers to agents, Surveyors, appraisers, and property managers. Depending on which job you need them to execute, You might need one or all at the same time.
They all have their parts to play. Investments usually require teamwork, and the person with the best team wins. Ensure to fully outline each job role and ensure proper execution.
- Real Estate Lawyer
These are the various roles they play:
A real estate lawyer is a certified legal professional who understands real estate laws and oversees the legal aspects of real estate transactions. They negotiate the terms and conditions of the real estate transaction. Also, they prepare and review legal documents and facilitate the transfer of titles. They carry out proper verification of property documents for you.
- Real Estate Agent / Realtor
Real estate agents are professionals who help you find and buy properties, either for residential or commercial purposes. The key role of a Realtor is to guide clients through property acquisition and the negotiation process to ensure they get the best deals within their budget. They can also help you sell properties by actively finding buyers.
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When buying land, the expertise of a surveyor is needed to measure the land features such as depth, shape, and size. They also examine previous land records to verify data accuracy.
- Real Estate Appraiser
A real estate appraiser conducts a detailed and complete analysis of a property to determine its market value. They do this by carrying out site visits, taking notes of property features, and comparing them against similar properties within the same locality. They estimate the value of a property based on its intended use, market value, and physical characteristics.
- Property Manager
The key role of a property manager is to manage properties that the real estate investor does not live close to or does not wish to manage directly. A property manager manages your property by advertising and filling vacant units, negotiating and enforcing leases, and maintaining and securing the property premises. They can also help you set rental rates by looking at what other people are charging in the area, collecting rent, and taking care of maintenance requests.
A very obvious step, but still highly important. You must be ready and hands-on to execute the necessary actions for a successful business. This step involves executing everything you have developed when creating your business plan. This involves the day to day running of the business, target goals and projects, networking, marketing etc.
8. Build a brand
Building a brand based on competence makes it easier for potential client’s to trust you and repeatedly do business with you. You can decide to create a presence both offline and through social media platforms.
This is the age of the internet, and social media platforms serve to amplify voices. You should take advantage of this. To effectively reach your target audience, you need to have a marketing strategy. To attract ideal clients and potential business partners.
9. Join the Necessary Associations
Being part of a professional real estate body ensures you are not operating against the law.
Associations are also a perfect place to find mentors and like-minded associates. Most of whom may become future partners for your projects,
Also, you get some pieces of information that other independents are not privy to, as well as referrals from colleagues. A bonus is that you can easily be directed to the best ways to get your license and permits.
Examples of real estate institutions in Nigeria are the Real Estate Developers Association of Nigeria (REDAN), the Association of Estate Agents in Nigeria (AEAN), and the Nigerian Institute of Estate Surveyors and Valuers(NIESV).
Starting a real estate business, especially in Nigeria, requires being constantly aware of new trends in order to make necessary adjustments. Here at Realty Nub, we give you tips and up-to-date information on real estate that can guide you on your journey.