I am sure you have heard the phrase “there is money in real estate” and you are wondering how investors make money with real estate properties.
In this article, we will show you five ways to make money with real estate in Nigeria.
Kindly read this article to the end to see the best option that’s fit for you.
Table of Contents
Why you Should Consider Investing in Real Estate
There are many reasons why people invest in real estate. At the end of the day, it boils down to making profit.
When you keep your money in the bank, inflation sets in and the value of your money reduces. In context, the value of things your money can buy reduces over time.
If you decide to keep your money in a savings account without withdrawing it, the maximum interest you can get is 6-8% per annum.
On the flip side, if you buy a property, the value of your property increases over time. Sometimes, you can get up to 20 or 100% increase in a couple of years if you invest in a good location.
Investing in real estate is one of the best ways to hedge your hard earned money against inflation. It is also a sure path to building generational wealth.
You have seen the reasons why you need to invest in the real estate sector, you do not know which option is best for you. Do not worry about that, we have listed the most common ways to make money with real estate in Nigeria
Land banking is one of the easiest methods to make money with real estate in Nigeria. It is also the most affordable to start with.
In land banking, the investor buys land at a location that has the potential to increase in value within a period of time.
For example, you buy a piece of land for 3 million Naira and sell it for 12 million Naira after 8 years.
The value appreciation of the land depends on various factors within the area where the land is located.
If you buy land in an area and after a few years, there’s no development within that axis, the value of the land will appreciate but slowly.
One of our clients wanted to travel to Canada with his family, he had a plot of land in two different locations; one in his village at Ondo State and another land at Sangotedo.
He inherited the land at his village from his father while he bought the land at Sangotedo in 2013 for 2 million Naira per plot; He bought 3 plots.
At the end of 2022, he needed to raise funds to relocate to Canada, so he decided to sell his lands.
His land at the village was valued at 200,000 Naira per plot while the lands at Sango-tedo were valued at 13 million Naira each.
He sold two plots at Sangotedo and the proceeds were enough to finance his relocation to Canada.
If he had bought more lands in his village out of emotions, he may not have been able to fund his travel to Canada with his family.
If you want to get started with land banking, you can buy a few plots of land in Epe, Lagos.
At the time of writing this article, Epe is the best place to buy land for land banking in Lagos. We have an article on the best places to buy affordable land in Lagos.
House flipping is the act of buying a house, holding it for a while and selling for profit after a period of time.
You could buy a house in Lekki for 120 million Naira today and sell it for 180 million after 5 years.
Although, house flipping is capital intensive but it is profitable if done correctly.
Some of the factors real estate investors consider when it comes to house flipping are the demographics of people in that area, the population and the style of house.
These factors will determine the value of the property when the investor wants to sell.
Let’s use Lekki and Ikorodu as an example.
Lekki is a high brow area in Lagos while Ikorodu is not.
If two property investors decide to buy properties with the intention of selling after 5 years; one buys in Lekki, the other buys in Ikorodu.
If the rate of development within these two areas remains constant for a period of 5 years, the investor who invested in Lekki will get a higher return on investment (ROI) than the investor who invested in Ikorodu.
Both investors will make profit but one will get the lion’s share.
The best part of house flipping is that you can also rent the house out or use it for short lets while you wait for the time you want to sell; thereby making more money in the long run.
A short let is a fully furnished apartment that is rented out for a short period of time. The time frame could range from a couple of days, weeks or a few months.
Using your apartment for short-let’s is more profitable than when you rent it out.
A short-let apartment can cost up to ₦100,000 per day. There are lots of customers who prefer to stay in a short-let apartment for months rather than staying at a hotel.
If you get a customer who pays ₦100,000 for your apartment in 30 days, that’s 3 million Naira in one month. Compare that to putting your apartment for rent and charging 3 million Naira for each year.
Starting a shortlet business with your apartment is capital intensive because you have to buy the house and furnish it. You also have to be on the lookout for damages.
If you have a furnished house in a good location, you can hire PropertyScout to help you manage and market your short-let apartments.
Buy Off Plan Properties
An off plan property is an uncompleted building or the architectural design of a building in which construction has not commenced yet.
Developing a building from start to finish requires huge capital. Sometimes, real estate developers can get a large portion of land, get an architect to come up with a building plan, then they use other people’s money (OPM) to finance the building.
Some developers run out of cash during construction so they sell the property at that point.
Nevertheless, buying an off plan property will always be cheaper than buying a completed building.
One advantage that comes with buying an off plan property is that you can make recommendations that were not in the initial building plan while the construction is ongoing. It will be more expensive to do this with a finished house because you have to demolish some parts and rebuild.
You can buy an off plan property and resell it when the building is completed. You could use it as a short let apartment or rent it out.
This is one of the oldest forms of making money with properties. You can buy or build a house, then rent it out for a monthly or yearly fee.
If it’s a serviced apartment, you can also make money by supplying other amenities like electric power when the main power goes off, internet facilities, and housekeeping fees.
One advantage of using your apartment for long term rentals over short lets is the peace of mind that comes with rentals.
With rental properties in Nigeria, you charge rent yearly. So you are in touch with the tenants maybe once or twice in a year. If there are damages caused by the tenant, the tenant will fix this (it depends on the tenancy agreement). Moreover, with short lets, you will make more money but you will be in contact with new tenants frequently unless you have a property manager to help you manage it.
What’s the Best Option to Start With?
This depends solely on how much you are willing to invest with at the moment.
If you are looking for the easiest and most affordable option on the list, then you should consider land banking.
You can purchase a plot of land between 2 million Naira and 20 million Naira and resell it after a few years and make profit.
The best place to buy land in Lagos State right now is Epe. You can check our article on the lands for sale at Epe.
If you are looking to spend big bucks, you can get an apartment in areas like Lekki, Sangotedo, Ikoyi and use it for short lets or long term rentals. You can always sell the property in the future.
Thank you for reading our article on five ways to make money with real estate in Nigeria.
If you are interested in getting a property, you can chat with us by clicking the chat icon at the bottom-right of the page or give us a call on 08106072005.