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How To Invest in Real Estate in Nigeria - Top 12 Things You Need To Know
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How To Invest in Real Estate in Nigeria - Top 12 Things You Need To Know
Uche Emordi
Uche Emordi
April 19, 2022
8 min

Real Estate is not Dead

The Opportunity in Real Estate Investment in Nigeria:

Real estate is as old as God’s green earth and ever since man started cultivating land and marking territory - the accompanying commerce that ensued around using said piece of earth to make profits and all the activities carried out therein - gave birth to Real Estate Investment.

Nigeria, a country of over 200million people has a housing deficit of 17-21million in Lagos alone. With an ever increasing population growth, Nigeria is a prime investment destination, a ready market for various investments; tech, financial services and real estate investments.

But when we talk about real estate investment in Nigeria there is a need for us to realize and appreciate the peculiarity of our situation here in Nigeria. If you don’t realize, understand or appreciate our peculiarity and try to paint Real Estate investment in Nigeria with the same brush as is done in other climes - you may run into problems.

black-lion-cosgrove

This is an example of an email I received recently, a $40milion fully funded Real Estate project request from a Private Equity firm in Toronto Canada seeking for a contractor partner in Abuja.

Nigeria as a Real Estate investment destination Real Estate is worthwhile - with a ready hungry market that you can take advantage of!

This post is going to show you how to make a lot of money from Real Estate Investment in Nigeria or how you can alternatively save a lot of money from your Real Estate investment deals - because a lot can go wrong in a hurry.

The most important points to note about Real Estate Investment in Nigeria

In the Real Estate sector, much like in other sectors in Nigeria - we have to constantly tweak literature to align with our local realities. These are the important things you should know about Real Estate investment in Nigeria:

1.) Learn from Successful Real Estate Companies and Developers in Nigeria

If you want to dive into how to make successful real estate investments in Nigeria - it goes without saying that you have to look at some successful real estate companies and developers in Nigeria.

You have to study how they have done their real estate investments and stayed successful for years in Nigeria. Despite the numerous challenges they have somehow managed to not only stay afloat but thrive.

The likes of these companies and developers are such as;

Mixta Africa Landwey, Rendeavour

Uacn which has the subsidiary as updc.

Cosgrove

First World Communities

Brains and Hammers etc

If you want to invest in Real Estate or start a real estate business here in Nigeria, you should definitely pay attention to what they are doing. I can tel1 you that they are getting alot of things right.

2.) Choose The Right Real Estate Investment Strategy

Broadly speaking they are four (4) major strategies:

i.) Rentals:

Rentals are one of the oldest, safest, and most steady source of income from Real Estate.

In Rentals, you buy a property to put on the market for monthly or yearly rental. It has a lot of upsides like; regular cash flow, increasing value of the rental property, asset appreciation, collateral for loans, and property can be sold afterward.

The downside is that just like in many numerous Lekki and Banana island apartments, you may experience non-subscription of your apartment for long periods.

A company like First World Communities handles rentals in a prime place like Abijo and a 3 bedroom flat there goes for NGN1.2m per year with a property worth of 25m.

Dangote has taken out a lease for over 50 units and you can make guaranteed rental income of NGN800,000 per annum by buying these properties as a rental investment.

To find out more about rental investments, in Nigeria Click to Call us, or Send a Whatsapp message, or Email us.

ii.) Flipping of land and Houses:

Also referred to as land/property banking - you purchase a property to sell in the quickest time possible for profit.

A company that works well with this strategy is Gracias Global in Lagos..They have prime properties all around Lagos in Sangotedo, Eleko, Ibadan and some of these properties, with strategic locations like in Eleko junction.

They have the gracias morganite and goldstone, off monastery road, Sangotedo Lagos.

epe-morganite-estate-eleko

gracias-goldstone-sangotedo

Gracias’ major Real Estate investment strategy is buying and reselling land whilst providing infrastructure around the residential and commercial development.

They can see as much as over 100% ROI because they actually buy this land for cheap from Omonile, by doing ’sponsorships deals‘.

Another company that uses this strategy of flipping is Landwey Investment Limited in Lagos as well. Word on the street was that the total payout for westwood estate by Landwey also in Monastery road Sangotedo, Lagos; was NGN3billion.

gate-house-apartment-landwey

Nowadays though, Landwey is majorly into property development and that is the next Real Estate Investment strategy we would talk about.

iii.) Property Development

Property development involves purchasing land, erecting buildings, developing infrastructure, and selling to the buyer either as carcass (lintel level), fully finished, with fittings, plumbings, and so on, or fully finished and/or furnished.

This arguably can be the most profitable strategy and companies like Cosgrove in Abuja with their flagship 500m fully finished and furnished property in Wuye.

for-sale-cosgrove-katampe-phase-1 (2)

kitchen

lounge

room

toilet

sitting-room

A company like Landwey started with flipping lands but after they started their first developments in Abraham Adesanaya - the Urban Prime Estates - each unit reportedly cost between 14m-18m and they sold for as much 40m+ and above.

landwey-urban-prime estate-lavadia

for-sale-urban-prime estate-lavadia

urban-prime estate-lavadia-abraham-adesanya

property-for-sale-urban-prime estate-lavadia

After the success of the Urban Prime Estates - Landwey has never looked back and have majorly been into property development these last few years.

They currently have a 100m 5 bedroom property in Abijo, Eko Ekete. How crazy? The more mind-blowing fact is that it is off-plan (not yet built).

hockley-apartments-for-sale-beside-lekki-epe-expressway-abijo

But property development is capital intensive and it requires alot to position for success.

For example Gracias Global as mentioned above, started years before Landwey and although they have tried their hands on many development projects like the Goldstone, Peridot Heights all in Sangotedo, they haven’t been as successful as Landwey with development.

peridot-heights-sangotedo-apartments-for-sale

They seem to have realized their competitive advantage and stuck with flipping properties; selling land in only prime areas in Lagos and Ibadan.

There is another less talked about Real Estate Investment strategy: Real Estate Investment Trusts (REITS).

iv.) REITS:

Simply put, a REIT is a trust that pools fund from individual investors, acquires, operates and/or manages income-generating real estate.

There are different types of REITS like Equity REITS, and Mortgage REITS. These REITS, listed in the Nigerian Stock Exchange distributes the income derived from their owned properties and investments as dividends to subscribers.

REITs are traded on the Nigerian Stock Exchange (NGX) just like stocks; you can buy or sell REITs through stockbrokers.

There are currently only 3 registered REITS rrecognized by the Securities and Exchange Commission namely; Union Homes, Skye Shelters and UPDC, a subsidiary of UACN.

Nigeria by 2019 had a market cap of REITS at NGN32-72bn, compared with South Africa which has a total market cap of over $31.42 billion of 31 REITS.

For even better context the combined market capitalization of the three REITs in Nigeria is US$131 Million while in the United States, the combined market capitalization of REITs is around US$898.41billion.

REITS have been very challenging to implement in Nigeria, and even a major REIT - UPDC, a subsidiary of UACN posted a loss last year.

So you can see that whatever strategy from the above you choose, you have to position for success because it isn’t a walk in the park.

But How do you choose the right Real Estate Investment Strategy in Nigeria? How do you implement your strategy successfully?

3.) Understand the Role of the government:

The role of government is very heavy in Nigeria.

When motorcycle ride haling entered into the market it took just a simple announcement to squash investments and livelyhoods. Companies had raised millions of investor dollars, and it was over in one day.

Now to even emphasize the role of government in this industry, per the Land Use Act, it empowers the governor to have unrestricted access to all land in the state. So the governor has to approve ever single land transaction for it to become legally binding.

If you do not understand this or the role government plays in rectification, ratification, giving titles, and approving transactions, you’ll get into trouble.

It is no wonder the likes of Wale of Landwey, Sujibomi of Sujimoto, Cosgrove’s Ceo are always pictured with the governor and top government officials. Befriending government is a strategy here depending on how high you want to fly.

Why-isSanwo-olu-best friends-with-Lagos-Property-Developers

4.) Understand land laws and titles

Following from the above - you should be aware that the only legally binding property transaction, can only be done on a proper titled property registered at the state’s registry.

The major title you should always look out for is the C of O. The certificate of occupancy is a document that confirms the lease of a piece of land to an individual for 99 years.

Other land titles you should know are:

i.) Governor’s consent: a governor’s consent can be considered as a title because it confers authenticity on a land. Like the name inplies, it is a duly signed deed of assignement by the governor of the state. This means that the land has no encumberance and all legal rights are backed by the state and power of the governor.

Other useful titles to note are:

ii.) Excision.

iii.) Gazette.

NB: A survey plan is not a title. Also, ‘freehold’ isn’t a title as well. Per the land law, if land is not registered and duly approved by the governor - you have no enforceable legal right over it.

5.) Choose The Right Location - It is everything

The popular saying goes; real estate is all about location location location!

This fact it is not any different here in Nigeria.

Whichever strategy you choose; the most important decision you would make is the location!

How to Choose The Right Location For Your Real Estate Investment

The right property in a prime location sells itself.

Property Development in Prime Locations:

A company like Cosgrove has Prime locations in Abuja like Guzape, Wuye, Katampe, Mabushi, Maitama.

One thing that prime locations do for you is that your property sells itself. Mabushi - the city centre, Katampe phase 1 and 2 close to the airport and facing a major road and Maitama are major prime locations in Abuja Cosgrove is in.

terraces-cosgrove

3-4-bedroom-terraces-cosgrove-katampe

cosgrove-katampe-by-ministers-hill

But the things about prime locations is that they are expensive. Very expensive.

So what happens if you do not have the budget for a prime location? Then consider areas that share boundaries with these prime areas.

In Lagos, Real Estate and location value has been a linear progression - from Ikoyi-Lekki-Ajah-Chevron-Sangotedo-Abraham Adesanya-Abijo all the way to Ibeju Lekki.

Property Rental in prime Locations:

Lagos is such a heterogenous place that attracts, investors, expats, holidays goes, people on official visits. There is a housing deficit of 17-21million and it is ever growing. The rental industry is struggling to meet up with demand and most people do not want to rent for long or stay in hotels. So the solution? Serviced Apartments!

To this end, alot of developers are positioning their property developments for the market to take advantage of the shortlet market. And since most of the demand is in Lekki, you can see companies like veritasi, tribitat real estate, God’s Made Homes Luxury positioning in Freedom way Lekki and with an initial deposit between 2m-10m, you can get a 3 bedroom, fully serviced apartment here.

lekki-view-ikate

along-lekki-epe

lekki-view-ikate

But prime areas do not become prime overnight; most times it does not look like it for years.

For example, when Cosgrove came into Wuye it was abandoned land that other Real Estate companies and developers had run away from. But through an engineering miracle, they turned it around.

You could make alot of money and save massively on your initial investment by spotting auspicious locations that would do very well in a few years.

You would able to buy affordably now and maximize your profit when you want to sell, rent or put on the shortlet market.

These are other important points you need to note about your real estate investment:

6.) Follow areas of government interest

7.) Take advantage of Urban areas

8.) Take advantage of GRAs

9.) Take Advantage of Beachfronts

10.) Take advantage of areas of infrastructural development Plans

11.) Take advantage of free zones

12.) Buy into Mega city projects early

Knowing the above above Real Estate Investments - how do you fund these project.

How to fund Real Estate Investments in Nigeria

  • Out of pocket
  • Take advantage of payment Plans
  • Cooperatives
  • Sponsorship deals
  • JVs

If you want to invest in Real Estate in Nigeria, Click to Call us, or Send a Whatsapp message, or Email us.


Uche Emordi

Uche Emordi

Realtor and Content Manager

Professional Scrum Master | SEO & Lead Generation Specialist | Real Estate | Sales | Business Development

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