Benefits of Real Estate Investments in Nigeria

Published on: October 26, 2021 (Updated on: April 22, 2024)

Benefits of real estate investments in Nigeria

If you are considering making a low-risk investment in Nigeria, consider investing in real estate. This post highlights the benefits of real estate investments in Nigeria.

What is real estate?

Real Estate can be defined as any property i.e building, that is situated on a piece of land and the natural resources attached to it. Real estate also connotes the legal rights a person or group of persons have over the use and ownership of the real estate.

What are real estate investments?

Real estate investments are investments in the purchase, sale, lease, or development of real estate property in order to make a profit.

The Real estate sector has witnessed a good amount of growth in Nigeria over the years. For a nation whose economy relied on agriculture in the past and now oil, development in the real estate sector seems like a breath of fresh air giving the dwindling performance of the oil sector. The Real estate sector contributed 8.7% of Nigeria's GDP in 2014 and by the first quarter of 2021 has already contributed over 5% to the country's GDP. This shows that the development in the real estate sector is important to growing the nation's economy.

While most sectors all over the world were affected by the COVID-19 pandemic, the real estate sector was unaffected. People will always need accommodation and the real estate market has no opening or closing time. Investments in real estate provide certain assurances that are not found in other forms of investment. Unlike investments in Cryptocurrency and Foreign exchange, Real estate is a less volatile form of investment.

Benefits of real estate investments in Nigeria:

The value of a real estate property increases over the years

1. Real estate investments are low-risk investments

Due to the low volatility of the real estate market, risks involved in investments are little and can be insured against. Investors can take out comprehensive insurances on their property to cover certain losses.

2. Real estate investments provide financial stability for investors

Profits in real estate investments are not immediate and may take a period of years to come by. What they guarantee, however, is passive income. Investors can receive passive income in the form of rent from residential and commercial real estate properties put on rent or lease.

3. The value of a real estate property increases over the years

An increase in the value of a property depends on the physical attributes of the property, location, and improvements carried out on the property. These factors help in increasing the monetary value of the property, whether in the form of rent or outright sale.

4. Ownership of real estate can be leveraged to secure loans from banking institutions

Real estate assets can be used as collateral to secure loans from banks in order to execute other business or investment projects.

5. Real estate constitutes an asset rather than a liability

Assets are properties owned by a person that increases in value. Liabilities are assets that reduce in value or cost the owner money. Real estate investments unlike cars are assets that appreciate in value while cars are liabilities that depreciate in value.

Ownership and rights in real estate can be passed down from one generation to another.

Investment options available in the real estate sector include:

1. Development of rental properties: Although this is a capital-intensive venture, it, however, guarantees passive income. Investors can develop residential or commercial properties and put them up for rent for a duration of time. The investor receives rent as payment for the use of the property.

2. House Flipping: This is a form of real estate investment where investors purchase old properties, renovate them, and sell them for a higher price. This would require the use of professional valuation experts to help determine the open market value of the property before renovation and after renovation.

3. Real estate investment trusts: Popularly called REITS, it is set up by corporations who help investors purchase, operate, and manage properties.

4. Real estate investment groups: Enable investors to purchase units of apartments in developed properties and lease them out. The investment group handles the management and advertisement of the properties or estates.