Real estate is defined as an immovable property of its kind, including interest or a specific piece of real property, (more generally) buildings, or housing in general.
Real estate includes land and the structures on it as well as its natural resources, such as crops, minerals, or water. Real refers to land property and is distinct from personal property in terms of law, whereas estate refers to a person’s “interest” in that land property.
Real estate is distinct from personal property, which includes things like cars, yachts, jewels, furniture, equipment, and a farm’s rolling stock but is not affixed to the land permanently.
In Nigeria, business corporations, individuals, nonprofit corporations, fiduciaries, or any other legal entity as defined by the law may transfer, own, or acquire real estate.
Real estate brokers are authorized to assist clients in the purchase, sale, and leasing of real estate. Both active, income-generating activity and the necessary administrative paperwork for the employment are completed each day.
Generally speaking, real estate investment is a great idea. If the value rises over time, it may produce continual passive income and make a smart long-term investment. You might even incorporate it into your overall plan to start accumulating riches. Real estate investment is a method that may be both rewarding and profitable.
Prospective real estate owners can utilize leverage to purchase a property by paying a percentage of the whole cost now, then paying off the balance, plus interest, over time, unlike stock and bond investors. The Nigerian economy is heavily reliant on real estate. Housing for families is provided by residential real estate.
For many Nigerians, it is their main source of wealth and savings. Commercial real estate, which includes residential complexes, generates employment and provides locations for offices, retail, and manufacturing. Real estate can be divided into five primary categories: residential, commercial, industrial, raw land, and special use.
Real estate consistently outperforms other assets in terms of long-term value growth. Additionally, it is less susceptible to sudden changes than the stock market is. Whether you choose to purchase a home or rent an apartment or business building for income, you obtain a real, functional asset.
One of the most promising business sectors nowadays is the real estate market in Nigeria. It is anticipated to increase to USD 1 trillion by 2030 from a size of USD 120 billion in 2017. Yes, this industry is expanding quickly, luring people from all walks of life to launch their own business here.
Investing in real estate is secure because: It is a valuable tangible asset, Its worth will nearly always rise over time, Your portfolio is given diversity, which helps to lower risk, It offers tax advantages.
One of the best methods to build money has been purchasing real estate for hundreds of years.
Although, there have been cycles of real estate booms and busts in recent years, many of the people have become wealthy over time by owning real estate across the country.
A residential property’s average annual return is 10.6%, a commercial property’s average annual return is 9.5%, and a REIT’s average annual return is 11.8%. When comparing your return on investment properties, knowing that the national average return on an investment property is quite helpful, keep in mind that you could not see a return on your investment for several months.
However, you will discover that investing in real estate is a choice that is worthwhile in the long run.
Here are the top 5(five) real estate investment categories, in case you’re ready to invest.
1. Commercial Real Estate
One of the most successful real estate investment kinds is a commercial property. Industrial, retail, office, and even parking spaces are just a few of the different kinds of commercial spaces.
The potential for better cash flow is one of the reasons commercial buildings are regarded as one of the top real estate investment kinds. Commercial real estate may provide investors greater income possibilities, longer lease terms, and lower vacancy rates than other types of real estate.
A commercial property investment is typically anticipated to produce a significant return on investment. In addition, you will be renting to a company rather than a person. This implies that everything will go more smoothly because companies typically care about their reputation and will take good care of the property.
Additionally, because they do not want to lose the location, most firms have a tendency to pay their rent on time. Consider seizing the great real estate opportunity before it’s too late if you discover a chance to invest in a business space in a bustling neighborhood.
Properties with the most renters are often ones that have the biggest potential return on investment. These commercial real estate assets may consist of multi-family developments, dorms for students, offices, self-storage facilities, and buildings with mixed uses.
2. Residential Houses and Rental Properties or Homes.
Residential and rental homes are usually an easy investment to make and a safe one. The monthly rent you receive from the tenant if you invest in a residential property will be a source of income for you.
This has a high potential for long-term financial gain. Additionally, a consistent income will be guaranteed for you. The property will require routine upkeep to maintain its worth, so keep that in mind.
Additionally, you can run into tenants who don’t pay their rent on time or won’t reimburse you for any damage they create to the house. Additionally, it’s possible that you won’t be able to rent the house out for a while.
These are all potential roadblocks that could reduce the return on your investment. In the event that you choose to sell the property, you will probably make money off of the transaction.
Even though the value of most real estate assets is predicted to rise, it is advisable to make an investment in a region with growth potential. This will almost certainly enable you to continue renting it out and, if you choose to sell it, profit from doing so.
You can assess your savings by buying a house, whether for residential or investment purposes. Prices for homes have been steadily rising, particularly during the past ten years.
The cost of land and building are rising, and house costs are likewise steadily rising due to annual inflation. As a result, purchasing a home in the hopes that its value will increase can be a successful investment strategy.
As soon as the tenant is settled in the home, you can discover additional revenue. Renting a home in the city center is simple, but the costs are considerable.
Additionally, if you want to get the most out of your residential property that you bought for a profit, look for communities adjacent to freshly established transportation networks and newly built urban districts.
3. Fixer Uppers
A fixer-upper, purchased with the intention of selling it, requires a lot of work. When purchased, this property is typically in poor condition and was paid for at a low cost.
After fixing it, the investor resells it for a profit. The ideal investors for this kind of investment are those who want to get rich quick. But bear in mind that this kind of investment necessitates in-depth research and specialist real estate experience.
You must first locate a nearly abandoned property with a lot of promise. The next step is to identify quick and inexpensive modifications that will raise the property’s value.
In order to profit from the sale, you must finally market the property. Buying a fixer-upper needs a lot of work, creativity, and knowledge. If executed properly, this kind of investment is certain to yield a profit in a short amount of time.
4. Investment in Land for the Middle Term
Residential land, which has increased in value due to the growing need for housing, is becoming more and more valuable every year as a result of the growing population.
Land investments are among the most lucrative real estate since they are simple to sell and increase in value over time. The value of the land rises together with the amount of buildings and green spaces surrounding the investment.
One of the most effective ways to gain money in 2022 is by investing in land. The demand for land as an investment has increased during the last few years.
The sales of rural land increased by 155% between 2020 and 2021. The stability that comes with owning a piece of land is what has caused this growth.
Undeveloped land can be purchased and held onto for a profit, especially over the long term, as the price of land today has the potential to increase in value over the future years. Additionally, there are numerous ways for investors to buy undeveloped land for less than market value.
5. Land/House Flipping
Investing in real estate is buying and selling properties quickly for a profit.
It is among the best investments one can make, and the owner needs to put in little to no effort. You are prepared financially and are knowledgeable about land ownership and the purchasing and selling procedure.
If you wanted to make hundreds of millions of dollars, you would need a lot of cash, but you could start small by purchasing just one plot and work your way up to purchasing tens of plots and acres, selling them continuously all year long.
Flipping houses involves a lot of real estate expertise, marketing, and restoration. One needs the necessary funds and the ability to supervise repairs when they are required for house flipping to succeed.
Shorter term capital commitment, Can provide prompt returns.
Needs more in-depth industry information, Unexpected cooling in hot markets because they rarely save enough uncommitted cash to cover the mortgage on a property over the long term, flippers who are unable to rapidly sell a house may run into problems. As a result, losses may snowball.
Which property is the best investment for me?
Before you invest in any kind of property, remember that you are seeking for the most profit, not the most rent.
Profitability will depend on a number of variables, including the amount invested and capital growth.
Your property’s capital growth, also known as capital appreciation, is the amount of value growth or decline over time.
This means that in addition to the actual property, you also need to think about the surrounding region. A five-bedroom villa in a place with no potential may be more profitable than investing in a studio apartment in a developing neighborhood.
The size of the property itself is not more significant than other elements that influence its value growth. The ideal investment strategy ultimately depends on your goals.
Consider investing in a fixer-upper if you want to generate money quickly. You can pick between a residential or commercial property if you have the patience to wait.
Your financial situation will also have an impact on your choice. No matter what kind of property you decide to invest in, always keep in mind to thoroughly research the market.
Analyze the neighborhood and property to identify any room for expansion. If you want more information before choosing, you may also speak with a specialist.
Meanwhile, some of the variables that could go wrong include things like plot location, plot shape, plot direction, neighborhood, accessibility, etc.
Your biggest asset could quickly become your largest liability if none of these variables are taken into account before you purchase land.
In our other articles, you can find information on things to consider before buying a plot of land, a piece of property, or making any other real estate investment.