Types of real estate investment

We bring to you a quick guide on the types of real estate investment options you may consider.

Are you planning to start a new career or a side hustle to earn extra money? You might be thinking about real estate.

The real estate business is booming and if you are smart, this is the best time to start the business, particularly because the growth of the industry is not looking to slow down anytime soon.

Running a real estate business is one of the hot business ideas in Nigeria that many are not really looking into.

In this article, we will bring types of real estate options in Nigeria that can help you kick start your career.

Stay with us as we explore together.

1. Real Estate Investment Trusts (REITs)

This is one of the simplest methods of securing real estate assets without actually acquiring a physical property.

Real Estate investment trusts are companies that create platforms where people invest with them.

These companies are regulated by the Securities and exchange commission (SEC). REITS, is a unique type of company that allows investors to pool their money to invest in real estate assets.

Some REITs simply buy properties and rent them to tenants, others develop properties from the ground up, and some don’t even own properties at all, choosing to focus on the mortgage and financial side of real estate.

The portfolio of underlying assets is placed under professional management to maximize returns to the investors, who are able to hold an indirect interest in real estate on a flow-through basis, placing them in a position as if the property were held as a direct investment.

REITs  are bought and sold on the major exchanges, just like any other stock.

Related: How to start real estate business in Nigeria

Advantages of REITs

  • This kind of real estate investment provides an opportunity for investors to own big projects without necessarily owing the actual entry capital for such projects.
  • Needs no minimum investment.
  • Features tax advantages.
  • This strategy is a super liquid way to invest in real estate. You won’t need a realtor to cash out your investment.
  • REITs pay high yields in the form of dividends.
  • Provides you the opportunity to share in non-residential properties like malls, industries, and hotels.

If you want to invest in real estate, REITs can be a very easy way to get started.

There’s excellent return potential in owning investment properties outright, but there’s a lot of work involved with direct real estate investments, even if you hire a property manager to oversee their day-to-day operations.

2. Land Flipping

Land flipping is the ideal real estate investment for people who have low start-up capital and still want to reap huge profits within a short period of time.

It involves buying lands at a low price and selling at higher prices to make huge profits. This type of investment is profitable when land buyers buy land in an area that is rapidly growing.

You can make up to 200% on your investment in a few months or in some cases a few years.

Advantages of Land Flipping

Land unlike other forms of real estate investments require minimal maintenance.

You need to renovate buildings frequently to maintain the integrity of the property but, you can let the land sit fallow for years, without spending much in maintenance and it will still appreciate in value.

One of the downsides of other forms of real estate investment like rental properties is dealing with tenants, tax issues and other issues associated with maintaining buildings. Flipping lands cut off all these contingencies. 

Raw land is easier to maintain, even if you have to hold onto your investment for a long period of time.

Lands are generally cheaper than developed properties, which means you can start small and grow your portfolio big enough to eventually be able to secure financing for future investments.

To make huge profits in flipping lands, follow these tips:

In this type of real estate investment, you need to research thoroughly, pick out areas that are rapidly developing, have the potential for developing in future or already developed areas.

Depending on the location and economic viability, certain areas mature faster than others. If you are able to acquire land in a more developed area at a fair price, go for it.

More developed areas are the easiest to flip in a couple of months and earn profits compared to developing areas. Developing areas may require a couple of years to fully appreciate.

Ensure that the seller is the rightful owner of the land and has complete land documents including a Certificate of Occupancy or a Governor’s Consent.

Avoid lands with inconclusive land titles like Excision in Process or Gazettes. Since you’re reselling, you must avoid getting caught up in land title issues. Go for clear, genuine lands with the appropriate land titles.

If you’ve secured the perfect land at an ideal location, do some work on the land.

Clear the land, create a path or road to the land. Get a surveyor to get the area marked and craft a brilliant description of the area.

Advertise the land by utilizing the numerous social media sites and other forms of advertisement.

Related: How to start a palm oil supply business in Nigeria

3. Open Space Leasing

In this case, you own a land in a good location. While you wait for the property value to increase, you lease the land to people for temporary use for a monthly feed.

For example, you can lease it to a car wash, mechanic shop, church, or other businesses that can build a makeshift structure that will be easily dismantled when you are ready to sell.

Advantages

Extra monthly profits before actual land sale

4. Become a real estate agent

There are several steps that every individual must take to become a real estate agent. 

  • Train Yourself

Self-development is the key to success in every industry.

Your communication, networking sales, and negotiation skills need to be top-notch to succeed as a realtor regardless of whatever qualification or degree you have or don’t.

To begin your journey as a real estate agent in Nigeria, go for intern at any top real estate organisation for 3-6 months. This gives you more experience about the industry and helps you to build key industry relationships.

Endeavor to also extend your training to social media for real estate marketing and create a strategy suitable for you to implement.

  • Brand Yourself

After you train and learn all about your practice and technology, brand yourself both for online and offline purposes.

Focus on your name, and try to face content to create a theme for your personal branding everywhere.

5. Property development

Property development, also called real estate development, is the process of developing buildings or land into a higher use-value. It’s a multi-faceted business that can encompass any of the following:

  • Buying land and building property on it
  • Renovating, extending, or improving property
  • Converting property from one use type to another.

6. Franchising

Franchising is an excellent means of acquiring and holding land in various growing locations.

The only con is that it needs a considerate amount of capital. It’s as easy as when you acquire a land and use it to establish a business, such as a fast-food restaurant.

You then purchase land in several other locations, build your structures and locate franchises that will manage the restaurants on your behalf.

We have many brands, such as Shoprite, Sweet Sensation, Chicken Republic, Mr. Biggs, McDonald’s, and several others that exist today.

Advantages

  • These lands quickly appreciate in value over short period of time.
  •  Run a sustainable business while acquiring high value real estate.
  • Own land in multiple major locations across the country.

Related: Top 15 real estate companies in Lagos state

7. Build or purchase rental properties

This type of real estate investment is the most common form. The “buy and hold strategy” involves purchasing a property and renting it out for an extended period of time.

Essentially, a “buy and hold investor” seeks to create wealth by renting the property out and either collecting monthly cash flow or simply holding the property, until it can be sold for profit in the future.

Among the advantages of this strategy is that during the time that you hold the property and rent it out, the mortgage is paid down every month, decreasing your principal balance and increasing your equity in the rental property.

Investing in rental properties can generate passive income, significant tax benefits (being an income property), and build equity from price appreciation over the years.

Types of Real Estate Investment (Summary)

That’s all on types real estate investments. Mistakes can be made in real estate business as in anywhere else and that is why one needs to practice patience and try to be wise.

We hope you’ve found this article to be helpful. Do like, share, and drop your comments.

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