People invest in businesses for different reasons, and real estate business in Nigeria is one of those businesses anybody can invest in with the right resources.
Before diving deep into reasons why investment in real estate business in Nigeria is the real deal, we will take a cursory look at the meaning of real estate and real estate business.
A real estate is an assemblage or aggregation of properties which mostly consists of land or buildings.
Real estate business itself is the purchasing, renting or selling of a property or aggregated properties for a profit. At the point the particular property or asset is purchased, rented or sold, it may or may not have been fully built or developed. From the above, we can conclude that real estate business deals in purchasing of property, as well as renting and selling them for profits or gains.
Examples of real estates include but not limited to the following– houses, undeveloped land, dwelling houses, warehouses, office buildings, retail store buildings, farms, firms, and factories buildings.
In Nigeria, real estate is a lucrative venture to invest your capital due to its large potential earnings.
By picking finely chosen properties to invest your money in, the investor can enjoy a steady cash flow over time, enjoy wonderful investment return, take tax advantages inherent in the property industry while also diversifying portfolio. The above means can be leveraged to build wealth through investment in real estate business in Nigeria.
If you are still wondering if investment in real estate business in Nigeria is worth your time, the following are serious reasons to consider why adding real estate business in your investment portfolio is good business.
1) Cash Flow
As of June 2020, there is an estimate deficit of 20 million housing units in Nigeria. Access to affordable houses is still a very big problem for a lot of Nigeria’s 200million population.
Bridging such a deficit through investment in real estate, coupled with the high rate of urbanisation in the country, will create huge source of income for the real estate investor. This becomes even bigger when you consider the fact that Nigeria is projected to double the population number to 400million by 2050.
- The investor Earns Passive Income
This is by far the main reason to invest in real estate. Real estate portfolio is one of the few portfolio turnkey with the ability to constantly generate a steady active income for the investor. One of the ways to enjoy this great benefit is by investing in real estate markets in Nigeria that are stable and enjoy a well calculated growth pattern. Doing this generates a continuous passive income for the investor during the lifetime of the real estate.
An example of this is buying of properties in developing areas in different parts of Nigeria, then selling or renting it out when it is profitable to do so. Also, many real estate business agents can assist an Investor seek out the best performing real estate markets to build or add to portfolio.
- Real Estate Business is an inflation-protected instrument.
The drop in Treasury Bills necessitated by the Central Bank of Nigeria’s monetary policies has positioned real estate businesses in Nigeria as one of those investments that can withstand any form of inflation both at the micro and macro level of the economy.
What this means in a nutshell is that real estate is not dependent on most of the other market variables and factors which generally affect the economy. Land or housing is an essential need.
- Real estate appreciates.
The ability of real estates to appreciate with time makes it a real deal for asset leveraging. As a real estate investor, you can leverage on the appreciative values of real estates and build equity. The fact that real estates are also inflation-protected or inflation absorbers adds to this advantage.
- Portfolio Diversification
As the name suggests, real estate business in Nigeria helps the diversification or wealth spread without putting or concentrating every wealth in one investment.
By diversifying your wealth through real estate business in Nigeria, you limit the unpredictability of your investment. This will in turn provide a new avenue to generate and guarantee income return.
- Utilisation of Market Cycles
This can be referred to as ‘effective market timing’. It simply involves buying low and selling high. This is one of the major features of any successful real estate businessess in Nigeria.
Although it is not easy predicting the upward and downward trends of an economy, cues are easy to see for a real estate business investor to utilize and take advantage of.
A lot vital indicators can be used to predict and know the market life cycle of real estates. At the top of these determinant factors are population growth, demand and supply, employment rates within a location, security, standard of living and interest rates. With real estates, timing is key.
- Competitive Risk-Adjusted Return
Real estates yields different returns for different reasons. However, all real estates are controlled by factors like the type of property in question, location of the property and management of the property.
Bearing this in mind, an investor will always adjust his investment risks and returns depending on the developmental drives witnessed in the area his real estates are located. This gives the investor a competitive advantage, especially annual earnings from the property.
- Tax Breaks and Deduction
There are many tax breaks and deductions which are open to a real estate business investor in Nigeria.
Generally, you can subtract costs of operating, managing and owning a property by spreading it over a period.
The investor can also spread and depreciate the cost of his estate buildings all through the property’s life span which will help lower his tax deductions.
- Use Leveraging to Maximize Return on Investment.
This applies mostly to capital investments. In leveraging, an investor can borrow money from financial houses to build real estates and spread the repayment over time bearing in mind the potential earning capacity of the asset.
By using loaned capital to expand the earning potential of your real estates, you are using the full power of leverage to maximize your returns. Real estate is a physical asset and potential return is always significantly higher.
- Real estates can be improved.
In a nutshell, real estates are made with tangible materials like wood, metal, brick, concrete and glasses. This attribute means that real estates can be improved upon with time to increase its value or reduce its value to improve returns on investment.
This can be done through a structural readjustment or aesthetic decorations.
Housing is a basic necessity everywhere. It is third in the order of human necessities after food and clothing.
Seeing as Nigeria has interesting ownership rates, investing in real estate business in Nigeria to take advantage of the housing deficit of the population will yield an excellent return on any investment.