How To Choose The Right Real Estate Investment Strategy in Nigeria

 

 Rentals:

Rentals are one of the safest and most steady sources 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, asset appreciation, collateral for loans, and property that can be sold afterwards for a profit.

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 25m.

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

 Flipping

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, and Ibadan and some of these properties, with strategic locations like in Eleko junction.

They have the gracias Morganite, Goldstone and Peridot heights, off lekki epe expressway Lagos.

Gracias Global’s 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 also located in Lagos as well.

Word on the street was that the total payout for Westwood estate by Landwey in Monastery road Sangotedo, Lagos; was NGN3billion.

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

 Property Development

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

This argument can be the most profitable strategy and companies like Cosgrove in Abuja with their flagship fully finished and furnished property in Wuye cost NGN500million.

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 NGN40million and above per unit.

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).

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.

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).

 REITS:

Simply put, a REIT is a trust that pools funds 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 on the Nigerian Stock Exchange distribute 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 recognized by the Securities and Exchange Commission namely; Union Homes, Skye Shelters and UPDC, a subsidiary of UACN.

Nigeria by 2019 had the 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 an 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 namely;

i.) Rentals ii.)Flipping Houses/Land iii.)Property development iv.) REITs,

You have to position yourself 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?