Passive income is another of the opportunities that the real estate industry offers you. You can make your money work for you while you focus on other sources of income. It is a smart way to secure your future and investments. Here are some reliable passive income strategies to help grow your pocket:
Rental Properties
Investing in rental properties is a great way to earn passive income from real estate. Rental properties of any type remain in high demand in Nigeria. Many investors or property owners have residential buildings ranging from single rooms, self-contained rooms, bedroom apartments, and flats, to duplexes and mansions. You will enjoy a steady and stable income when you rent out these properties for 12 months or more.
Other options include commercial properties such as warehouses or market stalls. As a passive earner, you should get a property manager to ensure compliance and maintain tenant relations, maintenance, and evaluation. You negotiate a percentage of the gains that go to the manager while you continue to earn passively.
Real Estate Investments Trusts (REIT)
Buying shares in real estate investment trust companies is a smart and lucrative way to earn passive income. These companies provide investment opportunities for new entries in the industry. It also allows you to enjoy the benefits of a diverse portfolio.
REITs are different from real estate investment where there is much risk involved. These companies make buying and selling shares and investments easy. They are also a safe investment option for new investors. The REITs sector is wide with varying investment options. Here are some main options.
Publicly Traded REITs
This is the most common type of REIT. It is a passive investment style because all you need is research and invest. The setup allows you to sell and buy shares using a brokerage system and on open stock market days. While there is ease of entry, remember that publicly traded REITs are open to the volatility of the market. Nevertheless, it is a great source of income if you are specific and informed in your investment choice.
REIT Mutual Funds
This system groups a class of REITs and helps investors enjoy exposure in the selected real estate sector. You have a manager who actively participates in the buying of shares with high returns and impressive performance. The Manager contributes to the funds used for the stocks. While the manager's contribution is usually low, his active involvement in the investment makes up for it.
Non-traded REITs
This is a less volatile form of investment fund for new investors. This system uses the stock exchange as its trading platform. It is a direct form of investment that requires a higher minimum entry level. On the plus side, it yields higher returns compared to other forms of REITs. There are stricter ground rules and regulations. Buying and selling of property shares is more difficult and it is once a quarter.
REIT Exchange-traded funds
This is another suitable investment plan for new partners in the real estate industry. It is an appreciable source of passive income. Like mutual funds, this investment trust combines a broad range of REITs and reduces the risk of loss. The exchange-traded funds management charges investors but with a promise of funds security.
Land leasing
Land leasing is another lucrative option in the real estate passive income sector. If you own acres of land in low-exposure areas, you can lease these lands for agricultural or other commercial uses. Local farmers, businesses, and other related stakeholders are always in demand for lands in remote areas. There should be an agreement between the owner and the user on the acceptable land use, the duration, and the option for extension.
You only need rare inspections to ensure compliance. Land leasing helps keep the land occupied and safe from fraudulent poachers. Your land also continues to appreciate while in use.
House Hacking
House hacking is an innovative way to earn passive income in Nigeria if you own a residential property. House hacking involves renting out a part of your house or apartment to others needing smaller space. Specific examples include renting the annex of your duplex. Some more innovative ideas include renting out a room to a student.
Short Term Vacations
Short-term vacation houses or apartments are becoming popular in Nigeria. The rise of Airbnb worldwide shows the increasing demand for short-term rental properties. You can tap into this demand by building high-quality and aesthetically pleasing structures for vacations and recreation. Locations with lots of festivals and concerts are ideal for such business ideas. Short-term are expensive and create an appealing environment for the best time on vacation.
It promises high income in short periods. The bonus is that you can use the property when it is vacant or during low-traffic periods. To make this option passive, you should hire a trusted management agency to deal with bookings, regulations, and maintenance.
Real Estate Syndications
Nigerian platforms like Crib stock and Keble are popular platforms for real estate syndications. This passive income strategy is similar to the crowdfunded structure. In this system, investors become part owners of a specific property. Real estate syndications focus on commercial real estate such as office buildings, warehouses, or private properties. This is different from REITs because it is less volatile.
Buy and Hold Strategy
This strategy is indirect for passive income. It's a good strategy if you plan to sell a property later. In the meantime, you rent out the property. For some, the buy-and-hold strategy involves development. The owner develops the property or redesigns it for a different use that fits the location demands. For example, you can redesign a basic residential property to hospitality real estate and sell it when it has significantly appreciated.
Regardless, be sure to keep it in good condition. If it remains vacant, then it is important to maintain it and bear any repair costs. When it remains in good condition, the valuation of the property increases. You can use the property as leverage to invest in other properties. It elevates your portfolio.
Conclusion
There are options for you to enjoy passive income in Nigeria’s real estate industry. You can pick from numerous investment options including rental properties, investment funds, real estate syndications, and more. The most suitable option depends on your properties, investment plans, and available assets. Our experts at Land Republic are readily available to help you invest properly with optimal gains and returns.
