Pros and Cons of Investing in Real Estate in Nigeria: All You Need to Know

Every investment strategy has its pros and cons. As a wise investor, this shouldn’t scare you. Rather, it should spur you to research and maximize the pros while navigating the cons wisely. 

Investing in real estate in Nigeria is fast becoming a major investment option for several people. How well you maximize the market could have a significant effect on your financial future. The pros and cons of investing in real estate in Nigeria will help you navigate the market smartly and wisely.

Pros of Investing in Real Estate in Nigeria

Real estate has been considered a lucrative investment plan across the world. Nigeria is not left out of this trend as it has a booming real estate economy. Before venturing into the field, you should be aware of the advantages resident in the Nigerian real estate economy. Come along with us as we show you the pros of investing in real estate in Nigeria. 

1. There is a High Demand for the Real Estate Market

Everyone living in Nigeria requires the real estate industry for one thing or the other. Nigeria has a fast-growing economic population. People in the Nigerian communities require lands and houses for their homes, businesses and companies. 

Due to this fast-increasing population, demand for real estate is on the rise. Consequently, these properties quickly appreciate and afford real estate investors an appreciation in capital.

2. Serves as a Hedge Against Inflation

Inflation has little or no effect on real estate investors. Rather than get worried about inflation, real estate investors get to profit from inflation. Inflation leads to a rise in the cost of properties and rentals. Consequently, the income of real estate investors increases whenever inflation occurs.

3. It is Not a Capital Intensive Investment

Real estate is a multifaceted field with numerous entry points. With its broad and numerous phases, you do not need so much capital to get started with real estate investment. If you desire to get started on a large scale, Nigeria has several financing options you can take explore.

4. Real Estate Gives You 100% Control Over Your Investment

Investments like shares and stocks are very volatile and could be negatively affected by downward economic change. In such investments, it is difficult to make long-term plans and projections because of the role of the economic outlook. On the other hand, real estate is a stable investment plan. This enables you to plan your income and estimate the returns you will get. Additionally, you can induce appreciation and increase your ROI by your actions.

5. You Don’t Have to Do Everything

Real estate investment is one of the few investment plans that don’t require you to commit your time fully. You can work a full-time job while actively engaging in real estate. Real estate has several professionals you can outsource your tasks to in exchange for pay.

This could be more advantageous. Most especially, if you are a beginner in the real estate investment field. Even if you desire to be fully involved, the tasks that you don't feel comfortable with can be outsourced. For example, if you are not comfortable negotiating prices and renovating properties, these parts can be outsourced to real estate agents and companies.

6. Steady Income Flow

Real estate investment is one of the investments that guarantee a steady flow of income once you are established in the field. To make the best of this advantage, you need to be aware of the potential of the properties in your possession. For example, you could lease your bare land as a car wash, farmland or even a park. While at it, you get a steady income from your tenants.

Furthermore, you can always use the income from one real estate property to induce appreciation on other real estate properties you own. For example, the income from Real Estate Investment Trusts can be used to develop other real estate properties. You can use such income to develop your bare lands and renovate existing buildings.

7. You can Purchase Property Below the Market Value

Real estate is one of the few fields in which you can purchase properties below the market value. Sometimes, real estate owners are pressed by challenges and need to dispose of their properties to the nearest available buyer. In such situations, such distressed sellers are more concerned about selling the property than the market cost. Most times, the asking price of such properties is usually below the market value. Hence, enabling you to make maximum profit from the transaction

8. Appreciation is a Constant Feature in the Real Estate Industry

One major advantage of real estate investment is that it doesn’t depreciate. Rather than depreciate, property appreciation is a regular feature in the real estate industry. Several economic factors aid the appreciation of real estate properties. These factors include development, inflation and a high demand for properties in an area.

One of the ways to maximize appreciation is by being strategic with your real estate investment approach. Invest in areas that are prone to development, so you can make the best of the property when the appreciation wave starts. As a property owner, you can also induce appreciation by taking certain steps. For steps on how to get started, read up on how to leverage forced appreciation in Real estate.

Cons of Investing in Real Estate in Nigeria

Before investing in the real estate market, you need to know the cons so that you can avoid them:

1. There is a Risk of Making Bad Choices

Real estate is a low-risk investment strategy that is often considered a safe option. However, investors are at risk of making wrong choices. These wrong choices could range from choosing the wrong environment to choosing the wrong dealer and wrong tenants. 

When investors make these kinds of mistakes, they get discouraged and could quit real estate investment altogether. One of the ways to avoid this is by doing due diligence before investing in a property. After you are certain you have done due diligence, you should carry experts along. This will prevent you from repeatedly making bad choices.

2. It Could be Difficult to Maintain Real Estate Properties

You can maintain several shares and forex investments with one click. However, real estate does not work that way. The more properties you have to maintain, the greater the demand for your time and your presence. As a result, it is easy for real estate investors to get busy following the motions while their properties gradually deteriorate.

Unfortunately, deteriorating properties cost more to repair. When investors are unable to spot damage early and restore the property to shape early, they tend to lose the investment as a whole. Despite this difficulty, you can manage the situation like a professional.

For starters, you don’t have to manage all your investment properties yourself. Hiring a property manager will go a long way in ensuring your properties are always in shape. As the property owner, your job will be to schedule property management visits to ensure the property manager is carrying out his job.

3. Real Estate Requires Repeated Expenditure

Real estate is an investment strategy with repeated expenditure. There will always be a need to spend money on property management and improvements. Failure to manage and improve on the property could lead to deterioration which will cost more to repair. 

Aside from expenditure in terms of funds, real estate requires time and attention. You need to constantly examine the property to ensure it is in shape from time to time. If the property is bare land, you need to pay visits to the property to ensure scammers are not encroaching on the boundaries of your land. You also need to pay constant visits so your neighbours can know you and alert you of fraudulent activities on the property.

4. Illiquidity

Low volatility is one of the numerous advantages of real estate in Nigeria. However, the tables could turn and this could be a disadvantage if it’s a short-term investment. Real estate is often difficult to sell if you have a very short timeline for disposal. Most especially, in the cases of emergency.

When emergencies like that arise, quick disposal of the property will require you to sell below the market value. Consequently, this will reduce your profit margin. You can get ahead of this by investing in Real Estate Investment Trusts (REITs) which are easier to trade off compared to properties and lands. You can ace your REITs journey by learning all you need to know about real estate investment trusts.

Conclusion

Real estate is a lucrative field with several advantages. Before investing in real estate, you should know what you are getting into. In this blog, we outlined several pros and cons of the real estate market.

Here at Land Republic, we are committed to giving you a smooth transition into property acquisition. Our community of seasoned real estate agents are always on standby to guide and walk you through property ownership. Do not hesitate to contact us today via +2348122222283 and support@landrepublic.co.