Hello, I’m Joy! You are here because you have considered investing in real estate. In today’s article, I’ll be sharing with you valuable insights to help you build a successful real estate investment. Oftentimes, the common reason why people don’t want to invest in real estate is the perception that real estate investment is a luxury and only the elites can afford it. With this, I can say the knowledge gap about investing in real estate gives the impression that other assets are easier to invest in.
Here is my breakdown of what real estate investment is about and why it is a preferred asset.
To begin with, real estate investment is simply generating income from owning properties. To create cash flow and achieve long-term financial growth, invest in real estate by purchasing, owning, and managing properties. Its benefits include but are not limited to asset appreciation, high returns on investment, portfolio diversification, owning tangible assets, and wealth building. In Nigeria today, real estate is one of the most lucrative and secured investment options. With adequate knowledge and a reliable real estate investment platform, you too can delve into the world of real estate.
Five reasons why real estate investment is highly preferred
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Appreciation
Real estate is a dependable and lucrative investment option because of its growing potential in Nigeria. Over the past 5 years, I have invested in several real estate properties, and currently, I have recorded an appreciation of approximately 8% annually. This appreciation has helped me generate wealth through rental income, and I consider it to be a great advantage for those looking to invest. I also tracked this appreciation and realized that various factors such as my properties’ location, demand for space to rent, and the development around them. The development in and around the location of the property has appreciated my real estate and helped me increase the rental income as demand for the properties rises.
I suggest looking for real estate in urbanized locations like Lekki, Lagos, Ikoyi, Lagos, or Gwarinpa, Abuja. These areas have huge growth in demand due to their development and the growing demand for residential and commercial real estate in such locations. Also, you should look out for real estate with infrastructure development and proximity to businesses, schools, and transit hubs like airports, seaports, and other facilities. Investing in this type of estate will add to the property’s value and its appeal to investors and those looking to rent your property.
Adding to the value of my properties, I further invested in a facility maintenance service to carry out constant maintenance and renovations to the properties. As the house owner, I ensure this routine is carried out to keep my properties aesthetically pleasing and always in operation.
Compared to other investments like stocks and bonds, real estate investment is preferred because it is more stable and takes a while to change. With time, they increase in value, making it a reliable and profitable long-term investment.
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High Returns on Investment (ROI)
In real estate, return on investment measures the profit you can make from a property, and a good ROI on real estate is expertly said to be between 8 and 10%. However, I recently derived data from the World Bank that real estate in Nigeria yields up to 30% annually, which makes it an excellent choice of investment. I also noted that these high returns are generated from the appreciation of properties and the consistent income earned from property rentals.
These high returns on investment (ROI) have made real estate investment in Nigeria quite popular because it is one of the most profitable and stable asset classes in the country. For investors and homeowners, rental income offers a consistent and dependable source of earnings as there is a rising demand for residential and commercial spaces, especially within and around urbanized locations. Rental returns from residential flats or office spaces in high-demand locations are excellent ways to show the high rate of return on investment, as it frequently creates wealth and outperforms returns from traditional investments.
Real estate investment also has several options, such as land banking, short-term rentals (short-let rentals), and luxury real estate developments, which contribute to the high rate of returns you can get from occasional renting and long-term leases.
Although ROI varies due to economic stability and inflation levels, real estate investment is highly profitable and has substantial returns, especially in areas that are favourable and appealing to tourists and business. In Nigeria, we have an expanding population and an increase in housing shortage, and with this, there is a constant need for real estate. This demand guarantees you long-term value and a high return on your investment.
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Portfolio Diversification
To invest in real estate, you can diversify your portfolio by distributing your investment among various properties, such as residential, commercial, or land, in various locations while using different approaches to lower risk and increase profits. This allows you to have a balanced real estate investment portfolio by cancelling losses in one sector (like residential) with gains in another (like commercial or land) in case of an economic meltdown.
You can also choose either land banking, short-let rentals, or luxury property developments to cater to your financial goals. Portfolio diversification is essential when investing in real estate, as it lowers possible risk. I suggest you also insure your properties or consider a real estate investment trust (REIT) to minimize risk exposure. REIT is a financial tool that lets you invest without having to directly manage, finance, or own your real estate assets. When investing in high-brow areas or diversifying your portfolio, feel free to gain valuable insights from professional expertise.
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Owning Tangible Assets
In Nigeria, another reason why real estate investment is popular and preferred is because of the stability, increasingly huge value, and physical presence real estate offers. Being a tangible asset, it allows you to have a sense of ownership and security as it can be touched, seen, and lived in. This physical value provides a sense of security for investors in contrast to digital assets only available in paper or virtual form.
In Nigeria, I have recorded that owning a property is highly viewed as a sign of success. Hence, land and buildings are dependable tangible investments since their value appreciates steadily over time. Unlike other asset types, properties are less vulnerable to short-term market volatility and are more likely to hold or appreciate during recessions. This stability makes real estate investment a reliable choice for preserving and increasing wealth.
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Wealth Building
In Nigeria, investing in real estate is generally considered one of the best ways to increase wealth. It is a preferred asset class for people and companies looking to protect and grow their money since it provides great chances for long-term financial success.
Property appreciation and the increasing demand for homes in Nigeria, particularly in urban areas, allow land owners to make steady revenue through leasing (either short-term or long-term). In times of economic instability, you can still build wealth, as a real estate investment provides a soft landing against inflation. This passive income gives you a strong financial foundation as well as enhances your other income.
Real estate investment can be accessed through different channels, including land banking, real estate investment trusts (REITs), and direct property ownership, and this makes it a preferred means for accumulating and maintaining wealth over time. With comparatively little initial investment, you can manage high-value assets by purchasing properties through loans or mortgages.
Over time, substantial wealth creation is made possible by the increasing returns on investment as property values and rental revenues come in. Lastly, people of various financial levels can participate in real estate investing due to its flexibility, which ranges from land banking to commercial or residential developments.
Now that you know all about real estate investments and why they are the most preferred assets, visit Mixta Africa to start building your real estate portfolio. You too can afford the ‘luxury’.
Author’s Note: Hi again, I’m Joy – a seasoned finance professional based in Lekki, Lagos. I balance a fulfilling career with successful real estate investments in Nigeria. Join me as I share insights on navigating the world of real estate investments in Nigeria. Let’s find your dream home and unlock financial success together!
