How to Invest in Nigerian Real Estate Without Breaking the Bank

In this guide, you’ll learn practical and cost-effective methods to invest in the Nigerian real estate industry without breaking the bank.

The real estate industry is one that is capable of helping you generate wealth. This is because there is high demand for for housing and commercial spaces due to the country’s growing population of over 200 million people. However, many people assume real estate investment in Nigeria is reserved for the wealthy.

The unpopular truth is that with the right strategies, anyone can take advantage of the lucrative opportunities in this sector. Whether you’re a young professional, an entrepreneur, or a retiree, there are budget-friendly ways to enter the market and grow your portfolio. Below are eight practical ways to invest in the Nigerian real estate industry:

1. Start with Real Estate Investment Trusts (REITs)

Real Estate Investment Trusts are companies that own, operate, or finance income-producing real estate across a wide range of property sectors. This allows you to own a share of income-generating properties without directly buying or managing them. As an investor, you earn dividends from the profits made, such as rental income, without needing to buy, manage, or maintain the property yourself.

Why Choose REITs?

Affordability: You can start investing with relatively small amounts compared to outrightly buying properties.
Diversification: REITs allow you to diversify your portfolio as your money is invested across multiple properties.
Liquidity: Unlike physical properties, REIT shares are traded on the stock exchange, making them easy to buy or sell when needed.
Regulated Environment: In Nigeria, REITs are regulated by the Securities and Exchange Commission (SEC). This makes them a safer entry point for first-time investors and ensure transparency and safety for investors.

To get started, you need to make research on the REIT options available on the Nigerian Stock Exchange. Also, you need to consult with a stockbroker or financial advisor to help select the right REIT option based on your financial goals. Finally, you have to monitor the performance of your investment and consider reinvesting your dividends for compounding growth.

2. Consider Co-Investing

Co-investing in real estate is an excellent way to overcome the financial burdens that comes with purchasing properties, especially in high-demand cities like Lagos and Abuja. This collaborative approach allows multiple investors—who may be friends, family, or even professional real estate companies—to pool their resources and collectively own property. With this approach, you share the costs and returns.

Benefits of Co-Investing

Shared Financial Burden: By dividing the costs, co-investing makes it easier for you to afford prime properties that may otherwise be out of reach for a single investor.
Access to Better Locations: Partners can combine resources to invest in desirable areas with higher returns, such as Lekki or Banana Island in Lagos.
Shared Expertise: Co-investing with experienced real estate professionals or knowledgeable partners allows you to leverage their insights and connections for better decision-making.

Meanwhile, you must choose the right partners. It’s essential to have clear and legally binding agreements that outlines ownership percentages, profit-sharing arrangements, and exit strategies. This helps to minimize potential disputes between you and your co-investors.

3. Invest by Buying Land in Emerging Areas

Purchasing land in emerging areas is a savvy strategy for real estate investors looking to capitalize on future growth without overspending. Unlike high-demand locations like Victoria Island or Banana Island in Lagos, emerging areas such as Epe, Ibeju-Lekki, and parts of Ogun State offer affordable plots of land with immense potential for appreciation.

These areas often have affordable land with potential for future appreciation due to ongoing developments. For as low as ₦500,000, you can secure a plot of land that could multiply in value in a few years.

Also, ongoing infrastructure projects like road expansions, industrial hubs, and residential estates in these regions significantly increase property values over time. Areas like Ibeju-Lekki are attracting large-scale projects, such as the Lekki Free Trade Zone, Dangote Refinery, and a proposed deep-sea port, making them hotspots for future growth.

4. Lease-to-Own Options

A lease-to-own arrangement allows you to rent a property with an option to buy it later. Part of your rent contributes to the eventual purchase price, making it a practical way to acquire property without a large down payment. This option is becoming popular in urban areas like Lagos and Port Harcourt.

Advantages of Lease-to-Own

Gradual Ownership: Tenants build equity over time, turning rent payments into an investment.
Lock-In Purchase Price: The agreed purchase price remains fixed throughout the lease period, protecting tenants from future market price hikes.
Test the Property: Tenants can live in the home and get a firsthand experience of the neighborhood before committing fully.

The lease-to-own option is very flexible for investors because it gives them the time to stabilize their finances or improve their credit scores, which may help secure better mortgage terms later.

5. Flip Distressed Properties

Distressed properties are simply homes or buildings that are under foreclosure, abandoned, or in poor condition due to neglect. These properties are usually priced below market value, making them appealing to investors who are ready to invest time and resources into renovations.

Flipping distressed properties is one of the most creative and financially rewarding strategies in real estate. It simply involves purchasing properties in disrepair, renovating them, and selling them at a profit. This approach is popular in Nigeria’s real estate markets, and provides opportunities for both seasoned and beginner investors looking to grow their portfolios.

Benefits of Property Flipping

High Return on Investment (ROI): Properly flipped properties can yield significant profit margins within a short time.
Hands-On Learning: For new investors, flipping properties provides invaluable insights into market trends, renovation planning, and customer preferences.
Market Opportunities: With increasing urbanization, cities like Lagos have a constant demand for modernized homes, making flipping a viable business model.

6. Use Real Estate Crowdfunding Platforms

Digital innovation has brought crowdfunding into the real estate sector. In recent years, real estate crowdfunding has emerged as an innovative and accessible way for individuals to invest in real estate without the need for substantial capital.

With platforms like Coreum and Landvest, Nigerians can now pool their resources with others to fund real estate projects. It is a low-risk, high-reward investment option especially for those with limited funds but looking to build wealth through the industry.

Real estate crowdfunding platforms connect multiple investors with developers and project managers to fund residential or commercial real estate projects. As an investor, you can contribute a smaller portion of the total capital needed, in exchange for a share of the profits when the project succeeds.

Crowdfunding is of two types: Equity crowdfunding, where investors earn a share of the ownership in the project, or debt crowdfunding, where you lend money to the project in exchange for interest payments over time.

Benefits of Real Estate Crowdfunding

Low Entry Barriers: Traditionally, real estate investing required large sums of money, but crowdfunding allows you to invest with smaller amounts—sometimes as low as ₦50,000—making it accessible for more people.
Diversification: By investing in multiple projects, you can spread your risk across various assets in different locations. This enhances your potential returns while minimizing exposure to market volatility.
Transparency: Crowdfunding platforms provide detailed updates, reports, and financial projections for each project. This gives you insight into how your money as an investor is being utilized.
Attractive Returns: In Nigeria’s growing real estate market, properly managed crowdfunding projects can offer high returns, making it a viable alternative to traditional forms of investing like stocks or savings accounts.

7. Leverage Real Estate Loans and Mortgages

One of the most effective ways to break into the Nigerian real estate market without needing substantial upfront capital is by leveraging real estate loans and mortgages. Several financial institutions in Nigeria offer attractive mortgage options tailored to suit the income levels of various individuals, making it easier for you to secure your dream property over time.

Real estate loans and mortgages are financial tools that allow you to borrow money to purchase property, with the understanding that the loan will be repaid in installments over a period of time. With mortgages, a portion of your income goes toward paying off the loan, enabling you to own property incrementally.

Benefits of Real Estate Loans and Mortgages

Affordability: By breaking down the cost of purchasing a property into manageable payments over time, loans and mortgages make homeownership more easy to attain. You can get the property of your choice today, while paying for it in smaller installments over several years.
Low Interest Rates: Programs like those from the FMBN often feature lower interest rates compared to conventional loans, which can result in significant savings over the life of the loan.
Increased Property Value: Real estate in Nigeria, especially in fast-growing cities like Lagos and Abuja, tends to appreciate over time. By purchasing property through a mortgage, you not only secure your future home but also make an investment that could yield significant returns as property values rise.

8. Invest in Short-Term Rentals

Investing in short-term rentals has gained massive popularity, especially with the advent of platforms like Airbnb. These platforms allow property owners to list their homes or apartments for short-term rentals, targeting tourists, business travelers, or even temporary residents.

In Nigeria, popular locations like Lagos, Abuja, and Port Harcourt offer strong demand for short-term accommodation due to their bustling tourism and business environments.

Short-term rentals also offer the flexibility of using the property when it’s not rented out. The income can be substantial enough to cover maintenance costs, and in some cases, even provide a steady profit. However, it’s important to understand the legal requirements for such rentals, such as registering your property, adhering to tax regulations, and ensuring it meets health and safety standards.

Final Thoughts

Investing in real estate doesn’t have to drain your finances. With the practical options highlighted above, you can gradually build a solid portfolio in real estate investment.

Remember, the key is to do your research and be patient with your investment to yield great returns.

Are you ready to start your real estate journey? Share your thoughts or questions in the comments below!