How to earn over 20% returns in real estate in Nigeria

A set goal with a purpose is the first best thing that you can do to milk the most profit from your investment in real estate. Your goal shows the kind of value or returns that you are looking to derive from your investment in real estate and also determines the kind of opportunity that you should consider investing in.

Investment in real estate has the potential to deliver two kinds of return. Some investment opportunities by chance deliver both at the same time. While most times, an investor must choose the exact return they wish to have and find real estate investment opportunities based on their goal.

The two kinds of return are:

  1. Sentimental return: An example of this return can be to have bragging rights, brand perception, making a loved one happy, preventing physical stress, gaining access to a community etc. Investors for sentimental value are often passive about investing. They do not mind if a property comes expensive with no potential for a great cash return. So long as it fulfils an emotional desire.
  • Many of the real estate options available are designed to deliver this kind of return. This means that you will easily find land or house deals that make you feel great for buying.
  1. Monetary return: It is first and only about the money. Investors who invest for money, care less about sentiments. They are more logical and have their eyes on the numbers. If the numbers are not adding up, they will not consider a real estate asset for investment. This class of investors are actively looking out for opportunities that multiply their money.

The type of real estate investment that delivers great monetary value is oftentimes not commonly found. Therefore, in this article, I will be listing two of such real estate opportunities for monetary value investors and why you should consider them.

1. Raw or non-end-user real estate opportunities: An end-user real estate is a final product. End-user real estate products are designed to deliver sentimental value. You can barely do modifications or create cash value around it. You will have to use it as it is till you no longer want it. An example of end-user real estate is a flat in a low-cost housing scheme and some of the semi-luxury or high-end luxury houses around.

Non-end-user real estate has at least 2 cash creating points in the lifecycle of the asset. A few scenarios of non-end-user real estate with cash-creating or monetary value points are:

  • Buying a piece of an undeveloped yet secured parcel of land near the new RCCG auditorium for say ₦2,500,000 per plot from a primary buyer to sell at ₦5,000,000 after 2 or 3 years to someone who desires to build their home in this strategic location is investing for monetary value. Opportunities such as this most times come in unexpected shapes and colours. Note that there are loads of offers on this axis and the majority are end-user designed.
  • Buying a plot of land in Idado for say ₦75,000,000.00 and developing 3 units of semi-luxury houses to sell at ₦75,000,000.00 each is investing for monetary value.
  • Buying or building a block of 6 units of 3 bedrooms flat for about ₦70,000,000 in a location like Gbagada and renting it out at ₦1,200,000 per unit per annum puts some ₦7,200,000 in your pocket per annum.

Now let’s see a few end-user designed real estate:

  • Buying a unit of finished property for ₦75,000,000.00 which you can not rent out for more than ₦3,000,000.00 per annum or sell at 10% above buying rate after 2 years is buying for sentimental value.
  • Buying a flat in a block of flats where AirBnB is not feasible or with low patronage is not an investment for monetary returns.

2. Off-plan real estate: This type of real estate is one that most times evokes scepticism.

Yet, it is one of the options that deliver great returns to an investor when you find a credible developer willing to let you in on the juice. Of course, not all off-plan locations or projects have the potential to deliver returns.

Investing in off-plan projects in a location like Ogudu GRA or Magodo GRA delivers an ROI of upwards of 20% per annum. This is because land is scarce in these locations yet middle-class families desire to own homes and live in these locations while existing owners are not ready to let go just yet.

Money-making opportunities abound in real estate in Nigeria. With an open mind, an investment coach, the right network and some optimism, you can maximize profits in the Nigerian real estate sector.

Source: Nairametrics

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