Real Estate Investment Guide For Beginners

real estate investment

Real Estate is one of the most profitable investments anybody can ever think of and it’s also an investment opportunity that can never go obsolete. Ask me why. 

Because as long as people are in existence, there will always be a need for housing for these people.

The higher the numbers, the higher the possibility of making money from real estate investment.

According to Worldpopulationreview, Nigeria’s population is projected to hit 264 million by 2030 – crossing the 300 million threshold around 2036, compared to the current 227 million.

Meanwhile, this did not include foreigners or citizens who decided to relocate to their home country after being away for a long while.

Take for example, I purchased property X at 250 million naira, and 10 years later due to demands and urbanization, the property is now valued at 500 million naira, will you say you have made a profit or loss? 

If you agree with me that, you didn’t make a loss then this article is for you.

If you believe that it was a loss, you can also read this to the end to learn how you can make your real estate investment yield returns for you.

Before I move on, I would like to introduce Zylus Homes to you, one of the leading Real Estate Companies in Nigeria. 

Let’s delve into what is real estate investment, which would serve as a solid foundation for you.

Definition

Real estate investment can be described as committing financial resources to acquire tangible assets, typically land or buildings, to generate ongoing income through rent payments or realize profits through the eventual sale of the property.

From this definition above, you can see that there are two ways a real estate investor can make money from his properties;

  1. By renting
  2. By selling

Renting out your properties to get ongoing revenue seems like a good idea, as you will still retain ownership of that property.

But in the case of selling it off, the moment you sign those papers, you’ve transferred the ownership to the person whose money is either in your bank account or in your hands.

Selling might be the right solution for you if you’re not in the country and you are not interested in what we call passive income, but if you’re living in the country, you might want to consider receiving rent payments from your tenants while still retaining ownership of the property.

Even if you’re not in the country, you can receive rent from your properties in Nigeria as well.

Another definition of real estate is that it’s the deliberate allocation of funds to build and manage a diversified portfolio of real estate assets.

This definition points out the fact that you can choose to either build from scratch or manage an existing property.

These definitions point us to 1 common thing, real estate investment has to do with buying and selling, and just like every form of investment that exists, there are risks attached to it which you must be aware of before stepping into the deep.

Bonus: do you know that real estate investment can hedge against inflation? 

Types of Real Estate Investment

1. Residential Real Estate: This investment type has to do with you purchasing and developing properties like single-family homes, condos and multi-family for individuals or families to live in. 

An image showing an example of real estate investment
An example of residential buildings.

2. Commercial Real Estate: This is the process of purchasing properties for business purposes like office buildings, retail spaces, and industrial warehouses.

3. Vacation or Short-term: Unlike residential real estate where you can have your tenants living in or on your property for years, vacation real estate is purchasing a property with the aim of letting it out for short period of time.

These properties can be used as vacation homes, Airbnb, or shortlet apartments.

Another difference this has is that you may be required to maintain the property as frequently as possible especially seeing that your tenants don’t stay for long.

Our Lekki Pride apartments is a perfect example of short-term properties. 

4. Real Estate Investment Trusts(REITs): this has to do with investing in publicly traded companies that own, operate and finance income-producing real estate.

Yes, there are income-producing real estate and there are non-income-producing real estate

REITs offer a way for investors to gain exposure to real estate without direct property ownership

5. Real Estate Flipping: This is the process of purchasing properties with the intention and goal of renovating or improving them and selling them at a higher price for a profit.

It is also referred to as a short-term investment strategy.

Non-income producing property means a property that is not generating any significant rental revenue and includes land and or development with a clearly stated development plan.

As there are different types of real estate investment, is the same way there are different benefits and risks attached to it. Your best bet is to research and invest in what suits you best.

Real Estate Investment Benefits

1. Source of income: With real estate, you get a steady flow of cash especially in rental properties. They provide a steady and predictable income stream and serve as a reliable source of passive income.

2. Increased capital gain: Over time, real estate properties have the potential to appreciate in value which can lead to capital gains when the property is sold.

This is one of the advantage real estate investment has over other types of investment.

3. Significant asset: You can purchase real estate with borrowed money allowing investors to leverage their investment using a relatively small amount of their money to control a more significant asset potentially magnifying returns.

4. Hedge against inflation: As the cost of living rises, that’s the same way rental prices and property values rise, which provides a natural inflation edge for real estate investors.

5. Control and Influence: As a real estate investor, you have a level of control over your investment that may not be present in other asset classes.

You can actively manage and improve properties to enhance value and profitability. Nigerians will pay more if they can get more value from what they are paying for.

For example, Hotel A has all the good things a hotel should have, but there’s Hotel B offering airport dropoff and pickup as additional services and of course, you will pay more.

Which would you go for? If I was the one, I would go for Hotel B for comfort and luxury.

Risk Associated with Real Estate Investment

1. Market Fluctuations: Real estate markets can experience fluctuations due to economic conditions, interest rates, or local factors.

A downturn in the market can lead to a decrease in property values, which impacts potential returns.

2. Economic Recession: During economic recessions or downturns, demand for real estate may decline because there’s an increase in vacancies, lower rental income, and difficulties in selling properties at desired prices.

3. Property Risks: Individual properties may face different risks such as natural disasters, property damage, or unexpected maintenance issues.

These risks can lead to financial losses and require additional capital for repairs which would make a dent in the income or profit from the property.

4. Regulatory and Legal Risk: Changes in local regulations or legal issues related to zoning, permits, or property rights can impact the value and use of a property.

Legal disputes can lead to unforeseen costs and delays.

The reason why we’re sharing the risks with you is for you to be well aware of what you’re stepping into, it’s important that you’re not only aware of the benefits of investing in real estate but also the risks that come with it.

Conclusion

We’ve said all of this to let you know that Real Estate Investment is not only viable, it is also profitable. Zylus Homes has awesome properties in urban locations for you, to get a look at our properties, give us a call at 080364273547 or visit our website at www.zylushomes.com

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