In this blog we will be looking what is Real Estate business, types of Real Estate, how to invest in it and benefit of investing in Real Estate. We also suggest an experienced and trusted Real Estate Firm to buy property in Nigeria.
INTRODUCTION
As national/ international real estate investment became increasingly common in the early 21st century, the availability and quality of information regarding real estate markets increased. Real estate is one of the primary areas of investment in Nigeria, where an reasonable percent of household wealth is invested in real estate. The terms land, real estate, and real property are often used interchangeably, but there are distinctions.
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Land refers to the earth’s surface down to the center of the earth and upward to the airspace above, including the trees, minerals, and water. The physical characteristics of land include its immobility, indestructibility, and uniqueness, where each parcel of land differs geographically.
Real estate encompasses the land, plus any permanent man-made additions, such as houses and other buildings. Any additions or changes to the land that affects the property’s value are called an improvement. Once land is improved, the total capital and labor used to build the improvement represent a sizable fixed investment. Though a building can be razed, improvements like drainage, electricity, water and sewer systems tend to be permanent. Real property includes the land and additions to the land plus the rights inherent to its ownership and usage.
WHAT IS REAL ESTATE?
Real estate is defined as the land and any permanent structures, like a home, or improvements attached to the land, whether natural or man-made. Real estate business is a form of real property business. It differs from personal property, which is not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment.
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Investing in real estate business can sometimes feel a little overwhelming, simply because there are so many options available. If you’re just getting started in the business, it’s helpful to understand the four main types of real estate and how they work. Then, you can determine the real estate asset class that’s best for your investment strategy:
- The residential real estate market: Any property used for residential purposes. Examples include single-family homes, condos, cooperatives, duplexes, townhouses, and multifamily residences.
- The commercial real estate (CRE) market: Commercial properties are designed for businesses and can include office buildings, retail stores, and industrial warehouses.
- Industrial real estate: Any property used for manufacturing, production, distribution, storage, and research and development.
- Land: Includes undeveloped property, vacant land, and agricultural lands such as farms, orchards, ranches and timberland.
How To Invest in Real Estate
Real estate investing involves various steps, from researching and selecting properties to managing them and generating revenue. This are the following different stages of real estate investing.
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Research and Property Selection: Before investing in real estate, it is crucial to conduct thorough research and identify suitable properties that align with investment goals.
- Investors should analyze the local real estate market, considering factors such as supply and demand, vacancy rates, and rental rates.
- Investors should evaluate potential properties, assessing factors such as location, property condition, and expected returns.
- Investors should analyze the financial aspects of potential properties, including purchase price, financing options, and projected cash flow.
Financing and Acquisition: After selecting a property, investors need to secure financing and complete the acquisition process.
- Investors typically need to provide a down payment, which is a percentage of the purchase price, to secure a mortgage for the property.
- Investors often use mortgage financing to cover the remaining cost of the property, with various loan options available depending on the investor’s credit score, financial history, and property type.
- The closing process involves finalizing the property purchase, including signing legal documents, transferring funds, and obtaining the property deed.
Property Management: Effective property management is essential for successful real estate investing, as it ensures the property is well-maintained and generates consistent income.
- Regular maintenance and timely repairs help preserve the property’s value and ensure it remains attractive to tenants.
- Thorough tenant screening helps to minimize vacancy rates and ensure reliable income from responsible tenants who pay rent on time and respect the property.
- Investors must comply with local and federal regulations, such as fair housing laws and building codes, to avoid fines and legal issues.
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Benefit Of Investing in Real Estate in Nigeria
Real estate investing offers various benefits, such as diversification, Equity, Appreciation, Hedge Against Inflation, passive income, and tax advantages making it an attractive investment option.
High-income from Apartment Renters
The most significant benefit of owning a rental property is that the renters provide a direct income stream. There is no limit to how much money one can earn from owning a short let home; depending on the type of apartment being rented out, the season and time of the year, a three-bedroom duplex can fetch the owner as high as N150,000/ day, and that is being modest. A two bedroom bungalow can go for N60-N70k and a one bedroom apartment can go for 30k to 45k depending on the city.
Income from Property Value Growth
There is a massive gain from an increase in the property value over time due to changing demands in the area; even if the property does not undergo any changes, the value may rise significantly over a few years.
Sweat Equity
This entails repainting the home, adding new siding, refinishing the inside, doing some basic landscaping to the yard, and it will add value to the house without high financial cost. Not only will this allow a charge more for rent, but it will also increase the value of the property itself should the investor choose to sell it in the future.
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Steady Cash Flow
In major business and relaxation hubs in Nigeria, short let homes tend to house guests regularly since many business owners and families that travel for relaxation or business prefer to stay in a home that gives them privacy and opportunity to make their own food over a cramped hotel room where one is limited to the food served him in a hotel.
Leverage
Like every other property, a short let home offers the owner leverage on tax and bank loans. Investors can still use their home as collateral to get a loan for business or investments while still on rent.
Value Appreciation
There is better value appreciation with a short let apartment; the rental value can quickly serve as capital for other businesses within a short period while turnover increases.
In conclusion, the emergence of short let apartments is changing the trend of hotel bookings in Nigeria. As the economy bites harder among the low-income and middle class, the demand for affordable accommodations keeps rising.
Short let services in Nigeria are a solution intended to meet the need of regular-income folks looking to have comfortable accommodation away from home.