Real Estate refers to tangible and fixed landed property. It can be subdivided into 3
categories.
The first category is Residential Real Estate, which is the most common form of real estate. In addition to food and clothing, shelter is one of the basic needs of man.
Residential real estate includes all forms of property used for housing people. It includes
blocks of flats, duplexes, triplexes, single family homes etc.
The second category of real estate is Commercial Real Estate. This type is utilized for
business purposes. It includes offices (open-floor offices, co-working spaces, buildings),
hospital, shopping malls, cinemas etc.
The third category is Industrial Real Estate. As the name implies, it is used for industrial
purposes such as farming, warehouses, and factories.
Before investing in real estate in Nigeria, one of the first things to find out is what type of real estate it is. If you plan to build residential apartments, do not buy land that the government has set aside for commercial purposes, otherwise, you will be sanctioned by the law.
Ways to Invest in Real Estate: Property Rental
Property Rental refers to the leasing of a property by a company/person to another
company/person for a period of time in exchange for payment of money (called rent), on a weekly, monthly or yearly basis.
If you are interested in residential real estate, it is a good area of investment. Under this
investment, you either buy or build a property, and lease it out on a temporary basis to
tenants who pay rent on a monthly or yearly basis. One benefit of this form of investment is regular cash flow. Another benefit is that it can be used as a security (collateral) to obtain loans.
There are downsides to this investment too. One is having terrible tenants who can damage the property (To forestall this, you can charge a caution fee, in addition to the rent. This caution fee will be used to remedy any damage to the property. If there are no damages, the caution fee will be returned to the tenant at the expiration of the tenancy). Another downside is potential vacancies arising from non-subscription by tenants. In other wards, the time between when one tenant vacates the property and when a new tenant moves into the property, you will have lost potential income from rent.
The second aspect of property rental involves commercial real estate and industrial real
estate. If you rent a property for this form of investment, you first need to ensure that the lease agreement permits you to sublease the property. If not, you will be on the wrong side of the law, and could be sued for breach of contract.
However, if you buy or build the property, you are safe. Commercial real estate involves
buying of buildings for offices (open floor plan, co-working spaces, general office plan),
hotels (shortlet inclusive), hospitals, shopping malls etc.
The third aspect has to do with industrial real estate where you can buy /build warehouses, shops, farms etc. One benefit of these two forms of property rental investment is that there is a high possibility of appreciation in value of your property which you can later sell for profit.
One downside is that they require time and effort to maintain the property ( To overcome this, you can engage the services of a property manager to manage the property on your behalf).
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