The Hidden Truth About Real Estate Investing In Nigeria

…what most real estate companies don’t want you to know?

This real estate investing crash course is for complete beginners and intermediates in the industry. And for you to be on this page right now it’s either you want to start investing in real estate or you’ve already started investing in land and properties in Nigeria. Nevertheless,  I’ve got something unique and insightful to share with you today about investing in properties across Nigeria, and I’m certain you will learn something new.

The experience I will be sharing with you is what have learned over the past 2 years investing in real estate properties in the southwestern states of Nigeria. And the majority of  the lessons I’ve learned and have been through:

• Losing millions of naira; I mean the school of hard knocks (aka trial and error),
• And paying mentors and competent professionals like surveyors, agents, lawyers, ministries of lands officials, etc.

Anyways, before I go ahead and split the bitter truth, I need to give you a short disclaimer.  

Disclaimer: This piece of content is by no means investment advice or a recommendation to purchase a particular type of property. It is also not to discredit any investment firm or property development company in Nigeria.

Don’t take anything personally, just read through and pick one or two lessons that would help you as you embark on your real estate investing journey.

… having said that, let’s dive into the deal of the day.

What is real estate?

The simplest definition of real estate that I can see on the internet is probably that of Investopedia, which states that “Real estate is the land along with any permanent improvements attached to the land, whether natural or man-made – including water, trees, minerals, buildings, etc.“

Real estate is also referred to as a hard asset. This is simply because they are physical(i.e. you can see and touch them). Another major distinction between real estate and other asset classes is that it tends to appreciate over a long period since it’s limited in supply. You cannot just manufacture land out of thin air. Building/apartment construction even takes a lot of time when compared with the growing population rate.

Is real estate a good investment?

Or better still, let me rephrase the question above to this 👉🏼…Why invest in real estate?

Real estate as the name implies is one of the only real assets that you can invest in and have it hold its value and passive income over a long period. Every other thing might lose its value drastically except real estate. For instance, let’s put bitcoin, gold, silver, and oil into consideration; the major reason they are not more of a real asset is that they are very volatile and their price fluctuates a lot. In contrast, real estate and the passive income that it generates appreciates over time and rarely sees a sharp decline.

Real estate investing in Nigeria

Real estate investment is one of the major investments attracting both local and foreign investors across the country. From commercial cities like Lagos to administrative cities like Abuja, several individuals and companies engage in real estate investing activities. Less I forget, many also buy real estate for personal use.

The major participants in the Nigerian market are: 

• Investors
• House owners(clients)
• House agents(realtors)
• Estate surveyors(valuers)
• Land surveyors
• Marketers
• Legal practitioners(lawyers)
• Real estate developers
• Building construction professionals
• Property managers
• Building materials suppliers
• Officials from the state’s ministry of land etc.

How to go about investing in real estate in Nigeria?

I happen to be among the few individuals in the world who believe that profit is made when you’re buying and not when you’re selling. Hence, the most important thing about investing in real estate is what, when, and where you’re buying. 

What to buy:

• Land for building construction:
  • Plots: standard size is “100ft by 100ft” or “30m by 30m” or “900 square meters (SQM).” However, it may vary depending on location eg. Ibadan (~450 SQM).
  • Acres (~6 plots)
  • Hectares (~ 2.471 Acres)
• Farmland: 
  • This can be to plant or breed livestock
  • They are usually purchased in acres and hectares
• Existing buildings
  • These are usually old or abandoned buildings bought for renovation purposes
  • Accessibility and location are important when buying such buildings
• Newly constructed buildings
  • Empty, semi, or fully-furnished apartments
  • Office space
  • Shopping malls & petrol stations(not common)

When to shop for real estate:

This has to do with timing. It’s important to shop when you can get cheap deals or during a market crash, recession, or global pandemic. In such times most people are cash trapped and wouldn’t mind selling their assets for any reasonable offer to cover their expenses.

Generally speaking, the Nigerian real estate market is still at its early stage, and apart from Lagos which has many overpriced properties, now is the best time to shop for properties across Nigeria.

Where to shop?

Where to shop depends on the type of investment that you’re looking out for. 

We have:

1. Sanitized investments: These are less risky investments and at the same time, less profitable. In other words, they’re safe investments that you don’t necessarily make good returns on anytime soon. You can get this type of investment from most real estate development companies in Nigeria.  Although I don’t advise that you go for this type of investment, I still think it’s a good option for you if you’re just starting or you don’t like to take risks.
2. Unsanitized investments: These types of real estate investments are riskier and much more profitable. You can hardly get these deals from real estate developers. You can only see them directly from Families who own the land/buildings or a good real estate broker/lawyer who has a motivated seller.Here you’re dealing directly with the seller and although it may be risky, you can make more money if the deal goes well.The reason you can’t get this type of deal from a real estate development company is that this is the type of deal they are also looking for, to make a huge profit selling it to you. They always take care of the risk then they start selling to you at a premium price. And while they sell to you, you’re not necessarily buying at a good price to turn the investment into profit now or a few years to come.

Real Estate VS Crypto(Digital Asset)

A very good distinction between real estate and some cryptocurrencies like Bitcoin is that the former is a physical asset while the latter is a digital asset. However, when it comes to investing, you invest in the two asset classes the same way. Let me explain further below:

• Capital gains: Here you buy any of these assets at a low price and sell at a higher price, i.e buy low and sell high. This can be very profitable if we don’t have a market crash because, over time, prices of real estate tend to go up.
• Cash flow: Here you don’t intend to sell the asset. You just buy so you can continuously generate passive income via renting or lending the asset out. For instance, you charge monthly or yearly rent for giving your house out to a tenant, and you charge hourly interest for lending your crypto out to borrowers. This type of income is good if you have a long-term mindset.

Note: You can do both types of investing. You can buy now, collect rent for a while (cash flow), then sell it later on after the value of the asset has appreciated(capital gains).

One additional tip I will like to give you is that in crypto, you make more money buying an asset early when the price is cheap. This can be directly from the project team/founder using a decentralized exchange like Uniswap or Bakery swap, or buying before it gets listed on a major exchange like Binance.

If I’m to relate the above explanation to real estate, I will say that you can make more profit by buying land directly from family members. However, you will need a trusted agent/broker to take you to them or buy distressed properties from lawyers who have motivated sellers.

A motivated seller needs cash to settle a financial problem as soon as possible and wouldn’t mind selling his or her asset below market value. Funny enough, I love this type of seller.

Should you buy from real estate developers in Nigeria?

Yes, if you want a good environment full of rich people. You can also buy from them if you want a place to live. This is simply because their lands are usually safe and you will usually not have any issue of Omo onile(land grabbers) if you buy from a good real estate development company.

No, don’t buy from them if you’re investing to make money and profit in a few years to come. This is because:

1. Most of their deals are usually premium prices. It will be hard for you to resell and make a profit without waiting too long after purchase
2. Also, they reserve the best places(the front) in their estate for themselves so they can easily sell it for profit. That is before you can sell your plot of land at the back or middle of the estates, they would have sold 5 plots in the front(they’re now your direct competitor)
3. Most of their estates are usually very far(a bad location for you if you intend to resell soon)
4. Some of the estate developers employ bad business tactics (I will share more details about this later). Anyways, I want you to know this one; some of their drivers over speed a lot, thus making the distance look short but at the same time putting your life in danger of a car crash(accident).

Expert tips in real estate investing

According to the author of Rich Dad Poor Dad(Robert Kiyosaki), the renowned investor and financial education expert, here is what you must know about real estate investing.

1. Education: The most important thing when you start investing in anything is education. You will make a lot of mistakes at first, however, you need to learn from them, keep growing and keep learning. Another way to put this is that, If at all you want to succeed in this industry you can’t do without learning.
2. Liquidity: Real estate is not a liquid asset. It’s not like Bitcoin, gold, or stocks that you can go into it(buy) or get out of it(sell) anyhow and anytime. That is, it’s not that liquid. Hence, you must take your time to do your research before putting money into any property otherwise, your money might be tied into the deal for so long if you don’t get anybody to rent or buy it.
   
   As a matter of fact, Robert Kiyosaki suggests that when you’re just starting in real estate, you should find 100 properties within 3 months, write a report on them and then choose one. I think it’s very good advice.
3. Location, location, location! In this business, location is very important whether you want to sell the land or use it for rent. The location affects the:
   1. number of available customers or people interested in the deal
   2. The price of the property
   3. The amount the property would be rented out
   4. How long it will take to sell or rent it out
4. Management: You don’t just buy a property and leave it. You need to do regular maintenance to ensure the house remains in good condition and continues to appreciate. You can decide to do this maintenance yourself or give it out to a facility management company. It all depends on whichever one is convenient for you.
5. Financing: How you finance a house is very important. Depending on how large the deal is, you can decide to finance it with your capital or raise money from banks or other individuals. Note that because real estate is not that liquid, you should not always tie down your cash, especially if you need the cash to run other business activities.Also, you will need to gain some experience before you can start raising money from banks or other investors. You need a track record showing that you can successfully turn a property into a profit before people will give you their hard-earned money. You must earn their trust.

Here are my real estate investing tips in Nigeria

1. Just start: The reason why I’m saying this is because many people are so scared of making mistakes that they never start. Some even allow the belief of not having any money to stop them from investing in properties.
   
   This is very wrong. I didn’t have much money when I started. I subscribed for a payment plan, then I started thinking of how to meet up with my payment, and miraculously, I was able to pay.
2. Start small: You’ve got to start small either by first buying a cheap plot of land or a cheap apartment depending on which one you can afford. When you complete such a payment, it boosts your morale and motivates you to buy more properties. Nevertheless, this is where you need to be more careful. You need to invest more in knowledge at this stage.
3. Invest in knowledge: You can do this by seeking mentors either through online or physical training. You can also buy books and join a real estate investing club/community around you. This will guide you to investing in bigger deals that can fetch you more returns.
4. Learn how to work with people: Real estate investing will require you to meet, connect and work with a lot of people. As a result, you will need to improve your people’s skills. You must know how to talk politely, negotiate, tip, or pay people well. All in all, you must have good manners. This will make people trust you and want to work with you for a long period.
5. Don’t always look for cheap deals: Don’t be pennywise and pound foolish. A lot of people will bring deals when they know you’re out there shopping for properties: the cheapest is not usually the best, and the most expensive is also not the best deal. Your evaluation process coupled with a good/experienced broker will help you choose the best deal.
6. Watch out for lies and turnoff in deals: All I need is a lie from the agent or seller and I call the deal off. I know it’s very hard for most sellers to be 100% honest however, 1 or 2 lies is still a turn-off for me. Below are scenarios I had to cut off some deals:
   1. I met a bike man while going to one of my properties. He told me he’s aware of a piece of land available for sale and I told him to take me there. When we got there, he told the person in charge that I’m his brother that just came from Lagos. Deep down I knew I have come to the end of the deal.
   2. On another occasion, a Nigerian based in Canada said he was going to provide his driver’s license to complete a deal. At the point of closing that deal, he changed his mind citing cyber security risks. Although he had a legitimate concern, I had to cancel the deal as well. If you’re not based in Nigeria, and you can’t provide evidence of where you’re based, I don’t think it is worth the risk.
7. Be proficient in IT(smartphones, computers, and the internet): You need to be able to use computers, the internet, and smartphones very well if you want to scale your real estate business. You see, as you build your connection in the industry, you will have contacts of families that want to sell land, surveyors, lawyers, agents, government officials in the ministry of lands, etc and you will need to be able to communicate with them online for prompt and seamless transactions. You cannot be everywhere at any time. So you need IT skills in other to be more efficient and focus on important things like raising capital to finance deals and marketing your properties.
   
   For instance, right now if I want to verify a property is well documented with the State Ministry of Land, I just call the person in charge and make payment via Whatsapp. That saves me time and stress. Another scenario of using IT to save time, money, and stress was when I wanted to confirm the size of a piece of land. I hired a land surveyor, paid him, and directed him to the land via a Whatsapp video call. If you’re also good at digital marketing, it will make your business very profitable.
8. Don’t buy land, houses, or any property based on a survey plan or paperwork only: Make sure that you visit the place and see the distance, location, topography with your own two eyes. You may send a trusted colleague but you have to be careful enough to trust the person’s judgment. For instance, I can remember visiting a site and telling the estate developer I don’t like the area that’s covered with water and I want a place much closer to the gate(entrance). He told me I will get a place closer and he showed me on the survey map. After payment and I proceeded for allocation, I was stunned when I realized the place he showed me on the survey was exactly the place I didn’t want. I was immediately upset. So guys, forget papers and go see the exact plot or place you’re going to be allocated.
9. When buying residential plots from estate developers, make sure you buy a few plots(1 or 2): This is because they’re usually selling at a premium price and you’re paying a lot of fees. It doesnt make sense buying 6 plots and paying all the exorbitant documentation fees. In most cases, the total package/fees can get you a piece of land/property much closer to town, or a better deal if you take your time to search for it.
10. Real estate development in Nigeria is like Cryptocurrency:  It’s in the early days. The teams who build the project and those who buy in the early stage make most of the money.
11. Don’t think the estate developers are the ones that will bring development to the area: It’s a blatant lie. If you’re lucky, the fellow rich men who bought the area and like it may decide to come and live there and thus start development. However, most times they will wait for the government to tile the road or bring major facilities, amenities, and infrastructure to the area.
12. If you will end up creating your own real estate development company, ensure you give people an issue-free experience. This will put you among the top 1% of the industry.
13. Negotiate! Don’t just pay the exact amount quoted by the estate development company, it is usually bloated and overpriced. Instead, negotiate the land or properties. Also, negotiate the documentation fees. Make a competitive bargain by telling them to reduce if you buy an additional plot. They need money and you need land. And if you’ve got the money, use that to your advantage.
14. Try to buy from lawyers or agents who have motivated sellers: These types of sellers are genuine and usually need money to cover urgent issues.
15. If possible, buy directly from the seller and pay the agent a 5% commission fee: Most times, when you remove middlemen completely, you usually buy at buying at an affordable price. Also, you may not necessarily buy from estate developers because they charge a lot of unnecessary fees and the majority of them offer poor services. They won’t even allocate the best portion to you even after paying millions. Some will also give you trouble. For instance, 
    1. I once paid the ₦100,000+ allocation fee to be allocated my plots, and their surveyors won’t even show me the corner piece. They even said if I call them again they would charge me additional money. What a poor experience from a company that needs me to recommend them to other people.
    2. I also saw a piece of land from an estate very far from the railway terminal in Ibadan selling at 1.8 times the price of another estate that’s even closer to the railway terminal. They charge ₦900,000 for land and ₦900,000 for documentation. Mind you, what are they documenting. I’m sure they may still throw me somewhere at the back when I complete my payment, something I always detest and negotiate about.
16. The location is the most important thing: Don’t buy where is too far because it’s cheap. The cost of erecting a building is very expensive and the farther your site the more expensive it gets. For example, you may get cheap land in a far place but if you calculate the cost of construction, it would be better you buy somewhere nearer that you will easily see tenants that would rent it and pay you well.
17. Again don’t pay for land on citing the survey plan: Visit the site and see where you’re going to be allocated. This is worth repeating. To be before warned is to be before harmed.
18. When you’re allocated land, see all the pillars, if possible mark it by inserting an iron pole and then erect a corners piece as soon as possible. Also, create a lot of signboards if you will be acquiring many lands. You just erect them on each land you buy.
19. If possible buy a corner piece or side angle land: This type of land is strategically at the corner of the layout. Most times two roads pass beside them. They are not land that is allocated in the middle of the layout where the road only passes the front. This will ensure your site is accessible and also get a lot of fresh air(something that I cherish.
20. Hire experts like the ones listed below to save you time, stress, and money:
    1. Surveyor to measure the actual size of the land
    2. Lawyer to prepare contract documents when needed
    3. Agents to help you find trusted and hassle-free deals.
    4. Marketers to help you promote your land/properties
    5. Ministry of land officials to confirm survey and title ownership
21. Again, if you’re buying from an estate, make sure you get allocated to immediately after making payment, and you erect a corner piece immediately.
22. Never send someone, a friend, or a member of the company to help you with the allocation. Only do this when you trust the company and it’s not your first purchase.
23. If you’re an estate developer, be honest with your clients. Give them good services and experience. Also, do first come first serve. Don’t punish the first set of people who believed enough in you(to pay first), by taking them to the very back of the estate.
24. Get a car to move around. When I started I used to climb bikes here and there. That’s a bit risky and I won’t suggest you all do the same. Get a car if you can afford one and be careful where you follow real estate marketers too so they don’t kidnap or steal your car. A friend of mine suggests you have pepper sprays.

These are the best tips I have for now as regards buying a piece of land or property in Nigeria. I hope you have learned something new. If you have any questions, kindly put them in the comment section below👇.

Thank you for taking the time to read through my long real estate banter.

I will like to remind you that the work has just begun. You need to go out there and start gaining experience.

If you need help finding deals or getting any of the professionals involved in a real estate deal, feel free to reach out to me:

Phone: +234 810 185 0909

Email: [email protected]

Goodbye, and God bless!

Let’s go make the money 💰💰💰.