Shelter will remain one of man’s basic needs, making real estate a thriving business in any part of Nigeria. Many people seek to begin a real estate business in Nigeria, but they cannot profit and scale their business because they don’t have the right structure or experience in the market.
Profiting from real estate is financially and emotionally gratifying – you know you’re giving people access to quality accommodation that will comfort them while you’re also getting paid for it.
Before we venture into the steps you need to take when you want to begin a real estate business in Nigeria, in this article, we will discuss the real estate market in Nigeria, its growth over the years, and the entry points for interested real estate investors.
Why Start a Real Estate Business in Nigeria?
In 2014, Reports had it that Nigeria’s real estate market had a value of N59 trillion. This was four times higher than the Nigerian stock market, with a value of around N12 trillion.
But it’s currently estimated to have a value of US$2.61, of which residential real estate holds the largest share.
According to the Development Aid, Nigeria has the world’s highest number of homeless people, making it about 24.4 million homeless people in Nigeria. This number accounts for over 13% of the country’s population.
While poverty might be the underlying cause, all shelters don’t need to carry the same luxury, as people with less financial strength cannot make a purchase.
The truth remains: more people are seeking to purchase their own houses wherein they don’t need to pay any more rent or share certain utilities.
And with the population increasing and people establishing new businesses, those who move fast in this business will take all the rewards.
With property rates surging, now would be a good time to begin a real estate business. However, you must bring in the right team and establish an excellent business structure. You can also thrive faster when you avoid certain common mistakes.
READ MORE: TOP 10 REAL ESTATE COMPANIES IN NIGERIA
How To Begin A Real Estate Business in Nigeria in 6 Crucial Steps
#1. Create A Solid Business Plan
Without a business plan, your business cannot scale. A business plan represents your desire to scale or increase your offerings in your industry. Many business owners start a business without a plan, and therefore, they struggle in certain situations.
In creating a solid business plan, you need to integrate entry points, investment opportunities, market penetration techniques, and a lot more. Introducing a business development coach to help you create a great business plan is a significant move.
#2. Gain Your License
To enter the real estate business, you must get the right and complete licensing from the respective bodies. In Nigeria, your license has to come from the Lagos State Real Estate Licensing Body if you operate in Lagos state. In contrast, other states require you to present your minimum educational qualification, CAC registration, and means of identification.
After you have submitted these documents, the licensing body will review all of them and grant you your license after a few days. With your license, you will avoid harassment from local dwellers whenever you want to enter a transaction with them.
#3. Register Your Business
Registering your business is a necessity. You won’t get a license to practice or begin your real estate business in Nigeria without proper registration. The body responsible for registering businesses in Nigeria is the Corporate Affairs Commission (CAC).
Registering your real estate business in Nigeria is now easier on this platform. Instead of constantly oscillating between your office and the registration body with piles of paperwork, you can upload them to their website. If your documentation is complete and your chosen business name is available, your registration will be complete as you get a code.
#4. Raise & Invest Your Capital
Anyone wanting to begin a real estate business must have the capital to get his plan running. The real estate market has such a prime entry point that you would need a certain amount of money to penetrate, except if you want to start at the lowest strata.
Finding investors for your real estate business is easy, as many investors already understand the profitability and security involved in the real estate business.
So, ensure you have a solid pitch and the right answers to every question that investigates the strength of your business.
#5. Get The Right Team
We can overemphasize the importance of teamwork. In building the right team, you need a perfect blend of people with fundamental and technical knowledge. The fundamental folks will help you create the structure, while the technical folks will help you design it.
Therefore, start searching for the right people to fill in the gaps in your world-class team. A good place to begin your search would be LinkedIn.
#6. Build Your Brand
People relate to a brand, patronize a brand, and stay loyal to a brand. Hence, to scale your real estate business, you must strive from being only a business to becoming a brand name.
You can start this journey by constantly spreading a message that resonates with your target audience. Introducing taglines, understanding and using the right social media tools and platforms, and creating delightful offers are activities you can implement.
Common Mistakes To Avoid In Real Estate Business
Many failed real estate businesses started and went down the mud because they couldn’t avoid certain mistakes. While mistakes can help you understand certain processes, some teach you that at a price you cannot afford. Hence, when you want to begin a real estate business in Nigeria, some mistakes you should avoid include:
#1. Excessive Borrowing
Borrowing money to start a real estate business in Nigeria is a bad idea. And to make it worse, when you borrow an amount that is difficult to pay up, you will encounter tremendous difficulty paying back your loan.
The real estate business thrives on time. The business’s profitability is largely based on your ability to wait for a property you purchased to appreciate. This way, you sell it at a price higher than your purchase price and either keep or use the profits to get more properties.
Borrowing a lot of money to gain many properties will only force you to sell quickly since you need to repay your loan. Instead of borrowing, start with acquiring one or two properties with your capital and watch them appreciate.
#2. Poor Business Plan
The real estate business in Nigeria is very profitable, but if you don’t have a bulletproof business plan, you might not share in its profits.
Many people who desire to enter a real estate business move in to disrupt the market and make large profits, but this process is gradual.
A solid real estate business plan must show the emerging markets and the possibilities within. And, of course, data must back this research.
#3. Lack of Teamwork
You can start a real estate business alone, but you cannot scale it without a dedicated and committed team. At certain levels of your real estate business, you must introduce other professionals to help you do the work. This way, you can focus on other aspects of the business.
Vince Lombardi commented, “Individual commitment to a group effort—that makes a team work, a company work, a society work, a civilization work.”
Factors to consider when starting a real estate business
#1. Property Location
The importance of property location cannot be overemphasized as it is crucial for real estate investing success. A property’s proximity to desirable amenities, such as parks, markets, and good schools, significantly impacts its value.
Conducting thorough research on the location can help you make informed investment decisions and avoid potential pitfalls. When assessing a property’s location, consider the mid-to-long-term outlook for the area
#2. Property Valuation
Property valuation is crucial in the real estate business. It involves determining the market value of a property based on factors like location, property size, condition, and market trends. Include details about using comparative market analysis (CMA), where you compare similar properties sold recently in the area and highlight the role of professional appraisers. Address how infrastructural developments, property demand, and neighbourhood quality influence valuation.
Investment opportunities in the real estate business
# 1. Rentals
Rentals are one of the oldest, safest, and most steady sources of income from Real Estate.
In Rentals, you buy a property to put on the market for monthly or yearly rental.
#2. Flipping properties
Flipping properties is a real estate investment strategy that involves buying a property, making renovations or improvements, and then selling it for a profit. The goal is to sell the property quickly, often within a few months, to maximize returns.
#4. Commercial real estate business
Investing in commercial real estate means buying properties that serve business needs, like office spaces, warehouses, and industrial facilities.
#5. Residential real estate
This involves purchasing land and constructing housing units to sell or rent.
Others include:
#6. REIGs (Real Estate Investment Groups)
Here, you pool funds with others to invest in properties. This is often with professional management.
#7. Real Estate Limited Partnership (RELP)
Here, you invest in a partnership that owns and manages properties with limited personal liability.
#8. REITs (Real Estate Investment Trusts)
This involves investing in publicly traded companies that own and manage properties, providing rental income and potential long-term appreciation.
Conclusion
Real estate is a highly profitable market. With over N500 billion in investment, this industry has potential and continues to show its promise to interested investors.
Avoiding excessive borrowing, setting up the right team, and creating an astounding business plan will help you easily set yourself up for success.
