Nigeria's leading finance and market intelligence news report.

Real estate offers viable investment options as returns on savings tumble

Due largely to the severe impact of Coronavirus pandemic on national and global economy, how to put the economy back on track has become the main pre-occupation of economic policy makers, leading to a comprehensive review of preCovid-19 fiscal and monetary policies.

In Nigeria where the local currency, the Naira, is struggling with deep devaluation, the country’s Central Bank (CBN) has been upbeat with a number of monetary policies that are stripping the economy of whatever it could give back to investors as returns on their investments.

There has been a significant drop in interest rate on savings. By the last count, interest rate on savings has dropped from 3.9 percent to 1.29 percent per annum or 0.104 percent per month. Similarly, interest rate on Treasury Bills, which used to be a preferred destination for investors with relatively patient capital, has crashed from 18 percent per annum a couple of years ago to less than 4 percent at the moment, making it an unattractive asset class for yield-hungry investors.

But all hopes are not lost. Real estate is a viable option. It provides a leeway for investors with patient capital for medium to long term investment that pays significantly for the effort in terms of return on investment. Though there are many ways to invest in this asset class, it calls for caution about risks.

Experts say investing in real estate is a great way to trade with money and earn profits. If you know how to manage things and can do the research yourself, you can make much profit through these investments.

Read also: How capital market’s low interest regime is encouraging affordable housing delivery

Arguably, real estate investment is popular all over the world. It is an easy way to earn cash, and an investor can build up a future for himself through it. But sometimes, people lose their investment when they are not careful. If you study and research your business, you will be capable of building a financial future in real estate.

There are ways to make money from real estate investment and these include trust deals, rentals, house hacking, home renting, and flipping property. A prospective investor can decide on his own which way he finds the best.

Though this is not catching up fast in Nigerian market, an investor can make a profit more easily from real estate investment trusts (REITS) than buying property by himself.

REITS act like mutual funds. You can invest in different properties. It is better than investing in only one property. In the long run, all investments go to buying properties. You wait for the eventual profits after investing in properties. REITS are typically handled by a company as has been done by Union Homes, UPDC, Skye Shelter etc.

In rentals, the investor has to buy a property and rent it to a trusted person. He earns money from rent and uses it to pay the mortgage of the property if the property was bought through mortgage. By the end of the mortgage, his earning will be significantly increased due to rent increases.

Money is, however, spent on maintenance and repairs. Many people think that rent is fixed, but it’s not. Property value depends on the location and economic state of the country. If the economy of the country falls, then the property owner needs to rent it for a lesser amount.

House hacking is a profitable way to make good money. For this, the investor needs to buy a multi-flat building. He can live in one unit and rent out other units. This will help him in getting monthly cash from rent, and he can easily bear his expenses.

Home renting is similar to house hacking, but this method is more straightforward. The investor lives in a house where he doesn’t need to use all the rooms. So, he can rent the property easily while living in it. He doesn’t even need to purchase that property to give rent to people.

Flipping property means an investor purchases a house, updates and repairs it, and then he sells it for more than the amount spent on purchasing and updating it. Therefore, he should know that most of his time, money, and energy will be required to make money this way in real estate. He needs to have money to buy the property and time to renovate it.

Whatsapp mobile

Get real time updates directly on you device, subscribe now.