Introduction
When Chidi, a middle manager at a bank in Lagos, decided to invest in his first property, little did he know it would be the beginning of a journey to financial freedom. With rising inflation eating into his salary and three children to cater for, Chidi was struggling to make ends meet. However, his friend Kingsley, who had invested in a few rental properties, seemed to be doing alright. After speaking to Kingsley, Chidi took the plunge into real estate investing.
That first two-bedroom flat he purchased in Lekki not only provides rental income but has also increased in value by 35% in just two years! Chidi’s story illustrates how real estate can provide stable cash flow and excellent returns that outpace inflation. This article explores five key reasons why real estate is a smart investment, especially in Nigeria’s fast-growing property market.
It is Financially Safe
Real estate investment offers financial safety that other assets cannot match [1]. Even when stock markets crash or currencies lose value, quality properties tend to hold or gain value over time. Unlike stocks and shares, a tangible property cannot simply vanish or disappear overnight.
Investing in real estate in Nigeria’s major urban centers like Lagos and Abuja is especially safe due to the huge and growing housing deficit. There is incredible demand that outstrips supply, leading to guaranteed returns for the smart investor [2]. Quality properties in the right locations tend to see a strong appreciation in value, providing a financial buffer during tough economic times.
It Requires Little or No Specialized Knowledge
While certain real estate investment strategies require extensive specialized expertise, getting started does not have to be complicated. Unlike trading stocks or investing in complex financial instruments, buying rental properties can be straightforward with just a basic understanding of the real estate market [3].
Even first-time investors in Nigeria can start small by partnering with others to purchase property or working with established development companies. As Kingsley told Chidi, “Real estate is one of the easiest investment vehicles to understand if you educate yourself and master a few fundamentals.” There are also experienced professionals like property managers who handle day-to-day operations as a rental investment generates income.
Landed Properties Appreciate Over Time
In a nation like Nigeria with rapid urbanization, population growth continues to drive massive demand for housing [4]. With scarcity of land in prime locations within cities like Lagos, Abuja, and Port Harcourt, quality properties facing extreme demand tend to see strong price appreciation over time.
Unlike cars or equipment which depreciate, well-located land and buildings tend to increase in value. Chidi’s Lekki flat has followed this trend, rising 35% in two years per current valuation estimates. Savvy investors position themselves to benefit from Nigeria’s favourable real estate supply-demand imbalance.
It Provides a Stable Cash Flow
For investors seeking regular income, rental properties can provide stable cash flow in the form of monthly rents [5]. The rental market remains strong in Nigeria’s major urban centers, with young professionals and small businesses looking for quality mid-range apartments.
After covering his mortgage and expenses, Chidi earns a positive net monthly cash flow from his Lekki flat. Real estate empires are built by acquiring multiple cash-flowing properties over time. Investors like Kingsley ultimately achieve financial freedom by having enough rental income to cover their lifestyle expenses.
It Beats Inflation
As opposed to keeping cash in low-interest bank accounts, real estate returns often outpace inflation [6]. While Nigeria’s inflation erodes the value of money sitting in the bank, rental incomes and property price appreciation provide returns that exceed rising consumer costs.
In a period of just two years when Nigeria’s inflation has been over 15% annually, Chidi’s Lekki flat has increased 35% in value while also paying monthly rental income. Savvy investors build wealth by positioning their money in hard assets like real estate that beat inflation.
Key Takeaways: Why Real Estate Works in Nigeria
– Extreme housing demand and favorable demographics make investing in Nigeria real estate safe
– Unlike complex financial assets, real estate fundamentals are straightforward for beginners
– With rapid urbanization and population growth, landed properties see strong appreciation
– Rental incomes provide stable cash flow while values often outpace inflation
– Getting started is simplified when working with established property companies
Conclusion
While Chidi was initially nervous about diving into real estate investing, the returns and financial security he has achieved make the decision one of the wisest of his life. He plans to continue steadily acquiring additional properties, with the goal of having enough rental income from a portfolio of flats and land to eventually attain financial freedom.
For those seeking an inflation-beating investment that does not require expert specialized knowledge, Nigeria’s red-hot property market presents a compelling opportunity. As Kingsley’s experience shows, patiently acquiring quality rental assets over time can position investors for long-term cash flow and financial security. The time to start is now.
References
[1] Elumoye, O., 2021. Real Estate is the Safest Investment Bet Amidst Financial Storms. Housing News. https://housingnews.org.ng/2021/09/real-estate-is-the-safest-bet/
[2] Broll Nigeria, 2022. Nigeria’s Housing Deficit May Hit 25m by 2030. Nairametrics. https://nairametrics.com/2022/01/31/nigerias-housing-deficit-may-hit-25m-by-2030/
[3] Ezeamama, M.C., 2018. Real Estate Investment Doesn’t Require a Skill or Expertise. Legit. https://www.legit.ng/1236781-real-estate-investment-require-skill-expertise.html
[4] Nigerian Finder, 2022. Current Population of Nigeria. https://nigerianfinder.com/nigeria-population/
[5] Nzekwe, C., 2021. 7 Benefits of Investing in Real Estate. Nairametrics. https://nairametrics.com/2021/05/24/7-benefits-of-investing-in-real-estate/
[6] Trading Economics, 2023. Nigeria Inflation Rate. https://tradingeconomics.com/nigeria/inflation-cpi
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