It is only rational and logical that anyone who makes an investment of whatever form expects at least some measure of returns (profit) on his investments.
The importance of profits to you or any investor can never be overemphasized. It is needed to cater for your bills, keep the lights on, put food to put on the table or medicine to keep you healthy.
These returns can be used to pay for vacations, put a down payment on a new car or even donate to charity.
Over time, however, those seemingly paltry amounts can grow into enormous sums if you reinvest them: that is, use them to buy other forms of real estate that would also eventually yield more returns in turn.
Avenues to reinvest your real estate returns
Here are some of the best options right now:
#1: Renovating the property
#2: Investing in a new property entirely
Another option is to just pool all the returns together and invest in a new property, preferably a land in a lowly developed suburb. You can get the land cheaply at a ridiculously low price. You will be surprised at the value of the property in just few years time.
#3: Invest in REITs
The way the Nigeria real estate market is going currently, it has become very possible to invest in real estate without the stress of holding a physical property. REITs let you do exactly that while also diversifying your holdings based on the type of real estate class each REIT invests in.
#4: Invest in a real estate focused company
There are many companies that own and manage real estate without operating as a REIT. The difference is, you’ll have to dig to find them and they may pay a lower dividend than a REIT.
Companies that are real estate-focused can include hotels, resort operators, timeshare companies, and commercial real estate developers, for example. Make sure to conduct due diligence before you buy stock in individual companies, but this option can be a good one if you want exposure to a specific type of real estate investment and have time to research historical data, company history, and other details.
#5: Invest in home construction
If you look at real estate market growth over the last decade or longer, it’s easy to see that much of it is the result of limited housing developments. For this reason, many predict that construction of new homes will continue to boom over the next few decades or more.
In that sense, it’s easy to see why investing in the construction side of the industry could also be smart. An entire industry of real estate developers will need to develop new neighborhoods and rehabilitate old ones, after all, so now may be a good time to buy in.
Large homebuilders to watch include Realty Point Limited, Landwey and Bersama, but there are plenty of others to discover on your own.
#6: Hire a property manager
While you don’t have to buy physical property to invest in real estate, there’s at least one strategy that can help you have your cake and eat it, too. Many investors who want exposure to rental real estate they can see and touch go ahead and buy rentals but then hire a property manager to do all the heavy lifting.
Someone i know personally owns a rental property in Abuja but actually lives in Lagos. While he tried to manage his properties from a distance at first, he ultimately chose to work with a property manager to save his sanity and his profits.
While he forks over 8-10% of gross rent to his manager, it was still “one of the best decisions he’s ever made” as a real estate investor, he says.
“They take care of the rental property basics – minor repairs, vetting prospective tenants, collecting rents – so that I can focus on my career, family, and locating the next profitable rental property investment,”.
In that sense, he gets the benefits of being a landlord without all the hard work. “One of the most important roles that a property manager plays is that they act as a buffer between the tenant and me,” says Huffman. “I don’t receive random calls, texts, or emails from tenants at all hours of the day or night.”
The key to making sure this strategy works is ensuring you only invest in properties with enough cash flow to pay for a property manager and still score a sizeable rate of return.
#8: Hard money loans
If you don’t like any of the other ideas on this list but have cash to lend, you can also consider giving a hard money loan. I have an acquaintance who is currently investing in real estate with this strategy since he wants exposure but doesn’t want to deal with being a landlord.
Hard money loans are basically a direct loan to a real estate investor. What he does is to offer real estate loans to an investor he knows in person, and he receives a 12% return on his money as a result.
Hard money loans directly to real estate investors are another strategy to consider if you want to invest in real estate but don’t want to deal with a property and the headaches that come with it.
#9: Invest in real estate online
Last but not least, don’t forget about all the new companies that have cropped up to help investors get involved in real estate without getting their hands dirty. Platforms like Bersama lets you invest into commercial or residential real estate investments and receive cash flow distributions in return.
Investing with Bersama is similar to investing in REITs in that your money is pooled with cash from other investors who take advantage of the platform. The cash you invest may be used to purchase residential property, commercial real estate, apartment buildings, and more. Ultimately, you get the benefit of more returns and distributions and long-term appreciation of the properties you “own.”