STRATEGIES TO MAKE MONEY WITH REAL ESTATE INVESTING WITH LOW RISK
In the midst of the challenges faced by the economies of nations around the world, real estate investment continues to stand as a beacon of hope for investors. All over the world, real estate investment remains the go-to portfolio for high returns and relatively low risks. In Nigeria, investing in real estate stands as one of the most profitable ventures, characterized by robust returns and promising opportunities for wealth accumulation and asset appreciation. Recently, I read the story of one of Nigeria’s richest men who lost all his money in a bad investment years ago.
It was said that the diesel business was booming at the time and as a smart businessman, he quickly put all his funds together to import the diesel in large quantities to sell and make huge returns. But while his vessels were still on the high sea, bringing the commodity, there was a government policy that crashed the price of diesel, and before you knew it, his investment went to ground zero. It was said that his loss was so significant that he contemplated ending it all.
However, during that lowest moment of his life, and failing to get help from friends or even banks, his investment in real estate became his saving grace. With professional guidance, he was able to raise funds from his high-yielding real estate investments spread over Lagos, with which he got back on his feet. His story was an inspiration for many at the time and opened the eyes of many Nigerians to the treasures in real estate investment.
The story is also told of a man Ahmed Ashiru (not real name), a man who grew up in a modest family in South West Nigeria and decided to work very hard to make wealth from real estate.
He started his real estate journey by purchasing a small piece of land in a developing area of Lagos. He knew that the key to success in real estate was to buy properties in up-and-coming locations before the prices skyrocketed. With this in mind, Ahmed made his first investment and patiently waited for the land to appreciate in value.
After a few years of strategic planning and wise decision-making, Ahmed’s investment paid off as the area where he had purchased the land became a prime location for commercial developments. The value of his property had increased significantly, and Ahmed sold it for a handsome profit. With the proceeds from his first successful investment in the early 90s, he decided to expand his real estate portfolio. He purchased more land, this time in different parts of Nigeria, and began to develop commercial and residential properties. Ahmed’s keen eye for emerging markets and his ability to anticipate trends in the real estate industry allowed him to make smart investments that yielded high returns at low risks.
As his wealth continued to grow, he became known as a prominent real estate investor in Nigeria. He was sought after by developers and investors looking for guidance and advice on where to invest their money. His reputation for success in real estate investment only grew stronger as he continued to make profitable deals across the country.
One of Ahmed’s most notable investments was the development of a luxury residential estate in Abuja. The project was a huge success, with the properties selling out before they were even completed. Ahmed’s attention to detail and commitment to quality made the estate a desirable place for wealthy individuals to live, further solidifying his status as a successful real estate mogul in Nigeria.
His story from a humble beginning to a successful real estate investor in Nigeria is a testament to the opportunities that exist for those willing to take risks and work hard. By making smart investments and capitalizing on emerging markets, Ahmed was able to build wealth and achieve financial freedom.
Like Ahmed, some of the wealthiest people in Nigeria and indeed all over the world are major players in the real estate industry because they understand the secret of wealth in real estate. The reason for the embrace of real estate investment in this part of the world are based on several factors spanning economic, demographic, and regulatory dimensions.
For example, one of the greatest drivers of profitability in real estate investment is population growth and urbanization. Nigeria’s burgeoning population, estimated at over 200 million people, is experiencing rapid urbanization, with a significant proportion migrating to cities in search of economic opportunities. This influx of people into urban centers fuels demand for housing, commercial spaces, and infrastructure, thereby driving up property values and rental yields.
Also, the housing deficit in Nigeria estimated at over 17 million units is a major factor that underscores the urgent need for increased investment in real estate development. Limited government intervention and inadequate funding for affordable housing projects have also exacerbated the shortage, creating a lucrative market for private investors to address housing needs across various income segments.
Also, the economic growth of the country makes investment in real estate a smart choice for investors. Despite occasional economic downturns and volatility, the country remains an attractive destination for real estate investment due to its vast natural resources, diversified economy, and potential for sustained growth. The country’s GDP growth, albeit fluctuating, presents opportunities for investors to capitalize on emerging markets, commercial developments, and infrastructure projects.
Additionally, real estate investment offers tangible assets with intrinsic value and the potential for long-term capital appreciation. Unlike volatile financial markets, real estate assets provide a hedge against inflation and currency fluctuations, offering investors stability and preservation of wealth over time.
These, amongst other factors, make real estate investment a smart choice for investors. Having said that, it is important to state that investing in real estate inherently carries risks, just like any form of investment. Infact, experts identify risk as one of the major factors of investment. However, there are strategies investors can employ to mitigate these risks and maximize their returns. Here, we shall share some proven strategies to invest with reduced risk in real estate.
Market Research and Due Diligence
First, carry out marker research and due diligence. There is no one single real estate investment that is risk-free, and there is no one that is too risky. The risk involved and the potential return on investment all boils down to the quality of information at an investor’s disposal.
Therefore, it is important for you to conduct thorough market research and due diligence before making any investment decisions in real estate. As a buyer, carrying out due diligence helps you to learn beforehand whether the property is worth investing in and if it has potential for long term profit. Due diligence means conducting a check that helps you make informed decisions. In carrying out your due diligence, understand your local market trends, demand-supply dynamics, demographic shifts, and economic indicators that can impact property values and rental yields.
A major aspect of carrying out due diligence is physical inspection of the property of interest. This is to ensure that the property is physically good condition and the environment is comfortable enough for the intended use. If you are buying a house for instance, your general inspection may cover things like interior and exterior finishing, structural design, utilities and structural systems, drainage, sidewalks, the general environment, and finishing, amongst others. By carrying out physical inspection of a property, you would have significantly reduced the risk involved in investing in the property.
Diversification
Second, diversify your real estate investment portfolio across different property types, locations, and investment strategies. Generally speaking, diversification is an investment strategy that lowers your portfolio’s risk and helps you get more stable returns. In real estate investment, like other investment types, diversification lowers your portfolio’s risk because different asset classes do well at different times. If aspect of your real estate investment fails or performs badly, you won’t lose all your money because another type may be doing well at that particular time. If you invest with REITs for example, you should also invest in rental properties and lands instead of putting all your money into a single investment.
In other words, investing in a mix of residential, commercial, retail, and industrial properties can help spread risk and minimize exposure to market fluctuations in any single sector.
Long-Term Investment
Third, invest long-term. To reduce your risk while making good returns on investment, adopt a long-term investment horizon and resist the temptation to speculate or chase short-term gains. Across the board, the value of residential real estate and commercial properties tends to rise over time. Even if there is market uncertainty and fluctuation, real estate makes an excellent long-term investment because its value continues to grow over time and in a stable manner. In general, real estate is not a “get rich quick” investment option. By their nature, those are usually more volatile options that can gain value quickly but then also lose it just as quickly. Real estate tends to appreciate in value more slowly but also retains that appreciated value over time.
Insurance
Implement risk management strategies to mitigate potential risks and unforeseen events as a real estate investor. In a bid to reduce risk, consider factors such as property insurance, contingency funds for repairs and maintenance, and rental loss insurance to safeguard your investment against unexpected challenges.
Talking about insurance, it plays a crucial role in risk management for real estate investments. It is important to maintain adequate insurance coverage for your properties to protect against potential risks such as fire, theft, natural disasters, and liability claims. Regularly review your insurance policies to ensure they provide sufficient coverage and make necessary adjustments as your portfolio grows.
Work with professionals
Finally, work with a professional. Seek professional guidance and expertise from real estate agents, property managers, and financial advisors with a track record of success in the industry. Leverage their knowledge, experience, and network to identify lucrative investment opportunities and navigate complex regulatory requirements. Working with a professional is a great way to get to know this information and develop your skills and knowledge. If you are a real estate company in Lagos that can help you achieve your investment goals to wealth creation. Look no further than PWAN Stars Limited. PWAN Stars is a property development and management firm founded with the goal of reducing the housing gap in Nigeria by providing Nigerians with comfortable yet affordable residential and commercial real estate solution. PWAN Stars is reputed for real estate development, real estate training and advisory, amongst others. Contact us today for all your real estate solutions.
