How to Make Money in Real Estate as an Investor

How to Make Money in Real Estate as an Investor: We can all agree that investing in real estate has always been one of the most reliable ways to build wealth. However, only a handful of people/investors know of the different strategies that are available to both new and experienced investors when it comes to making money in real estate. Today, we’ll explore three proven ways to make money in real estate: land banking, land retailing, and land development.

1. Land Banking:  

“I bought land in Lekki for N6,000,000 in 1992 and sold it for N200,000,000 in 2017” is a prime example of what Land banking is. Land banking involves buying land in developing areas and holding onto it as the value appreciates. There is no definite period of  time to hold it for. You can hold for 3 years, 10 or 15 years, the choice is yours. 

How It Works

• You identify areas with growth potential, such as Epe, Ibeju Lekki, or other developing locations. If you are outside Lagos, look out for locations mapped for development and monitor the directions the cities are expanding towards.
• Purchase land when prices are low and secure your land with pillars and fencing if necessary.
• Hold onto the property for several years as infrastructure and demand increase.
• Resell at a much higher price.

Example

Five years ago, a plot of land in Epe might have cost you ₦1 million. Today, that same plot could easily go for ₦5 million or more, giving you a 400% return on investment without lifting a finger.

Why It Works

• Low Maintenance: No need for construction or heavy management on your land.
• High Returns: Rapid appreciation in developing areas naturally reflects on your property with little to no improvements made on your property.

2. Land Retailing: 

If you’ve ever heard the phrase “buy low, sell high,” land retailing takes it to the next level. This is similar to buying commodities in bulk and selling in units. Land retailing involves buying land in bulk (acres or hectares), partitioning it into plots (300sqm, 500sqm, 100sm etc.), and reselling said plots at a higher rate.  

How It Works

• You can purchase a large piece of land at a discounted/bulk rate.
• Divide it into smaller plots.
• Add value to each plot (e.g., clearing, fencing, or basic landscaping).
• Sell each plot at a higher price.

Example

You buy 10 acres of land for ₦50 million. After dividing and improving it, you sell each plot for a total of ₦80 million, earning a ₦30 million profit.

Why It Works

• Scalable: The larger your purchase, the more you stand to gain.
• Appeals to Buyers: Smaller, affordable plots attract a wider range of buyers.

3. Land Development: 

This is the most popular investment strategy amongst investors in Nigeria. This strategy involves building structures on your land, such as homes, shops, or event centers, and then selling or renting them out.

How It Works

• You purchase land in a strategic location.
• Construct residential or commercial properties.
• Sell completed units or rent them out for steady income.

Example

The last of the 6 units of bungalows in Epe for N45,000,000 today. The owner invested N190,000,000 in that project and made N270,000,000. Also, a block of flats built for ₦30 million could generate rental income of ₦3 million annually.

Why It Works

• High Earning Potential: The returns from sales or rental income are substantial.
• Multiple Options: Build to sell or build to rent—both yield profits.

The Key to Success: Knowledge and Guidance

There are thousands if not millions of success stories attached to these strategies. Each of these strategies—land banking, land retailing, and land development—offers unique benefits and challenges. However, jumping in without the right knowledge can be risky. It is recommended you ease into it. If you are starting out, we do not recommend you invest 100% of your savings or resources into any of these strategies if you have no back up or emergency funds. 

Tips for Beginners

1. Do Your Research: Understand the market and location trends.
2. Work with Professionals: Engage surveyors, realtors, legal experts, architects, quality assurance personnel, etc.
3. Start Small: If you’re new, begin with land banking to minimize risk.

Conclusion

Real estate is a wealth-building tool that has stood the test of time. Whether you’re interested in the patient growth of land banking, the quick profits of land retailing, or the short and long-term gains of land development, there’s a strategy to suit your goals.

If you have any questions, leave it in the comments section. If you are ready to start your journey, send us an email or chat with us on WhatsApp to get started.

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