The ultimate guide to becoming a millionaire through real estate investing
Are you earning enough to make you wealthy?
If I stood in front of you and asked this question, what would your response be?
Yes, No, Maybe or I don’t even know?
My guess is that more than 50% of people will respond with ‘I don’t even know anymore’ and that will be the utmost truth. Another half of the people might respond with an emphatic ‘No’; because their income is not taking them home.
Whatever your response is, you should count yourself lucky to be reading this.
There are so many ways to earn income and right now because the real estate market is seemingly yielding high returns and has the opportunity to provide juicy payouts to its successful players, there are now so many people who will tell you “I am into real estate”. As a person looking to earn more money, don’t be fooled or pulled into this hype of a business segment; most of us as real estate agents, marketers and/or brokers (pick whatever tag you want) might never really be wealthy but we can be rich and we can be wealthy – but the chances are slimmer for most of us to achieve the latter.
But you, on the other hand, NOTHING should stop you from becoming rich, then wealthy – if only you would invest wisely, smartly and with the mindset of compounding your income across high performing assets.
One of such assets is real estate and here are a few reasons and ways that you should invest and optimize your capacity to become a millionaire (or billionaire) in real estate – even here in Nigeria and starting from the barest level of participation i.e. with your small income.
If there’s one area of investment that appreciates consistently and with the possibility of a real good profit margin, it’s real estate. If you own a property, be it land or house, it will appreciate over time, and we are not only talking in little thousands but this can literally be in leaps of thousands – when done right. Like everything else in the economy, it is governed by the forces of demand and supply of location, buyers and materials. House rent increases and land appreciates over time which can serve as channel for continuous cashflow for you the investor (not the agent).
The 20+ million housing deficit in Nigeria makes it even much easier to see that housing will almost always be a continued problem in Nigeria so before you think that more and more people are owning real estate, remember also that everyone needs real estate still.
There is a relationship between GDP growth and real estate demands. The truth is that no matter how the economy grows or stays stagnant or even depreciates, there’ll always be a demand for real estate – people need a place to live, work and play; no matter the paygrade. As a result of this, the buying power for Real Estate might not continue to increase but the leasing requests will surely increase. The best part is that as an individual, you can be on both sides of this equation – as a renter and a landlord.
(Remember what I said about thinking smarter? Here is one of such times)
- VALUE IS WHAT YOU MAKE OF IT
As an investor in real estate, houses can always be improved on and it will shock you by how much you can increase the value of a property by simply making some additions, renovations and adjustments to the current property yet make a huge margin of profit. For example, you have a higher chance of selling your house if it’s in very good shape but even better still if it’s optimized to suit the target that you are aiming for as a client that wants to buy the house.
For instance, in targeting a young and upwardly mobile executive who has recently decided to buy or rent a house – you will earn so much more from a house that has a private swimming pool than from one that has a mini flat or BQ that he/she can further rent out (**whispering – they like their privacy more than the idea of having more income from sharing their home space). And no, young, upwardly mobile clients aren’t thinking to setup a full office to operate from home – that still means they are bringing people into their space.
No one likes to buy a house that’s rusty, inefficient and not well taken care of – that makes it a liability. So investing in appropriate facility management is something that you also want to keep astride of to ensure that your investment keeps winning & earning for you.
- BUILD EQUITY AND HEDGE AGAINST INFLATION
Think about yourself saving 100,000 Naira every month for 5 years and having calculated that you will get N6m at the end of that time – with some interest of course. And as of today, May 18th 2021 that N3m can buy you a saloon car for example (what kind of car would you get for this amount?).
Do you think that with the way that Nigeria is going, you will be able to buy the same car or even similar for that amount of money?
Now, let’s flip that around a bit – let’s say that you save up N1.2m each year and invest that money with developers who are building homes with a turnaround interest payout of 12months – say 10% pa. So each year, you are getting N1.44m but instead of taking it out, you are recycling it and earning dividends on rental income from the apartments being built plus your capital kept in. Just imagine how much you will have earned in the space of five years. Rough calculations here for your non-compounded gains and total cash you can have at hand in five years
- On 1.2m capital invested each year = N240,000 * 4years = N1,200,000
- A share of the rental income not less than 4% of the cost of the property you invested in – example is 2 beds in Yaba/Surulere sold at N28m.
- 4% is N1.12m as rent; your N1.2m could have been about .067% and this could yield you N80,000 pa
Total cash you could withdraw and walk away with at the end of the tenure could very easily be a minimum of 1,200,000 + 400,000 + 6,000,000 = N7.6m
Upon the purchase of a property, there is a down payment with the balance being paid via debt financing from the lender. It’s slow at first, but it becomes faster towards the end of payment of amortization. This builds equity through principal reduction and as this happens, it gives one the advantage to purchase other properties and increase cash flow and solidify wealth for an individual.
- GOOD RETIREMENT PLAN
See that scenario above?
Now, imagine that was an investment towards your retirement. And you are 40 years old with 20 more years to work and save this amount or even more each of the 20 years you still have to work.
If you could get 7.6m in 5years, in 20years you will get a whooping N38m from continuing that process without considering that inflation would increase the rental value of property or that your saved contributions could yield more than 10% over time and compounded and all the other factors that could matter.
PS: This is also excluding other savings and investments from your active income streams.
The thought of having a means of income or better still, multiple means of income after retirement is a pleasant thought that puts one’s mind at rest.
- How apartment leasing works
- Path to Mega-City: The painful sacrifices needed to develop Ibeju Lekki
- Real estate investing from a younger age is an avenue that helps bring such thoughts to reality.
- How to calculate your return on investment in real estate
Dear young professional, this is how to invest in real estate with your salary
In summary, whilst some ways seem more favourable than others for the mode of investing that you do – the lesson here is that as a property investor, your opportunities are limitless as long as you are able to leverage them to suit and accumulate to achieve your end goals.
The best investors seek real estate to keep in business and use as a means of paying for their own homes and whilst many global warnings might tell you that owning real estate is a liability, there comes a time in life when owning a whole piece of real estate is an asset for you and your future generations.
Are you ready to be a real estate investor?
Click the link below and let’s know which of the reasons shared above is most appealing to you.
For more insights on real estate investing, get Lerato’s e-book here.
Till next time, I remain your friend in real estate investing.