Real Estate Investments: 5 Ways to Finance Them

  Real estate investments are typically capital-intensive. Unless you have a significant capital outlay with which to venture into the business of developing, renting and selling property, your options for getting involved in the industry will be limited.

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You may wonder what possible sources of funding for your real estate investments are available to you. It turns out that there is a handful of them that you can access. We discuss five of them here. Have a look.

Personal Funds

This is perhaps the first thing people think about when they’re considering a source of finance for investing in property. Many who have built a successful businesses in this sphere started out with money from their own pockets. This is especially true for smaller-scale investments or building projects that are drawn out over several months or years. Admittedly, not everyone has the sort of savings that are required to purchase land or build a house or office blocks. That’s why a lot of would-be investors turn to other means of funding, including the ones we’ll talk about next.

Family, Friends, And Acquaintances

If you don’t have savings that are robust enough to cater to your investing ambitions, you can seek help from family, friends, acquaintances, or other contacts. The kind of support you secure from them may depend on the sort of relationship you have with them. It might be relatively easy for you to obtain funding from your contacts if they consider you a trustworthy person. You may also be able to get loans or equity financing from family and friends at more favourable terms than other lenders and investors may offer.

Joint Venture

A joint venture in real estate refers to a collaboration between parties who contribute resources to develop and sell (or rent out) property. For example, land owners, property developers, investors, architects, and marketers can work together to finance, design, build, and sell office blocks. The great thing about joint ventures is that you don’t have to fund the project yourself. If you can get an investor onboard, you may simply contribute your expertise to the project and get paid a share of the proceeds realized from the sale of the building.

Mortgage

A bank could help you with the financial support you need to construct a residential or commercial property. But they will want to be sure that you have the capacity to repay the loan (plus interest accrued) within a timeframe they set. While mortgages are a formal aid for people and organizations involved in the real estate business, they aren’t everyone’s favourite funding source. That’s because they tend to be quite expensive; interest on mortgages in Nigeria is almost always in double digits. Besides this, the borrower is also usually expected to contribute a portion of the funding for the project in question. Cooperative Societies Housing cooperatives pool funds from members and invest those funds in real estate projects. These cooperatives can purchase large tracts of land, secure them, and develop them over time. One advantage of cooperatives is that they allow members to own real estate even if they don’t have the large capital that’s often required to buy and build them. However, members can’t lay claim to any single unit of property, as they are all held by the cooperative.

Final Words

We have laid out five ways to finance your real estate investments in Nigeria. You can go with one that suits your current situation, and begin developing a real estate business that’ll thrive in the coming years. Featured Image Source: Dradrock

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Got a suggestion? Contact us: editor@connectnigeria.com

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This article was first published on 24th November 2022 and updated on November 29th, 2022 at 2:45 pm

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