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  The real estate business can be quite rewarding. But it’s also often capital intensive. Sometimes, you will be able to start with little or no money. We’ve written about how you can do this here. But a lot of the time, you will require a substantial amount of money to begin. But how do you find funding for your real estate business? There are several ways to go about this. Some may be familiar to you; others, less so. We’ll present you with the options you have here, so you can choose one that’ll work for you.
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Your Personal Savings

Perhaps you’ve saved up a decent amount of money. You could use that to finance your real estate project. Admittedly, not many people are able to save enough to fund the larger, more lucrative real estate projects. But you don’t have to start big. If you have just enough savings you could consider starting up with land flipping in places with relatively cheap land prices, and build up from there. Another option would be to team up with others who also have some funds for real estate investment and begin with them. There’s more on that shortly. Partner With Other People The great thing about partnering with other people is that you can split costs with them. Of course, this also means that you’ll share whatever profit comes out of the project with them. Contributions don’t have to come as cash. Sometimes, members could bring in what they have—including land. Another person in the group could fund the removal of bushes on the land, and another it’s fencing. Joint ventures like this one should be backed up by a legal document that’s recognized by every person involved. This provides some protection against being swindled by members who turn out to have ill intentions.

Get Funded By Investors

This was one of the possible paths we listed for getting into real estate with little or no money. Unlike the joint venture option discussed above, most of the financing will come from one or more investors, who may not take part in supervising the real estate project. Investors will want a large cut of the profit that comes from your real estate business. You will need to discuss the terms and conditions of this type of support before you embark on the project.

The National Housing Fund

The Nigerian Housing Fund is run by the Federal Mortgage Bank of Nigeria. It’s perhaps the most attractive of all the institutional means of financing your real estate projects, because of its relatively low interest rate and extended loan tenor. The fund is a pool of contributions made by employees through employer deductions on their salaries as well as other sources. Self-employed people can benefit from the fund as well. Annual interest rates on the fund do not exceed 6%, and the maximum repayment period for it is 30 years. Learn how to get this loan in our article, How to Obtain a National Housing Fund (NHF) Loan.

Mortgage Banks

Mortgage banks primarily exist to fund real estate projects and reap their profit from the interest paid on those projects by their clients. You can find a list of approved primary mortgage institutions in Nigeria on the CBN’s website. These banks will grant you financial support if they believe your application is good enough. However, the terms of these deals tend to be prohibitive for the majority of people. Annual interest rates on these loans may exceed 23%. You will also be required to provide an equity contribution. These contributions may be at least 30% of the project cost.
 

Commercial Banks

Commercial banks may also provide mortgage loans to clients. But like the mortgage banks, their terms may be beyond the reach of most people or organizations applying for these loans. Annual interest rates may be well over 20% of the total project cost, and the loan tenor could last up to 20 years. Final Words The alternatives for funding real estate vary widely with respect to cost, possible contributors, and length of time within which the project can be completed. You may not be able to afford every one of them, but there could be at least one that you can adopt. Whatever you decide to go with, ensure that you look through their terms and conditions before signing up with them.
 

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This article was first published on 16th August 2021

ikenna-nwachukwu

Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.


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