How to Invest 500k in Real Estate for Passive Income

Looking to invest as low as 500k Naira into a real estate opportunity in Nigeria? 

Want to create a strong passive income portfolio in real estate that can grow over the years?

If yes, then you need a good plan.

Real Estate Investment is one of the most stable types of investment anyone can make.

With consistent cash flow and opportunities to iterate into several other kinds of businesses, little wonder why investors are looking to real estate investment as a long-term vehicle for cash flow as well as capital growth.

However, real estate investment can be capital intensive, but there are several ways to invest as little as 500k Naira, and grow from there.

In this article, we’ll look at some real estate investments you can make with as low as 500k, with opportunities for passive income and capital growth.

Let’s get started.

REITs

REITs – Real Estate Investment Trusts, are the mutual funds of the real estate market. 

REITs generally pool funds towards investing in income generating real estate assets, which can range from rentals, industrial, and hospitality properties.

With REITs, your ROI is mostly guaranteed but also fixed. So, you can grow your capital only as much as the returns being paid by a REIT.

An Investment in a REIT is, however, a good way to start investing in real estate without burning your pocket.

You can invest a little amount, and buy more stake overtime. This way, you invest as you earn without any pressure.

REIT Stocks

If you need more investment flexibility and a higher ceiling for your ROI, then buying REIT stocks could be a good way to start investing in real estate for passive income.

With a REIT stock, your capital stays more liquid than it would in a REIT portfolio. You also have more tools for monitoring and managing your investment.

A REIT stock however, does not guarantee any profit. In fact, you could end up with some loss on your capital.

So, you have to seek professional investment advice towards investing in these types of stocks.

Real Estate Index

Just like a REIT stock, a real estate index could be a good way to invest in real estate while staying liquid.

Yes, real estate and liquidity do not always go together, but with a REIT stock or a real estate index investment, you could manage how far out or back your money goes.

A real estate index on the stock exchange tracks specific real estate stocks that performs according to a set standard.

Some real estate index track mortgage stocks, while others track industrial and estate development stocks.

You could invest in any real estate index of your choice, depending on what real estate sector interests you or where you see iminent growth in the near future.

Private Leases

Private leasing is the default way most real estate developers start out their business.

It’s one of the best ways to get into real estate without committing too much funds in ownership.

All you want to do is get your money in and then get your profit out, while developing the community.

It’s a win-win kind of real estate investment.

So, how do you go about it with a minimum of 500k capital?

You simply look for underdeveloped real estate properties with massive potential for earnings. 

You obviously need to have an eye for opportunities, or hire a real estate developer or someone who does.

With a private lease, you make a contract with the owner of a property to develop and manage the property for a certain number of years before relinquishing the ownership.

Most private Leases in Nigeria last between 10 years to 20 years, depending on the type of property being developed.

Sublet Partnerships

Sublets are the lower version of a private lease. They are cheaper to invest in and faster to implement.

With a sublet partnership, properties are not redeveloped but enhanced to fit specific criteria of the utility for which they are used.

For example, a property with eight blocks of 2-bedroom flats in a student-dominated area might suffer from low patronage.

So, instead of letting the property go to waste, a sublet partnership could be put in place to enhance the property towards serving the local demographic.

Each block of 2-bedroom flat could be furnished with student bunk beds, and sublet to 4 students per flat.

This way, the financier and the property owner makes money without extensive property redevelopment.

Lease to rent

A lease-to-rent property Investment is like a sublet but with more control. It works better for industrial properties or businesses premises.

With a lease to rent, you could lease a large property and redevelop it into smaller units for sublets.

For example, you could lease a shed space with good foot traffic and then develop it further into shops for rent.

Another example is leasing an office space in a serviced building and then turning it into a coworking space or shared office with daily, weekly, and monthly rental.

This promises good cash flow if the property is situated in a good location with access to utilities and well-targeted users.