Real estate is a profitable sector in Sub-Saharan Africa due to the region's fast-rising population and high demand for accommodation. Already, some investors are making a fortune by pushing up property/rent prices in several cities across the continent, thus making real estate ideal for potential new investors.
But do investors coming into the market know the proven ways to make money in the African real estate sector? Below are some proven real estate money-making strategies that will help you generate profits. These strategies were culled from several reliable sources, including Investopedia.
1. Long-term Residential rentals
A report by Investopedia shows that residential rentals are one of the fastest ways to make money in real estate. With the fast-rising population in Africa, there is always a need for shelter. Africans can benefit from real estate with residential rentals in safe neighbourhoods with good schools and access to water and public transit. People want to walk freely and interact with the community without security risks, making a safe location ideal for long-term residential rentals.
2. Real Estate Investment Trusts (REITs)
Real estate investment trusts (REITs) allow investors to earn rewards without holding physical property. REITs offer diversity opportunities to investors, primarily in the market niches. Africans can buy and sell real estate investment trusts in the open market for rewards.
According to Markets Study Guide, REITs "pool in the money collected from a lot of investors. Then they use money from this pool to invest long term in properties. However, the individual investor need not be in for a long term investment."
3. Contract flipping
The American Apartment Owners Association defined contract flipping as transferring the right to purchase a property to another buyer. The process involves signing the agreement of a property for sale and flipping the contract to a new buyer. Africans can make money with contract flipping by bringing buyers and sellers together.
Available information on Fortune Builders show that contract flipping is a great way for new investors to start real estate. New African investors can act as an intermediary between property owners and buyers for rewarding opportunities.
4. Commercial real estate
Investopedia describes commercial real estate as properties used for business purposes to generate income. Most commercial real estate developers add value to properties through renovations and upgrades for the purpose of increasing profit margins.
Creative Africans can update and modernize a property to earn a fortune in real estate. If you can identify property areas that require value, consider commercial real estate.
5. Lease options
There are immense opportunities in the real estate market, primarily through lease options. Many investors earn rewards in real estate without significant capital with lease options.
Investopedia defines a lease option as an agreement that lets you buy the rented property at the end of a specified period. Note that the agreement prohibits the owner from selling the property to anyone else. Africans can benefit from this trillion-dollar opportunity in the real estate markets.
6. Short sales
Short sales are ideal for homeowners who are behind their mortgage payments. According to Investopedia, short sales happen when a financially distressed property owner agrees with a mortgage lender to facilitate the sale of a property.
Short sales present money-making opportunities for Africans, as it does not require them to invest in renovations. While a short sale can take time, it has a high-profit return. Also, short sales are profitable since investors can negotiate the price of a property below its market value.
7. Vacation rentals
According to a report by Right Era Properties, a vacation rental is a lucrative path to profits in real estate. Vacation rentals involve renting an apartment or house out for a short period.
Africans in major cities on the continent can earn lucrative passive income with vacation rentals. The best part is that Africans do not need to own these properties to earn passive income. Communication and negotiation skills come in handy, especially when dealing with homeowners.
8. Home-renovation flips
According to Forbes, renovating and flipping homes is lucrative with a high-profit margin. Home renovation involves buying a property to rehab and sell on the market. Available information on Flippers Prosperity revealed that negotiating and networking skills are essential in real estate.
Africans with excellent negotiating skills can earn a fortune in this market. Your negotiating and networking with contractors, agents, wholesalers, and other investors determine your level of success in this business.
9. Hard-money lending
Available information on Home Guides has shown that hard-money lending is a smart way for investors to acquire properties quickly. Unlike traditional banks, most hard-money lenders offer loans based on the property value for brief periods.
Lenders offer short-term loans with interest rates to commercials and residential real estate buyers. While hard-money lending requires capital, Africans can generate good profits in the short term.
10. Real Estate ETFs and Mutual Funds
Investopedia describes real estate ETFs and mutual funds as professionally managed pooled investments. Investors buy ETFs and mutual funds to get real estate investment trusts without evaluating individual REITs. Exchange-traded funds trade like individual stocks, and Africans with market experience can make money with the system.
Now that you know proven ways to generate income in the African real estate market, consider extensive research before investing. Instead of investing without foresight, consider researching the property location, neighbourhood and valuation. Thinking outside the box make good profits from the African real estate market, but research is vital.
Area of Expertise
Business Development and Management
African Economic Market
Political / Social landscape
Public Sector Engagement
African Market Intelligence
Business Plan Strategy & Creation
Market Entry Strategy & Creation