Many Africans grew up being introduced to real estate investing as the most popular form of investing. From Lagos to Nairobi, Johannesburg to Accra, the formula has always been the same: get educated, get a job, buy land, build a house... rinse and repeat. For many Africans — including those in the diaspora — real estate feels safe, tangible, and reliable. So real estate investing is not strange to us and remains the most common form of investing in Africa. It is one of the reasons we publish articles educating our audience on various other forms of investing beyond real estate.
Here are some of our previous articles where we outlined some passive income investment vehicles available for investors to take advantage of. Click on the links below to read.
- Passive Income Investment Options- Dividend Paying Equity (Stocks)
- Passive Investing Options- Commercial Papers
- Passive Investing Options- Money Market Fund
It is always a pleasure to see testimonials from readers who have benefited from the information shared in our articles, sharing their experiences receiving their first passive investment income, and the feeling of it. In the journey of investing, information is key — tantamount to "Location, Location, Location" in real estate conversations. And Cowryvest exists to democratize Investment education and information to help you in your investment journey.
We have also written about personal finance and investment lessons from two respected Africans, Jay Jay Okocha and Alhaji Aminu Dantata, both of whom emphasized real estate as their preferred and most comfortable investment vehicle. A lot of Nigerians in Diaspora are also big on Real estate investment compared to other forms of investment, and they have valid reasons for their preference, which are understandable.
Investing in real estate is great. Like every other investment it has its drawbacks too, but when done right it can be a great way to grow and preserve wealth. While many young investors might want to partake in real estate investing they are usually discouraged by the huge capital outlay required to invest in it, especially for small income earners or starters. In many cases, the smaller the investment sum required, the further into the outskirts of a city or town the property is located, which often affects the potential of the property to grow in value, essentially defeating the purpose of the investment in the first place, in addition to the other risks involved. As is typically said in real estate investing, "the three most important things in real estate are “location, location, location”", meaning that a property's value depends almost entirely on its location.
So what if there is a way to have sort of part-ownership in prime real estate properties in premium areas across Africa — without breaking the bank? What if you could have access to own shares in property assets traditionally reserved for the wealthy? And what if you could do so without having to manage the properties directly, yet get paid yields from such properties annually or bi-annually?
That is where REITs (Real Estate Investment Trusts) come in.
What are REITs?
A real estate investment trust (REIT) is a company that owns, operates, or finances income-generating real estate and sells shares to raise capital to do so. It allows everyday investors to own shares in income-producing real estate like apartments, malls, and warehouses, without managing the properties themselves. REITs offer high dividend yields, liquidity, and diversification, usually requiring them to distribute at least 90% of taxable income to shareholders as dividends, leading to steady income streams for investors. In simple terms it is having fractional ownership of a company/trust that owns real estate properties.
NGX (Nigerian Stock Exchange) describes Real Estate Investment Trusts (REITs) as corporations or trusts that use the pooled capital of many investors to purchase and manage income property and/or mortgage loans. There are various types of REITs, but the one of interest to us in this article is Equity REITs, which purchase, hold and manage commercial and rental properties such as apartment complexes, data centers, healthcare facilities, hotels, infrastructure (fiber cables, cell towers, and energy pipelines), office buildings, retail centers, self-storage units, timberland, and warehouses. Although they finance these properties in many cases, their primary focus is on profits through acquisition and management, and revenues are generated primarily through rent, not by reselling properties.
REITs operate like mutual funds by managing pools of funds for groups of investors, but for real estate rather than stocks and bonds. Investors earn returns from dividends and increases in the REIT's share value (capital appreciation). Essentially, REITs take real estate, which are illiquid assets, and make them liquid for investors, with easy entry and exit.
REITs are traded publicly on the stock exchange (including the Nigerian Stock Exchange, Johannesburg Stock Exchange, Nairobi Securities Exchange) just like stocks, providing liquidity and accessibility not commonly found in direct real estate investments. You can buy or sell REITs through a stockbroker as with other types of company shares. They allow you to earn income from real estate without having to buy, manage, or finance properties yourself.
In developed markets like the United States, REITs have existed since 1960 and are widely used by institutional and retail investors alike. Africa’s REIT market is younger but growing steadily, especially in South Africa, which has one of the most developed REIT sectors globally. As African capital markets deepen, REITs are likely to play a larger role in democratizing property investment across the continent.
Examples of some major REITs traded on the NGX and regulated by SEC include UPDC REIT, SFS REIT (formerly Skye Shelter Fund), and Union Homes REIT. As usual, this is not any form of investment advice. If you want to know more about them do your own research and speak to your financial adviser. To get started investing in REITs open a stock brokerage account in your country and purchase listed REIT shares just like stocks. Check out the below article for more information:
How to Start Investing in the Nigerian Stock Market: A Guide for Beginners
So if you are looking for a liquid way to invest in real estate without minimum investment requirement or breaking the bank, to share in both residential and commercial properties investments, to get regular yields/dividends from such investments, and to get capital appreciation from your investment, REITs might just be the ideal option for you.
In conclusion, one of the passive income investments you can make that would guarantee regular inflow of cash into your bank account is in Real Estate Investment Trusts (REITs). And you would do well to look in this direction, research it, and consider including it in your portfolio to diversify income streams and ensure regular cashflow both to offset expenses and to reinvest. Real Estate Investment Trusts (REITs) democratize real estate investment, providing access to property assets traditionally reserved for the wealthy by allowing shares to be traded like common stocks. They reduce financial and managerial burdens associated with direct property investment and offer portfolio diversification, steady income from dividends, and exposure to different property sectors, acting as a hedge against inflation and historically presenting competitive long-term returns.
Wishing you the best in your investment journey. Happy Investing! Feel free to share this article within your network.
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DISCLAIMER: All contents on this website are for informational purposes only and should not be taken as any form of investment advice. Do your own research and contact your financial advisor before making any investment decision. All contents may not be reproduced, distributed, or used without prior written permission.
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