In 2019, Quartz Africa reported that Nigeria was one of the fastest-growing markets for Airbnb globally, with Airbnb itself reporting an increase of 325% and 213% for guest arrivals in 2018 and 2019, respectively.
This might come as a surprise, seeing Nigeria is not known as a tourism powerhouse on the continent. Tourists would instead visit places like Mauritania, Seychelles, Morocco, or Accra.
However, Nigeria has something most of these places don’t have; Lagos, the hub for business in Africa.
With multiple business districts and a bustling environment, Lagos is an attractive destination for business travellers, creating a massive opportunity that serves almost every type of business, from car hire services, to food providers to even short lets.
But focusing on short-lets and their investment opportunities…
Tourists choose hotels for the experience, but business travellers prefer short-lets for their cost-optimisation benefits, which extend beyond the lodging costs.
Short-lets provide a full-house experience where lodgers have access to utilities like a kitchen where they can prepare their meals, as opposed to hotels where they have to pay for meals always.
In setting a short-let, a few things should be considered:
What segment of the population are you targeting with your short-lets? Who are you trying to attract to the place? Business people? Men? Women? Tourists? Locals? Foreigners? Low end, Mid Market, or High end?
The target market for the short-let will determine most of the other decisions you make regarding the property, like the location.
Location, Location, Location…
Once the target market is determined, the next thing to consider is the location. Lagos has multiple central business districts or what we will call activity hubs. Some of these hubs are:
- Ikoyi – Victoria Island, Lekki Phase 1
- Lagos Island- Marina, Isale Eko, Obalende
- Lekki- Phase 2- Agungi
- Yaba- Surulere, Oyingbo, Mushin
- VGC- Ajah, Awoyaya
- Oshodi- Isolo, Okota, Ago
- Mile 2- Festac, Amuwo Sattelite town
Not an extensive list, but these are clusters of neighborhoods relatively close to and easily accessible to each other.
Once you choose a location, the next step is to acquire the short-let space itself. There are multiple options available for exploration;
This is where you negotiate with a landlord to rent his property for typically 1-2 years with the understanding that you will be using it for a commercial purpose, i.e. short-lets some landlords would let you pay the going rental rate while some might ask for a bit more or even propose a profit share model.
Same arrangement as above but involving longer timelines like between 5-20 years. The benefit of this is the certainty and stability you can get. The downside is the lack of flexibility inherent to this model. If the neighbourhood becomes played out, you might find it difficult to pack and go. The means of payment for this model would usually be a profit share or a more flexible payment plan.
You could also buy an apartment in the neighborhood where you need to have the short-let. While this is the least popular option, it is, however, the best option because of the level of freedom you have to modify or run the short-let as you please.
If you can obtain a mortgage to buy the place, that could also be beneficial as you can potentially pay off the mortgage with income from the short-let. You can build equity within the property while making some side income.
After the property is acquired, you need to upgrade it. The extent of work you carry out on the place is often dependent on the state of the property, your target market, and your budget.
The older the apartment, the more work you might have to carry out.
Once this is done, the next step is to figure a way to get customers. Luckily, as a beginner, you don’t need to go out canvassing for customers by yourself. There are now multiple platforms that allow you to list your short-lets on the internet and attract customers. Some of these platforms are;
Please do your research on each platform, their different commission structures, booking rates, refund policies, etc. This is to understand which works best for you.
Now let’s do the math…
Assuming you want to set up a short-let to target business travellers who typically work in the tech space.
Research shows you that the Ikoyi axis is a hub for companies like these, so you search for a 1-bed mini flat within Lekki Phase 1 for a short lease agreement. The average rent in that neighbourhood is about N2,000,000. You spend around N500,000 on renovations and getting the place up to snuff. The average cost per night for 1-bed short-lets in that area is $50 (N23,000) per night (Based on Airbnb).
Assuming the place is occupied only 200 nights a year, your average revenue should be $10,000. That’s about N4,800,000.
Don’t sleep on short-lets. They are a very profitable real estate investment opportunity. Get it? I’ll show myself out now.