Why Location Determines Profit in African Real Estate: A Step-by-Step Guide

What Does “Location Determines Profit” Mean in Real Estate?

Location in real estate means where the property is. It could be a city, a neighborhood, or even a street.

Some areas are more attractive to buyers or renters. That means people are willing to pay more money to live, work, or do business there.

What Is Profit in Real Estate?

Profit means how much money you make from your property. You can earn profit in two ways:

1. Rental income – Money you get from people renting your property.

2. Capital appreciation – When your property increases in value over time.

So, when we say “location determines profit,” it means that good locations bring more rent and higher value over time.

Why Location Is the Most Important Factor in Real Estate

1. Demand and Supply: People Want to Live in Good Areas

If a location is near jobs, schools, hospitals, or transport, more people want to live there. This increases demand. When demand is high and supply is low, prices go up. This is how you make money.

Example:
In Lagos, people pay more rent to live in Lekki or Ikoyi than in outskirts like Badagry. Why? Because Lekki has better roads, jobs, and schools.

2. Rental Returns: Better Areas, Better Rent

Properties in popular neighborhoods bring more rent. In low-demand areas, rent is low, and you may have trouble finding tenants.

In Nairobi, apartments near Westlands or Kilimani rent faster and at higher prices than those far from the city.

3. Property Value Grows Faster in Prime Areas

A house in a good area will increase in value faster than one in a rural or unknown place. If you want to resell the property later, this matters a lot.

In Cape Town, real estate in Sea Point or Claremont has appreciated faster than outskirts like Delft or Khayelitsha.

4. Security & Infrastructure Matter

No one wants to live in a place with bad roads, no water, or high crime. Buyers and renters always choose safer, better-serviced areas first.

How to Choose a Profitable Location in African Real Estate

Choosing a good location doesn’t mean picking the most expensive place. It means picking a place with strong growth and high demand. Here’s how.

1. Look for Growing Cities or Suburbs

Cities with growing populations and new businesses offer more real estate opportunities.

Nigeria: Abuja suburbs like Lugbe, Galadimawa
Kenya: Nairobi outskirts like Ruiru, Syokimau
South Africa: Johannesburg East Rand, Cape Town Northern Suburbs

These areas are expanding, affordable now, and expected to grow.

2. Check Access to Infrastructure

Properties near these will gain more value:

• Roads and highways

• Public transport

• Water and electricity

• Schools and hospitals

• Shopping malls or markets

A property 5 minutes from a major highway is often more profitable than one 30 minutes away.

3. Consider Safety and Crime Rates

Would you live in a place known for violence or theft? Most people wouldn’t. Always check:

• Police presence

• Lighting and fencing

• Neighborhood reputation

4. Investigate Zoning Laws and Government Plans

Some areas are marked for:

• Residential homes

• Commercial buildings

• Industrial parks

• Future roads or railways

Government plans for development can increase future value.

Tip: Check your city’s urban master plan online or ask at local land offices.

Real-Life Examples: Why Location Changed Everything

Example 1: Two Apartments in Lagos

Both apartments cost about ₦30 million to build, but Apartment A made more rent and increased more in value—because of location.

Example 2: Nairobi Land Investments

• Land in Ruiru appreciated by 60% between 2018–2022 due to road construction and demand for housing.

• Land in Kiserian, though cheaper, grew slower with less infrastructure.

Example 3: Cape Town Suburbs

• Claremont saw house prices increase by 45% in 5 years.

• Mfuleni, with weaker services, grew by only 10% in the same time.

Key Factors That Make a Location Profitable in Africa

Let’s break it down simply.

Types of Real Estate and How Location Affects Them

1. Residential Properties

Location affects rent, tenant quality, and resale value. People pay more for convenience, security, and access.

Best Locations:

• Near schools, offices, hospitals

• In secure, clean neighborhoods

2. Commercial Properties

Shops, offices, and malls do well only in areas with high foot traffic and visibility.

Best Locations:

• City centers, business hubs

• Near transport stations

3. Land (Plots)

Raw land is cheap in far areas but may stay undeveloped for long. In urban areas, land costs more but sells faster and appreciates more.

Best Locations:

• Places with upcoming infrastructure

• Urban or peri-urban edges

Mistakes to Avoid When Choosing a Location

Mistake 1: Only Going for Cheap Property

Cheap doesn’t always mean good investment. A cheap house in a bad area may never grow in value or attract tenants.

Mistake 2: Not Checking Title and Zoning

A property may be in a good area but not suitable for housing or commercial use. You may lose money later.

Mistake 3: Ignoring Research and Expert Advice

Always speak to:

• Local real estate agents

• City planning offices

• Other investors

How to Predict a Good Location Before It Becomes Expensive

1. Follow Infrastructure Projects

• Road expansions

• New railway lines

• Bridges and airports

• Government-funded housing

Where roads go, development follows.

2. Watch for Big Companies

When banks, factories, supermarkets, or tech companies enter an area, workers need housing nearby.

Example: Tech hubs in Nairobi’s Upper Hill made land value explode in just a few years.

3. Listen to Developers

Property developers know where the government is planning next. If multiple developers buy land in an area, it’s a signal of future growth.

Summary Table: Why Location Determines Profit in African Real Estate

Pros and Cons of Investing Based on Location

Pros

• Higher rental income

• Faster property appreciation

• Lower vacancy rates

• Easier resale or flipping

Cons

• Good locations are more expensive upfront

• Competition is higher

• Property scams may target hot areas

• Taxes may be higher in urban zones

Tips for Students and First-Time Buyers in Africa

• Start small: Buy land in growing suburbs instead of the city center.

• Use installment payment plans.

• Research the area’s 5–10 year plan.

• Visit the location in person before paying.

• Always confirm land documents and title.

• Talk to local agents and residents.

Frequently Asked Questions (FAQs)

1. Why does location matter more than house size?

A small house in a good location can earn more rent and value than a big house in a poor location.

2. Is it better to invest in city or outskirts?

Both can work. Cities are expensive but profitable. Outskirts are cheaper but only work if development is coming soon.

3. How can I know if a location will grow in value?

Check for new roads, schools, companies, or government projects nearby.

4. Are rural areas good for investment?

Some rural areas may grow later, but many take years to appreciate. Only invest if growth is likely.

5. What makes a location “prime” in real estate?

It has good access, security, jobs, schools, transport, and high demand.

6. Should I buy land or apartment in a good location?

Depends on your goal. Land is long-term, apartments bring rental income sooner.

7. Can I make profit in a bad location?

It’s harder. You may get low rent and resale may take long.

8. How do I avoid location-based scams?

Visit the property, confirm documents, and work with trusted agents.

9. Are locations near universities profitable?

Yes, students need housing, and rent is regular.

10. What is the biggest mistake people make in location choice?

Buying without researching infrastructure, growth, or legal issues.

11. How do I know if an area is safe?

Ask locals, check crime reports, or visit at night to see the environment.

12. What happens if government demolishes my property?

You lose your investment. Always confirm land use, zoning, and title before buying.

Conclusion: Location Is the Key to Real Estate Profit in Africa

Whether you live in Lagos, Nairobi, or Cape Town, one rule remains true: location is king in real estate. Even with a small budget, you can succeed if you choose the right place.

Here’s what to do:

• Study areas that are growing fast.

• Focus on infrastructure and safety.

• Don’t just look for cheap; look for valuable.

• Check legal documents always.

• Start small, grow wisely.

By understanding why location determines profit in African real estate, you can avoid costly mistakes and build lasting wealth.