In Nigeria, buying a car is regarded as a liability while owning a house is rated as a good investment. However, this line of thought was recently questioned by finance expert, Tayo Oyedeji who argued that homeownership is a bad investment if the purpose is to live there.

Oyedeji is an entrepreneur who feels renting a home is wiser than owning it. He gave an example of himself, stating that he owns few properties which according to him are a bad investment on his part.

Renting is wiser for most people. Don't buy a house unless:

1. Mortgage is < 8%.
2. You can pay cash.
3. You plan to live in it for 10 years.
4. You need the psychological comfort of home ownership.

Rental/investment property is great. Home ownership is mostly a bad investment.

— Dr. Tayo Oyedeji (@tayooye) November 12, 2019

Why people own homes

According to Tayo Oyedeji, most people own properties because of psychological comfort, societal expectations, and cultural norms, but when the finances or returns on investment are factored in, such mentality is a bad investment.

Oyedeji stated that investment shouldn’t be made based on emotion. This, he believes could negatively affect people. He said investment should be based on ‘Math’, meaning, finances and returns on investment should be considered, therefore, living in a home you own is a bad investment.

The finance expert expressed his thoughts through his Twitter account, @tayooye. He shared on his timeline that, “The home you live in is your worst investment. For some of us, it’s not even an investment. Don’t buy the hype, do the math. A home purchase for living is a bad investment.” He, however, said buying to rent is a better investment.

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Reasons for Oyedeji’s stance

While defending his claim, Oyedeji opined that:

• An average property in Lagos is N40 million.
• Treasury bill rate is about 12%.
• Your N40 million will yield N4.8 million a year.
• You can rent a good home for N1.5 million and still have N3.3 million left over.
• Your house is costing you N3.3 million per year. Do the math.

In his reaction to one of the comments on his statement, Oyedeji said, “Homeownership is usually a bad investment in most places, even in the US. There are much better-performing asset classes and it limits your mobility.”

When and why you should buy a home

According to Oyedeji, individuals shouldn’t buy a home unless

• Mortgage is < 8%.
• You can pay cash.
• You plan to live in it for 10 years.
• You need the psychological comfort of homeownership.

Oyedeji ended his argument by stating that, “Renting is wiser for MOST people” = “Buying is a good option for SOME people”

Reactions that trailed his comment

Those in support of Oyedeji

There were Nigerians who were quick to support Oyedeji, stating that he wasn’t far from the truth.

It's the same in the US too. Unless you buy to rent out then it makes financial sense. Think about it based on assets and liability if you own it and it's not yielding returns its a liability. If you own it on mortgage and rent it out its an asset.

— Ooja Shop (@OojaShop) November 13, 2019

Your tweet makes sense. Once you live in your own house, it becomes a liability, it's no longer an asset. It stops yielding for you. Rather you spend to maintain it. Unless of course you pay yourself rent and who does that.. 😂😃

— Biola (@biyolah66) November 12, 2019

My husband taught me this maths a long time ago when we discussed about our investments but most people don’t know this. Housing in Nigeria is over priced . People are just too concerned about being a house owner and most people are not properly educated. Thank you for sharing

— Adaora Nnubia-Onyilimba (@ada_limba) November 13, 2019

Most middle class Nigerians buy houses because of the 4th reason. Thus, the mathematics or logic of investment will not apply to them

— Saadu Jijji (@saadjijji) November 12, 2019

I'll prefer a historical analysis. I grew up in a home that was purchased for N60k in the '80s roughly $80k or N29m in today's money. The rent for that amount of time would certainly be above N15m. So like you said if you plan to live in it >10years then own

— August visitor (@ENwokeafor) November 12, 2019

Context. In Zim home ownership is the way. Thats why even Kiyosaki is wrong about it in Zim context.

— Taita Kudzi (@kedukudzi) November 13, 2019

It goes back to what Kiyosaki said in his first books: A house is not an asset but a liability. According to him, a liability takes money out of your pocket. That's what your own house does. As your own car etc.

— Tobi (@TobiGbemisola) November 13, 2019

Thanks for sharing this Doc.

If you have N40m cash for an outright purchase then this tweet shouldn't bother you.
If not, how will you raise the cash, mortgage?

Here's why Doc said it's wiser for most people to rent…my maths, my experience 👇

— Eleojo Emmanuel (@EleojoE) November 13, 2019

Just talked about this topic with my wife less than 1hour ago. Same math.

— Abdulhakeem Adetunji Mustapha (@_amustapha) November 12, 2019

My dad was the first person to tell me this. He did the maths for me. And I agree that it’s not a good investment.

— Tobi Oyewale (@Tobioyewale1) November 12, 2019

Those against Oyedeji

Huh ? Renting basically means you are paying someone else’s mortgage ! Rents are almost ALWAYS less than your mortgage payments anyway. I don’t see the fin sense in renting if you are able to raise the deposit for a mortgage.

— Temi Fatusin (@Msfatusin) November 12, 2019

I beg to disagree Dr. I live in the U.S. and other than limiting your mobility, homeownership is much better than renting. Caveat- I personally don’t consider homeownership as an investment.

— Bode Akintola (@pakintol) November 12, 2019

I feel being rich enough to own a home should be the first and most important consideration. Paying rent all my life for me ain’t it.

— ʂɬ. ơცı (@chidi_bernards) November 12, 2019

https://twitter.com/Brute_Wane/status/1194329603315130370

Treasury bill in places like United state won't give you such return in a year. So it all depends on location with this maths. Thanks for the advisory role.

— BABS ISAIAH ABIODUN (@infinitybabs) November 12, 2019

Say you have a 40 million. You can definitely build a simple bungalow of 8-9 million and you have 30 million up for treasury bills. That way it’s a win win situation

— Idris-lawal🇳🇬 Pelican (@sir_whaless) November 12, 2019

This is definitely not for Nigeria! Home ownership here in Nigeria is ALWAYS A GOOD INVESTMENT.

— Davidadeola (@Davidadeola10) November 12, 2019

I just found out you don't stay in Nigeria, hence this tweet. No inhabitant of thus country will take this tweet serious, trust me.

— Davidadeola (@Davidadeola10) November 12, 2019

So…pay rent till I die vs pay mortgage for a couple of years, on a property that could appreciate and give a good ROI?
Please explain.

— Faith Ada Ochelle (@faithadaochelle) November 12, 2019

By Dec 2019, you won't be able to get treasury bill as an individual. U could chose to sell that home in Lagos in 10yrs at a much higher price depending on the location. How much rent would you have saved? What's the cost of land-Lord wahala and constant rent increase? How much

— Jonah (@jonahekpiken) November 13, 2019