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.
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.
News continues after this ad
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.
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.
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.. ??
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
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
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.
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.
I had an uncle who had businesses in the late 90s, he could afford a decent house but he was renting. Then business went sour, money dried up, investments failed, he could no longer afford to pay rent. He’s back in the village.
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