A Nigerian United Kingdom based Oxford-educated entrepreneur with business interests in technology and advertising,
Dr. Tayo Oyedeji says home ownership is mostly a bad investment.
He said this in a series of tweets on his official and verified twitter handle, stating that home purchase for living is a bad investment.
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.
I’ll share the math on home ownership sometime next week. 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. Home purchase for living is a bad investment.
Rental property is a great investment. Do the math. An average property in Lagos is N40m. Treasury bill rate is about 12%. Your N40m will yield N4.8m a year.
You can rent a good home for N1.5m and still have N3.3m left over. Your house is costing you N3.3m per year. Do the math.
Psychological comfort, societal expectations, and cultural norms are valid reasons for home ownership.
But when it comes down to the math: it just doesn’t work. I own a couple of homes for the reasons stated above. They’re not good investment.
READ MORE: How to invest, by Tayo Oyedeji
Investment is math, not emotions! Buying a home to live in is a good option for SOME people. Especially if you:
1. Can get cheap mortgage (< 8%)
2. Can pay cash.
3. Plan to live in it for 10 years.
4. Need the psychological comfort of home ownership.
Otherwise home ownership is mostly a bad investment. Those two tweet are exactly the same. Sometimes people are so emotionally invested in a point of view that it clouds their judgment.
You can’t make investment decisions emotionally. You’ll get into trouble every time you do that.
Investment = Maths + Logic
1. Never invest because it feels good, 2. Never invest because it sounds good, 3. Never invest because you like the manager.
Maths: Do the numbers make sense?
Logic: Do you understand how it works?
Investment = Maths + Logic
“Renting is wiser for MOST people” = “Buying is a good option for SOME people” Real estate investment is different from home ownership.
3 comments
[…] work. I personal a few houses for the explanations said above. They’re not good funding. https://thebelltimesng.com/2019/11/14/home-ownership-is-mostly-a-bad-investment-says-expert/ […]
I agree to an extent.
Imagine spending #40m building say 5 blocks of flats and rent each at 500k, it will take you about 16years to realize the #40m invested (that is without any maintenance and having very committed tenants all year round – no stories, no parking out). Whereas you can make more than #4m on a mutual fund market per annum.
It’s better to build a 5/6-rooms very well maintained hotel with a superb restaurant and bar with a good parking space for that #40m.
But I must advise, own your own house before thinking of investing in housing or real estate.
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