seniormallam:
Only business men will understand this man, if you are a civil servant pls wetin concern you with #40m talk?,
Goto ikoyi , central area in abuja and see locked duplexes, if not that the owners are politicians that will go back to our treasury and steal more money,
Locking of 150m house for 5years without living in it or renting it out is what?
Which private businessman will do that?
Go and tell Shina peller or Akin Alabi to buy house in abuja because of their 4years tenure election they won.

exactly

Mr Tayo's post suites business people who need to reinvest their profits into the business moving forward than salaried people. As someone whose parents bought quite a number of properties (of which some are emotional properties), I understand Tayo's point. Moreover, real estate unlike some persons say depreciates in the face of poor infrastructure, rising crime, rising sea levels and general poverty. Also, real estate is very illiquid - one cannot just wake up tomorrow to sell his/her properties at the same price they were purchased. It takes time to appreciate and even more time to find buyers. Worse still, inflation/devaluation eats up whatever gains it might have accured.

Tayo never said "don't build a house". He simply said don't build a house when you can reinvest the money into more profitable ventures. It's also true that the house one owns and resides in is not an investment, never! It doesn't generate revenue rather it requires maintenance which requires money. It's more profitable to buy and lease out than buy to reside.

Funny enough, people stress their lives by building houses in places like Ota, Agbara, Okokomiako yet work in VI, Lekki and Ikoyi. This is suicidal! Better to rent in Ajah, Yaba and invest in a business then later utilise the profits at a stage to purchase a property in those areas. When one even factors in the life expectancy rate in Nigeria, renting is better than outright purchase. The reason most do the latter like Tayo stated is because of their children and societal expectations. Unfortunately, some of these properties are sited in "emotional locations".

Lastly, knowledge of basic economics, mathematics and accounting is essential for every individual in his/her quotidian activities.

charliboy654:
This guy na mumu o, so the house you rent, is it some someone else house.

Did you even take a minute to digest his points? Or it's too complex to digest?

Promismike:
Not in nigeria sir. I know you pay some loyalty or something of such for owning a house in developed nations.

But in nigeria their is nothing of such.
The value of land and home skyrockets every year here in nigeria.

You still do not understand him.

That value is ONLY on paper as long as you live in the house.

Whatever does not add to your income is a liability. After paying cash, you'll still be spending money to maintain until depreciation sets in.

Who will want to buy a 10 year old house when newer designs with better features are everywhere for close to the same price?

What i'm i even saying, everybody go dey alright las las.

We won't take even 1 kobo with us to the ground. Do whatever massages your ego.

I SEE sense in what the guy is saying.....an average Nigerian caves in into societal expectation of owning their homes,you don't have a thriving business and you own your house that wont generate any income for you,where is the sense in that? No wonder we have shanties here and there all in the name of being called a landlord...if you build to sell or rent out it is an investment. QED.

Marcsunny:
Only Economists will understand you sir.
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charliboy654:
This guy na mumu o, so the house you rent, is it some someone else house.

He says, instead of you occupying the house; that it's better if you would rent it out to fetch you money. You're only tying down your investment if you occupy the house and it changes to become a liability. When you rent out the house, it is expected that you go for a cheaper house to rent for yourself. Technically, it pays your rent and you still have some cash in your pocket.

Treasury bills are good and the interest could be used in building a home. But come to think of it, the Federal Government has reduced the rate to 8% is it still viable?

Viking07:
His opinion has since been brilliantly countered and sent to the dustbin.

https://mobile.twitter.com/AyoBankole/status/1194587749560532993

If need be you can sell the property and buy or build a much cheaper apartment, Buildings are asset that appreciate as times goes on.

He should come back and say this when he is a pensioner, retired and still renting. Then he will understand the importance of having your own home. Yes, you have to apply sense in all financial decisions but making a blatant statement like this makes no sense.

tot:
He should come back and say this when he is a pensioner, retired and still renting. Then he will understand the importance of having your own home. Yes, you have to apply sense in all financial decisions but making a blatant statement like this makes no sense.

Uve just described a typical life of a civil servant here, pls what concerns a civil servant with a #40m talk?
Bros this talk is not for people on your level, its for millionaires, go and buy ur land and start building it small small, but someone on ur level can still buy two land, after 10years sell one to build one, instead of squeezing urself to death in the name of landlord.

Deltatoto:
dont u no that those ur friends are mad?

They are far more sucessful than most Nairalanders so I'll go with their logic.

They see houses as a means of generating wealth not storing wealth.

perryy:
The guy is very correct . The guy said owing a house to be inhabitated by u is a bad investment. In 2017, I built a house somewhere around Agbara at the cost of about 20m . (I never expected it would cost much) . To worsen matter , the contract I did , didn't yield anything as Obaseki didn't pay. In 2018, there was a a business that I supposed to invest in , a business capable of yielding at least 4m per annum , but I couldn't raise the money. I almost became poor instantly. If not for God , I would have been regretting my action till now. Building a house for rent is a good investment provided you already have investment giving good monthly income.

If I knew the contract I did would fail, I wouldn't have built the house. . with a million naira, I can rent a 3 bedroom flat around Ikeja , an even better place . 20m would definitely yield me more than 5m naira per year.

The economist is very correct and his hypothesis holds true both in UK and in Nigeria. Only those who are not in business wouldn't understand.

There are many angles to this issue.

First, expanding population, urbanisation and failure of government to invest in infrastructure means that available land and house prices are going up not down.

Second, rent is not a constant figure. Capricious landlords can increase it at any time.

Third, even businessmen require landed property as most bank lenders will not give you money without collateral. So your home in this case, can serve dual function.

In short, the decision to own a home or not, depends on many factors.

dake40:


Read the post again. And this time, be more careful...


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,

At a grown age, you know the time has come to have your property (though still optional), and during this time, you would have have enough to buy a home (with latest design)

The issue with Africans is LANDLORD mentality which is very wrong... For young hustlers, dont build/buy a house you know you wont live in for years when you can rent 1 and reinvest the remaining funds in good investments..

What does living in it for 10 years have to do with the argument? What difference does it make whether you live in it for 5 years or 12 years?

seniormallam:

Uve just described a typical life of a civil servant here, pls what concerns a civil servant with a #40m talk?
Bros this talk is not for people on your level, its for millionaires, go and buy ur land and start building it small small, but someone on ur level can still buy two land, after 10years sell one to build one, instead of squeezing urself to death in the name of landlord.

So the person with #40m will not retire someday? Are civil servants the only ones entitled to pensions? Obviously not.

That's why it's good to include tenant house while building...cave out your own plus tenants ...so u will getting money for body and house maintenance

charliboy654:
This guy na mumu o, so the house you rent, is it some someone else house.

Exactly what he’s saying... apply

helinues:
Na wah oo.. You guys will be using UK real estates to be comparing to Nigeria real estates.

Tax alone in UK wont allow you to have more than 1 house not to talk of having fleets of cars

The problem is Nigerians don’t think. People who have never been outside Nigeria talking about things they don’t know, many people have multiple houses in the uk that they rent out. A property you bought in Nigeria before 2015 is most likely worth half what you paid.

If you bought a property for 40m Naira before 2015, that property is still probably worth 40m today. In 2015 naira was $160 today it is 360 meaning a property that was with $235k in 2015 is only worth $111k today. If you had used that money for business or invested your money abroad and rented instead would have increased your capital. Even if you merely kept it in a dollar account, your $235k (40m) from 2015 would be worth 84 million naira today.

Seems a lot of people did not understand what he was saying....Let me break it down

Cost of getting a good decent house, is, let say 40M
You are going to be leaving in that house let say for the next 20yrs

You can put the say 40M in treasury bills that will yield you 4M every year.......you can then take 1.6M or even 2M to rent a very good house...While you will have 2M for other investments or just savings .....Over the same 20yr period you would have saved 40M, and your initial 40M will still be running and turning a profit for you.

Its a case of opportunity cost....

He also mentioned that for you to own your own house, the reason should be strong, reasonable and valid in comparison to the opportunity cost you are foregoing...

Mires:
He's somewhat right. Few days ago my landlord told me that he regretted investing in his money after retirement from oil and gas in building houses for tenants. That the block he used N50m to build can give him only N2.5m annually if the entire flats are rented. Meanwhile, there are five units of decent virgin one bedroom flat yet to rent (Ph residents if you are interested, buss me. Goes for about N400k each. Over make sense worry am. 24 hour water supply and a lot of facilities. Na only bad road affect the house). But if he had used the money on TB, he would be getting at least N5m annually even if TB is at 10%. That he knew all these but invested in the building for his children. Since some children might abuse cash in his absent.
He said worst still is the fact that some tenants instead of renewing his rent will be telling him, "Oga Landlord, what do you want to use all these money for". He said the way some of his earlier tenants handled his house has made him to put caution fee in his new houses.

His analysis is not quite correct. The t bills will give him 5m, true.
But he failed to understand that the property appreciates as well.

He equally failed to factor in the effect of inflation and devaluation on that his 50m and the 5m interest.

The property equally

khalids:
Seems a lot of people did not understand what he was saying....Let me break it down

Cost of getting a good decent house, is, let say 40M
You are going to be leaving in that house let say for the next 20yrs

You can put the say 40M in treasury bills that will yield you 4M every year.......you can then take 1.6M or even 2M to rent a very good house...While you will have 2M for other investments or just savings .....Over the same 20yr period you would have saved 40M, and your initial 40M will still be running and turning a profit for you.

Its a case of opportunity cost....

He also mentioned that for you to own your own house, the reason should be strong, reasonable and valid in comparison to the opportunity cost you are foregoing...

Many people are financially illiterate.

tot:
He should come back and say this when he is a pensioner, retired and still renting. Then he will understand the importance of having your own home. Yes, you have to apply sense in all financial decisions but making a blatant statement like this makes no sense.

Even as a pensioner, he will have no problems...because the profit from the treasure bills pays for the rented apartment and still leaves him with 2million to play around with...........

Same pensioner that builds his house with 40m, has roof above his head but cannot feed, because his pension is not coming at the right time or has been swallowed by a political snake....

This is what the OP is analyzing for you

partnerbizn5:


His analysis is not quite correct. The t bills will give him 5m, true.
But he failed to understand that the property appreciates as well.

He equally failed to factor in the effect of inflation and devaluation on that his 50m and the 5m interest.

The property equally

Property does not always appreciate. Property is like any commodity, subject to demand and supply and if you buy at the peak of a market your property may never appreciate in real terms in your lifetime I have already given the example of anybody who bought property before 2015. Most Nigerian properties are in real terms worth half of what you paid in 2015. Most people don’t understand this because we are dealing in Naira. The truth is most of our living expenses tract the dollar because most of the things we consume are imported. A good example, you cannot sell your property today and buy the same car or pay your children’s fees with the same Naira you used to purchase your house pre 2015. In real terms your pre 2015 property is worth half what you paid in 2015. See my post above for a more detailed explanation.

khalids:


Even as a pensioner, he will have no problems...because the profit from the treasure bills pays for the rented apartment and still leaves him with 2million to play around with...........

Same pensioner that builds his house with 40m, has roof above his head but cannot feed, because his pension is not coming at the right time or has been swallowed by a political snake....

This is what the OP is analyzing for you

So what happens when treasury bills rates drop to 2% for example and it can no longer cover his rent not to mention have change left to play around with? The security of having a roof over your head should never be underestimated. Investment climes change, stocks go up and down, same with savings rates.

isthatso:


Property does not always appreciate. Property is like any commodity, subject to demand and supply and if you buy at the peak of a market your property may never appreciate in real terms in your lifetime I have already given the example of anybody who bought property before 2015. Most Nigerian properties are in real terms worth half of what you paid in 2015. Most people don’t understand this because we are dealing in Naira. The truth is most of our living expenses tract the dollar because most of the things we consume are imported. A good example, you cannot sell your property today and buy the same car or pay your children’s fees with the same Naira you used to purchase your house pre 2015. In real terms your pre 2015 property is worth half what you paid in 2015. See my post above for a more detailed explanation.

Majority of the time, property appreciates - in most countries.

The reason land generally tends to appreciate is because it is limited in supply, consequently, as the population increases, so does the demand for land, driving its price up over time.

tot:


What does living in it for 10 years have to do with the argument? What difference does it make whether you live in it for 5 years or 12 years?

What he meant here is LONG TERM..

tot:


So what happens when treasury bills rates drop to 2% for example and it can no longer cover his rent not to mention have change left to play around with? The security of having a roof over your head should never be underestimated. Investment climes change, stocks go up and down, same with savings rates.

if the rate drops to 2%, he still has his original 40Million plus 800k interest....which he can diversify to continue to generate interest for him....

dake40:


What he meant here is LONG TERM..

Yes I know he meant long term, but how that buttresses his point is what I don't understand. What difference would it make if the person planned to live there just for the short term 2-3 years?

khalids:


if the rate drops to 2%, he still has his original 40Million plus 800k interest....which he can diversify to continue to generate interest for him....

But he was banking on paying his rent with the interest. If his rent is 2m, and tbills interest is 800k, he would likely have to dip into his capital for the balance.

tot:


So what happens when treasury bills rates drop to 2% for example and it can no longer cover his rent not to mention have change left to play around with? The security of having a roof over your head should never be underestimated. Investment climes change, stocks go up and down, same with savings rates.

Bonds, Stocks etc will surface...

Treasury bill is not the only investment plan that gives good returns..

tot:


But he was banking on paying his rent with the interest. If his rent is 2m, and tbills interest is 800k, he would likely have to dip into his capital for the balance.

Agreed, let's not forget that he has 40M, will he just sit there and be chopping the money....he has capital to fund and resolve his challenges....
And besides anyone wise enough to see this benefit would not have been playing around with the interest that the 40M had been generating for them

And if he feels he can't find any investment options, which is most unlikely...he can then go ahead and buy a house....

Whichever way you cut it, he is till in a far better financial situation than someone who just ploughed the 40m into one building.

dake40:



Bonds, Stocks etc will surface...

Treasury bill is not the only investment plan that gives good returns..

You are not getting my point.
Bonds historically are low returns, stocks which return more over the long term go up and down AND you can lose money as well.
A roof over your head is guaranteed. Investments are NOT guaranteed.