Renting Vs Owning A Home

• There has been an age-long argument between folks who think it’s better to own a home and those who believe it isn’t. But at the top of this discussion is the uniqueness of each person’s context. What is good for the goose may not necessarily be good for the gander.

We’ll begin with considering why people want to own houses.

Fannie May, in 2011, surveyed to find out why people desire to own a house. These were the top reasons:

A safe place

A good place to raise kids

More family space

As Nigerians, these sentiments are shared, except that we could also throw in “Prestige” to the mix.

Let us start with considering the pros and cons of each choice

.  The value of a home tends to appreciate

.  All maintenance responsibility falls on you, including the costly ones
.  Difficult to up and leave when it belongs to you
.  Costs more in the short run
.  The value of the home may not appreciate, especially in the first few years.

.  Lower payments in the short run
.  The responsibility of maintenance is not yours
.  It is easier to relocate

.  The constant rent may become a financial burden
.  Your rent may continue to increase
.  You would’ve built zero equity

If you eventually decide that it may be better to own a house, your WHY is also important. If you intend for it to be for rental yield, you should keep your mind on it as a long-term decision. In Nigeria, the annual returns on residential rental properties are around 5% to 6%. [Business Day, Nigeria].

If you do not like the returns, then maybe consider investing in a different asset, instead of a residential property. Alternatively, you could set it up for short-lets and earn more profit.

If you desire to own a home instead for prestige, consider what your situation is. Are you married? Do you have kids? You could have this as a retirement plan and put up a part of the house for rent in other to make extra income.

If you prefer to rent, ensure that your rent is not over 25% of your annual income. Try to get the best rental deals possible but consider things like transport costs. You could also consider having a housemate to share the rent and save costs if you’re single.

So, what option is best? It depends on what your reasons, are, whether it is to be rented, or for prestige or you intend to save costs or even as a retirement plan. Whatever it is, your desired outcome will influence which is best for you.

Before you make any major investment decision, be sure to talk to us first. 

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