By Oluwakemi Adeyemo
Homeownership is usually top on the list of all the reasons why people want to invest in real estate. Real estate is no doubt an indispensable tool for the support and sustenance of human life. It is also a tool useful for mankind to express creativity, desire, and ambition. When the coronavirus pandemic spread across nations, governments were forced to give shelter-in-place orders, causing us all to stay in our homes for months. This shows that homes are indeed a necessity. Yet, it is beyond reach for many people in developing countries.
Mortgage loans are one of the common options for homeownership in many countries, but in Nigeria, mortgages have not been effective. In cases where it is accessible, it is expensive.
Mortgage ineffectiveness, in Nigeria, is as a result of many underlying issues bedevilling our development as a nation. Here, I’ll provide you with a creative homeownership option that is legitimate and efficient in achieving your real estate investment goals as an individual seeking to own a home.
The mortgage option requires you to provide equity of 20% to 30% of the total value of the home sale price. This also means that the home will be the collateral for the loan as you increase your equity over a period of years. Loss of income or the inability to earn an income during the tenure of the mortgage translate, in most cases, to losing the home to the lender.
The inability to earn an income high enough to repay a mortgage is bad in itself. Losing that home to the lender makes it worse as you would have lost your homeowner status and, in some cases, the equity.
An alternative to the mortgage option is the invest-to-homeownership; it is a creative real estate investment option. It allows you to invest equity with a real estate business or private home developer. The equity is used to execute projects, and turned over, until the equity builds up to an agreed amount required to own your home. This option creates leverage that is not available in the traditionally popular options.
The invest-to-homeownership option is ideal when you do not have enough cash to buy a home in one fell swoop of payment. It also does not need you to pay interest. Instead, the returns on your equity accumulate towards your home purchase. The real power of compounding in real estate comes into play.
Five major conditions that make invest-to-homeownership work:
- Your choice of the developer
The developer must have a track record of executed and sold-out residential units. Invest-to-homeownership relies a great deal on the integrity of the developer. The first test of the integrity of a real estate entity is the track record and the quality of claims. You should choose based on qualitative pieces of evidence and not emotions or appeal.
- The project locations
The developer must have ongoing residential projects in strategic locations of the city. These projects must be real and positioned to sell out. This is because not all locations are profitable for all kinds of real estate business goals.
- The readiness of the developer to work with you
The developer must be desirous to accept your equity on respectable terms. This is because people management can sometimes be a tall order. If managing a bank loan will be easier, a developer may choose the bank above accepting to use your funds to execute projects, thereby growing your homeownership equity.
- Your mindset and belief
Many people hold the belief that owning a home in Lagos is hard. This belief sets you up to miss opportunities. Invest-to-homeownership option is a simple yet effective way to achieve a homeownership goal. A cheaper option that takes money out of your pocket fewer times than the popular mortgage option.
- Ability to adapt and trust the process
Your readiness as an intending homeowner and willingness to trust a transparent process when you find a developer who offers you one matter. The real estate investment terrain in Nigeria is still evolving, with many unpalatable experiences dotting the landscape. These experiences are due to a combination of several issues. Some real estate stakeholders have been able to master some fundaments of the evolving terrain and can minimize foreseeable issues. Your ability to identify a trustworthy process helps you harness the opportunity to own your home, interest-free.
With the invest-to-homeownership option, the risk of losing your home to a lender, in the case of protracted default or loss of income, is eliminated. The developer that you choose to work with is obligated to deliver to the terms that will be agreed upon at the point of investment. You should carefully choose a stakeholder who can and will deliver on your homeownership goal in record time.