by Christopher
The renting vs buying in Lagos decision is not a minor one.
Two weeks ago, a man contacted Victoria Crest Homes and indicated an interest in renting a unit.
During the KYC process, we discovered his budget for rent could get him a new home, and proposed that.
He accepted without hesitation and now owns a sweet two-bedroom apartment on Orchid Road.
In our last conversation, he mentioned that he had been agonising over whether to rent or just buy, but went with the latter because he thought he couldn’t afford to buy a good house in Lagos Island.
If you are like him, on the verge of making one of your biggest financial/life decisions, you understandably need all the clarity you can get.
Simple as it seems, the debate about renting vs owning has given many Lagosians sleepless nights.
In fact, some people spend decades thinking about it and still end up making choices they regret in the future.
In this article, we will discuss the pros and cons of buying vs renting a house in Lagos.
You will also learn important markers that will help you make the best possible decision.
Renting vs Buying in Lagos: The 6 Most Important Factors to Consider
Finance
What’s your budget? Can you comfortably buy a house without offsetting your other financial plans or going completely broke?
If you eventually set your mind on getting a house and need mortgage assistance, are you comfortable with paying the high interest rate?
If you choose to rent, how much will you be willing to pay annually? Consider your long-term financial plan. Is renting the BEST option for you?
From the foregoing, it is clear that finance is at the heart of the renting vs owning conversation.
In navigating the financial aspect, you have to consider the upfront financial deposit, the monthly taxes and fees, and other financial obligations of owning a house. The same goes for renting in Lagos.
That said, renting in Lagos is more flexible and requires less upfront financial commitment.
However, buying a house in Lagos saves you more money in the long run, but has a higher initial capital requirement.
Location
Another major consideration in the discussion on renting vs buying in Lagos is location.
The amount you will pay for a one-bedroom apartment in Ikoyi is the cost of buying 2 different 4 bedroom apartments in Ikorodu.
What this technically means is that if you want to stay in some of the best places to live in Lagos island like VI—with access to great amenities, proximity to school/work/shopping facilities, etc—renting is a more practical option.
Unless you have access to mortgage facilities, an upwards of 150 million naira or are buying a Citadel Views Estate unit [which costs about half of that], buying a house in the aforementioned locations is super-expensive.
However, if your desired neighbourhood has a generally low cost of living, undesirable road networks, or lacks certain basic amenities, real estate there might be affordable for buyers.
That said, location plays a big role in determining whether you should rent or buy. Because with great development comes great [or not too great] price of houses.
Ps. The average cost of buying a house in Lagos Island is 150 million, but people have gotten solar-powered homes in Lagos Island here for half of that amount.
Duration of Occupancy
Another major determinant in the renting vs buying in Lagos debate is the longevity of your stay.
Once you’ve identified your ideal location and taken stock of the financial requirements, the next step is to consider the duration of your occupancy.
How long do you plan to live there?
Do you have a job that might require you to move to another state?
What about the japa, do you have plans to leave the country?
All these and other questions concerning the duration of occupancy should determine if you should rent or buy.
Typically, people who buy homes for residential purposes often do it because they have plans to stay in a particular neighbourhood [and in Nigeria] for a long time.
While the opposite is the case for some tenants who enjoy the flexibility of renting.
Market Conditions
Market condition refers to the internal and external forces that affect dynamics like price and market forces like demand.
In real estate, market conditions are a mix of factors like demand and supply, pricing trends, economic factors, and market type.
To simplify this, economic factors like high interest rates influence why people rent or buy.
That means, in your consideration of renting vs buying in Lagos, if the interest rate is too high [which it usually is], you can consider renting until you can afford to own your home without a loan.
As for demand and supply, the typical condition is that the higher the demand for a product, the higher the price.
Supply, however, has the exact opposite effect on price—the higher the supply, the lower the price.
In some other countries, you can rent a place temporarily and wait for the price of houses to fall, then buy.
But this is not the case with the Lagos real estate market, especially the luxury side of Lagos real estate.
For the past couple of years, the price of properties has been on a steady climb, even increasing over 300% in the last 8 years, according to the Nigerian Institute of Estate Surveyors and Valuers.
There are currently thousands of unsold luxurious houses in Lagos even though the majority of Lagosians do not have the purchasing power. But, this has done nothing to reduce the price of these properties.
According to the prevalent Lagos real estate market conditions, the price of rent will continue to climb, and so will the cost of houses.
But with buying a house, you will be on the safer side. Whereas renting might have you paying twice the original rent in less than 3 years.
Lifestyle
This should be another major determinant in your renting vs owning decision.
Do you like customising a house to your taste?
How long do you typically live in a place?
Do you have kids?
What kind of neighbourhood do you like to live in?
What about your job, does it involve travelling or relocating?
Do you have a stable income?
Essentially, your lifestyle is a big determinant in your decision to rent or buy a house in Lagos.
If your lifestyle demands stability, then buying it is.
But if your lifestyle demands flexibility or reflects the desire to live in high-brow neighbourhoods, you might consider renting, especially if you can’t currently afford to buy a property in your preferred neighbourhood.
Investment Plan
Buying a home automatically contributes to long-term wealth-building.
Your home is an asset that increases in value, ceteris paribus. Plus, you can always take out a loan for other purposes using the home as leverage.
But a renter can’t do this.
Instead, your rent goes towards helping your landlord achieve his investment goals.
On the flip side, from conversations with some wealthy individuals who live in rented apartments in Lagos; sometimes it is more cost-efficient to rent while you use your funds for other financial endeavors with more ROI.
There are others too who buy an apartment and rent it out.
They go on to live in rented apartments that are way cheaper while earning rent periodically from their home.
So, in the renting vs buying a house in Lagos conversation, if building long-term wealth is top on your list, you should be looking at owning a house in Lagos.
Is it Better to Buy or Rent a House in Lagos?
I will take a wild guess and assume that the fact that you’re asking this question in the first place means you potentially can afford to buy a house, if not you won’t be considering it in the first place.
However, if you go through the aforementioned factors plus the pros and cons listed below, you will be in a better position to decide which is best for you.
At the end of the day, the better option is dependent on your preferences, lifestyle, finances, and other factors.
But the advantages of buying a house in Lagos far outweigh the advantages of renting one.
Take your time to process the pros and cons, and if you do decide to buy, click here to get in touch.
Read More: Best Places to Live in Lagos Island
Owning vs Renting in Lagos: Pros and Cons
The only reason you’re still reading this is because you are a smart person who wants to know the A-Z of renting vs owning, before making the right decision or advising your client.
There are several advantages and disadvantages to owning a house in Lagos, several too to renting.
Below are the pros and cons of owning and renting in Lagos.
Renting a house in Lagos
85% of the 62 million people who live in Lagos stay in rented apartments. This invariably means that the majority of Lagosians do not own houses.
So, if you decide to rent, you will be joining the majority who pay rent every other day.
However, the important question here is, why does a larger percentage of people in Lagos—Africa’s most important city—rent rather than own their own homes?
The easiest answer to that is finance, most Lagosians cannot afford to buy a house. Most Lagosians barely make rent.
Regardless, others prefer to rent for other reasons we will discuss shortly.
Advantages of Renting a House in Lagos?
Before deciding whether to buy or rent a house in Lagos, your final choice should factor in the advantages of renting, which include:
Flexibility
This is probably the biggest consideration in the renting vs buying conversation.
Renting offers you the flexibility to move out and change neighbourhoods whenever you want, unlike a house owner.
The flexibility that renting offers is important due to
- Ease of relocation
- Adaptability to life changes
- Financial flexibility
- Trial living in new neighbourhoods
- Convenience of changing property types
- And general adjustment to lifestyle changes
Low Maintenance Cost
Unless otherwise stated, repair and maintenance costs are covered by the homeowner.
This helps you as a renter, sleep easy and make better financial decisions.
In a nutshell, unlike building or owning a house, renting involves fewer financial responsibilities because the landlord handles repair and renovation costs.
This is one of the many advantages of renting in Lagos.
Access to Amenities
In estates like Citadel Views, residents have access to a standard swimming pool, state-of-the-art gym, and spacious kid’s playing area with safe playing equipment.
If you’re building or buying a house, you will need extra millions and even space to erect those facilities. This can further complicate your house ownership process due to finance or land availability.
But one of the advantages of renting in Lagos is that as a tenant, you have access to these facilities at low or even zero cost.
Zero Property Tax
One major advantage of renting is that you don’t have to bother about paying the mandatory property tax, which is usually 0.4%.
There are annual taxes and other minor neighbourhood property fees that house owners are required to pay at intervals.
In that regard, renting is better than building or buying because the landlord handles all property tax and related fees.
Predictable Expenses
In the buying vs renting in Lagos argument, this is one of the biggest perks of being a tenant.
The renter’s expenses are slightly more predictable as the rent is fixed. In case of an increment, the tenant usually gets an early notice, which helps them plan.
You can make better financial decisions by budgeting on a stable or even slightly predictable rent.
Plus, not having to worry about government policies that would affect property tax or insurance is an added advantage.
The homeowner can’t say the same because they handle repair, maintenance, and other unpredictable expenses that affect their fiscal responsibilities.
Access to Highbrow Neighbourhoods
Houses in Lagos are super-expensive, especially in select neighbourhoods in Lagos Island.
This is why most individuals resort to renting to afford to live in and enjoy the benefits of being in those neighbourhoods.
Being a tenant allows you to live in the best parts of Lagos Island where houses cost over 100 million naira and twice that number of Hail Marys.
Of course, living in those places gives you access to a constant power supply, round-the-clock security, magnificent infrastructure, proximity to work/major business districts, a quality social network, and all the other perks of living in highbrow neighbourhoods
In a nutshell, renting gives you access to highbrow neighbourhoods with a better quality of life.
Disadvantages of Renting over Buying a House in Lagos?
High Rental Cost
It is no news that living in Lagos is super-expensive.
This is why it is not surprising that the cost of rent has risen over 100% in less than a year.
One of the disadvantages of renting is the stupendously high cost of rent.
This is why most Lagosians typically spend over 70% of their income on rent.
But the average homeowner is not bothered by rent, instead, they cash out every month or year from tenants.
No Equity or Investment Potential
Unlike owning a house, renting has almost zero investment potential.
Since the house does not belong to you, you practically earn zero ROI and can’t leverage the property for any financial gain.
This is one of the biggest disadvantages of renting in Lagos vs buying a house.
No Room for Personalization
One of the disadvantages of renting in Lagos is that you’re restricted from customising the house to your taste.
You must have heard of several cases involving landlords who evict or take their tenants to court for tampering with the structure of their buildings.
Or tenants frustrated by their landlord’s refusal to let them carry out a necessary change around their homes.
Sometimes, this restriction ranges from major don’ts like “no constructing of additional structure on the building”, to minor ones like restrictions on painting or making a hole in the wall for hanging artworks or clocks.
Shocking right?
This is why some Lagosians get vexed and buy their own homes where they can do all the customizations they want.
Restrictions on Pets and Personal Activities
A tenant was evicted from his house recently for buying a dog, two in fact. According to the landlord, he had broken the terms of their agreement.
There are accounts too of landlord vs tenant troubles over activities like loud music, smoking, house parties, or tenants providing accommodation to friends and families.
This is one of the major disadvantages of renting in Lagos—It is not your house, so you have a limited say in it.
Unless otherwise stated, you don’t have the freedom to keep pets or carry out certain activities in your home.
But this is not the case if you own the place.
When you buy a house in Lagos, you call the shots–
No landlord to evict you if you decide to keep 10 dogs or even an innocent dragon as a pet.
Unpredictable Rent Increase
One major disadvantage of renting in Lagos is the fact that your landlord can wake up any day and increase your rent.
The bad part about this is that it is completely legal.
I mean, there are tenancy laws that protect tenants in Lagos, but price control in Nigeria is terrible, and rent is not excluded.
This is why house rent in Lagos has gone up more than 100% in less than 4 years, and it will continue to go up.
So, when considering whether to rent or buy a home in Lagos, know that the chance of paying twice your rent in a few years is certain. But buying a home gives you peace of mind.
Additional Upfront Cost
One of the major complaints of people house-hunting in Lagos is the long list of charges you pay alongside your first rent.
Landlords often require prospective tenants to pay legal fees, caution fees, agency fees, inspection fees, and a million other fees.
This means that renting is disadvantageous due to the additional upfront fees prospective tenants pay.
This is one of the major disadvantages of renting in Lagos.
On social media and even in real life, Lagosians are bemoaning the excessive fees they are forced to pay when renting a new apartment.
Limited Availability & House Hunting Challenges
These are two separate disadvantages to renting in Lagos, but they are connected in a way.
You won’t know there is a shortage of vacant houses until you need one, especially affordable and comfortable houses for rent in Lagos.
The search is almost like looking for fresh water in the desert.
On top of that is the challenges house agents pose. Some of them make you spend hours in traffic only to show you house options that will make you want to arrest them for fraud and attempted manslaughter.
But this is not the case with those buying houses, especially luxurious properties.
Every day, developers in Lagos are going to great lengths to provide comfortable houses in some of the best places in Lagos.
Quality and Maintenance Issues
One of the disadvantages of renting in Lagos revolves around maintenance.
Landlords might not want to undertake maintenance, may delay repair and maintenance, use inferior materials for repair, or restrict you from carrying out repairs on your own.
There is also the possibility that the quality of plumbing and other systems you find in the building will be substandard, and as we’ve discussed earlier, you might not have the freedom to replace these systems with better ones.
These are some of the reasons people buy their places or vacate their current tenancy and move on to other places where the landlords are more responsive when it comes to repairs and maintenance.
Uncertainty/instability
One of the major disadvantages of renting is the uncertainty and instability associated with it.
You might wake up tomorrow and find out that your landlord has sold the house, increased your rent, added a suffocating structure, or refused to renew your lease.
They say “Man proposes, God disposes,” you could say the same for the landlord situation.
The lord in ‘LANDLORD’ is not a gimmick for Lagos landlords. They are fervently committed to upholding the strength of that title.
This is why most people go out of their way to buy houses or invest in real estate to avoid embarrassment from landlords.
Read More: How to Invest in Lagos Real Estate
Buying a house in Lagos
Before deciding whether to rent or buy in Lagos, it is important to understand the pros and cons of buying a house in Lagos.
Advantages of Buying a House in Lagos
Asset
A house is one of the oldest and greatest assets known to man.
So, when you buy a house in Lagos, you get a physical asset with lots of potential.
You might not like social media motivational gurus who wail loudly about the importance of owning assets, but they are right.
There are a million and one advantages of owning an asset that the individual paying rent cannot experience.
Property Appreciation
Part of the advantages of being a house owner is that your property can potentially increase in value. Especially in Lagos where the prices of values, especially properties, grow exponentially.
When your property appreciates, you can either resale at a much higher price or bequeath the property to your family.
Freedom to customise
A house owner is free to customise and redesign a house as it suits them.
But tenants can’t do this due to the lease agreement.
This is one of the biggest advantages of owning a house.
You can add additional structures or pattern your house to suit your evolving taste or family needs.
Freedom From Rent
One of the reasons people build or buy properties instead of renting is to avoid the financial strain of monthly or annual rent payments.
It is no news that a large percentage of Lagosians live in rented buildings…
So, while most people in Lagos are racking their heads and breaking their backs to make money and spend over 70% of it on rent, you’re living rent-free, unbothered, and using a bulk of your income that would otherwise have gone to rent, to do other meaningful things.
Potential for Rental Income
When you buy a property in Lagos, you can rent some parts like the BQ to tenants or occasionally use it for short-term rentals [AirBnb] to generate cash flow.
This is one major advantage a house owner has over someone renting.
You can turn your house into a cash cow and make millions annually from rent, while the individual renting slaves away to get you or some other landlord paid.
No landlord restrictions
Restrict what?
You are the boss now.
No one can dictate what goes into your house or out of it but you. What you choose to or not to do with your home is nobody’s business.
The everyday restrictions tenants encounter from landlords are no longer your problems.
You can host a Grammy in your backyard, keep a dragon as a pet, or renovate your home into an architectural nightmare and no landlord will dare question you.
Inheritance and Legacy
One of the major considerations in the renting vs buying in Lagos conversation is what your loved ones stand to gain.
When you rent a place and pass away, your family will have to be evicted, move to a cheaper house or inherit the bills.
But when you own the house, you can bequeath them to your family.
Whether it is sold or kept by your kids is irrelevant, it will remain a legacy, your legacy.
Read More: Top 7 Mistakes to Avoid When Buying a House in Lagos
Disadvantages of Buying a House in Lagos?
High Purchase Costs
Real estate in Lagos is super-expensive.
The average cost of buying a good house in Lagos is about #90,000,000 [unless you’re buying from Victoria Crest Homes].
This makes it difficult for the average person to buy a house in Lagos except through Mortgage.
But that too complicates things because the average mortgage facility charges over 20% interest rate, and this has continued to increase.
This is why a bulk of Lagosians and by extension, Nigerians, live in rented apartments.
It goes without saying that in this regard, renting is better than buying a house in Lagos.
Maintenance and Repair
As a tenant, the landlord handles all aspects of your apartment’s repair and maintenance.
However, as a house owner, it is an entirely different story.
You have to cover the cost of repairs, maintenance, and related miscellaneous expenses to keep the house together.
Property Tax and Fee
One of the most popular disadvantages of owning a house in Lagos is the property tax and related fees.
While the tenant only has to worry about rent and underlying charges, the house owner has to fork out money annually to pay property and other related taxes.
Legal and Bureaucratic Challenges
Getting a house in Lagos is not a walk in the park.
You have to go through a lengthy legal process to ensure the documentation is legit, the owner is the real owner, the property is not mired in legal battles, and the ownership is transferred to you without stories.
The approval and property transfer process can suck life out of your house ownership ambition. This is why most Lagosians buy properties from reliable developers like Nedcomoaks, to ease the legal and bureaucratic challenges.
Security Concerns
The high insurance premium attached to owning a house in Lagos is proof that security concerns are not unfounded.
Although insurance typically protects you from natural disasters and major insurance concerns, there are also reports of cases of burglary, armed robbery, and the like, the brunt of which falls on the house owner.
This is also why a lot of homeowners invest in security gadgets and even collectively pay security personnel to guard their neighbourhood.
Also, for intending house owners building from scratch, the risk of thieves carting away building materials worth millions, is high.
This is one of the major disadvantages of owning a home in Lagos.
Liquidity Concerns
Yes, your house is an asset. But how quickly can you convert it to cash when the need arises?
One of the major disadvantages of owning a house is that it takes a while to sell it at a favourable price if you need urgent funds.
This is why many homeowners resort to selling their properties at “distressed prices” to sell faster.
Long term Commitment
One of the least popular disadvantages of owning a house in Lagos is the long-term commitment.
Buying a house is almost like getting a spouse.
Like marriages, you also have to consider your spouse before making certain life decisions.
In some ways, this commitment affects homeowners in a way the tenant cannot relate to, as his residential state is a situationship with more flexibility.
Conclusion: Renting Vs Buying in Lagos
This conclusion is an unnecessary formality.
If you’ve read up till this point, you now know the advantages and disadvantages of renting, same as buying.
You can’t eat your cake and have it, but getting your own home feels like eating your cake and having it. While renting feels like the opposite.
Click here to contact us if you want to check out some of the best houses for sale in Lagos Island.
Frequently Asked Questions
Does renting a house have more advantages or disadvantages?
Renting has an equal number of advantages and disadvantages.
However, the degree to which it is beneficial depends on individual circumstances, goals, and preferences.
The major advantages of renting are the flexibility to move anytime and the lower upfront financial requirement.
The disadvantages include factors like the house belonging to the landlord, you can be evicted any day, rent increases astronomically, and there’s usually a restriction on customization/personalization.
Is building a house for rent a good investment in Nigeria?
If your investment goal is passive income [cash flow], then it is.
Plus, you can sell the property at any time and make a substantial profit from that too.
But know that you can’t recoup your capital from rent alone in less than 10 years.
This is why the upside for this is the cash flow, property resale value, and the leverage it offers you.
[Ps. This is not “professional” investment advice, consult your investment advisor for more clarity].
What rental properties are most profitable?
Commercial rental properties are often the most profitable. However residential properties with multi-family units can provide the most stable source of income.
Is it Cheaper to buy or Build a House in Nigeria?
It is cheaper to build than to buy a house in Nigeria. However, building a house in Nigeria is more stressful, takes more time, involves more charges and paperwork, and typically has more downsides than buying a house.
