The True Value of Homeownership – ROI and Beyond.

‍Why does nobody talk about the ROI of Homeownership?

If you’ve ever been approached by a real estate company, chances are you’ve been sold on the idea of ROI—return on investment. You hear promises like, 

“Buy this property and enjoy a certain percentage of ROI in three years.” Beyond the buzzword, these promises work great for commercial real estate. But what about private homeownership? Does ROI apply in the same way when we’re talking about private homeownership? 

How do you evaluate how buying a home will impact your finances and lifestyle over time?  How do you determine the real value of that investment?

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This is NOT a "Commercial vs Private" property value debate!

Now, don’t get me wrong—commercial real estate is a good investment if you’re looking to make money. However, let’s take a moment to shift our focus from the commercial aspects. A look away from buying office spaces or a rental property that offers tangible, measurable financial returns into what it means when you just want a roof over your head. 

Apart from having no intention to disparage the commercial property market, this post focuses on the basic-level logic of homeownership. This is for 2 reasons: 
1. It is too complicated to ‘simply’ illustrate ROI for commercial properties with a short blog post.
2. It is a mash-up of accounting, financial planning, mathematics, law, city planning, economics, psychology and common sense. It's better discussed 1-on-1 on a 2-hour lunch break. (Request for a free consultation if you'd like a session on this)

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Keeping it Simple: Logic + Math, No Economics.

You're thinking of buying or building a home for you and your family to live in, not to turn a profit? What does the return on investment look like for you?

We start by assuming you have a fixed budget, and you’re looking to buy a house that costs N20 million. What returns can you expect, not just financially, but in terms of lifestyle and peace of mind?

Let's guide this illustration with some assumptions:
1. The N20 million is a zero interest loan that you have to pay back
2. Property appreciation pegged at zero.
3. Inflation, rates, and cost of living remain the same.
4. No extra maintenance or furnishing costs (you keep your existing furniture).

Now, this will not only help you understand certain benefits of owning a home, but also what to consider when planning for a home. 

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Step 1: Assess Your Current Lifestyle/Expenses

To understand the value you may or may not get, let’s start with a simple exercise. What are your current expenses without a house? You (probably) live in a rented apartment, so you pay rent. Then there’s transportation to work, utility bills, and other day-to-day costs.

Let’s break it down:

• Rent: Imagine you pay N500,000 per year in rent.
• Transportation: If you drive a car, a full tank of fuel at N50k weekly. Over a month, that’s N200k, approximately N2.5 million per year.
• Utilities: Let’s put this at N250,000 per year.

Altogether, your yearly living expenses amount to around N3.25m.

Step 2: Assess your expected lifestyle: What Happens After You Buy the House?

Now let’s see how these costs change after you’ve built or purchased your home.
Immediately, you’ll stop paying rent, saving you N500,000 per year. But what about transportation and utilities?

Let’s imagine two scenarios:

Scenario A: You build/buy your home far from work, maybe on the outskirts of Lagos. You stop paying rent, but your transportation costs, and utility bill remain the same. In this case, you’re only saving the N500k rent, leaving your expenses at around 2.65 million naira per year.
Now, if we do garbage-in, garbage-out, it will take you N20m divided by N500k, i.e. 40 years to recoup your investment from that N500k alone.

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Scenario B: You buy/build closer to work, say in Lekki, where your transportation costs drop to N50,000 per month—N600k per year. In this case, even though utilities rmain the same, you’re saving both on rent and transportation, giving you a total savings of 2.3 million naira per year. This means you’ll recoup your 20 million investment in just about 9 years! After that, the money you save can be invested in improving your lifestyle—whether that’s buying another property, taking a course, or just enjoying financial freedom.

Location is Everything

What makes the difference in these scenarios is location, and it goes beyond the geographical point that your home is built. Where you build or buy is crucial, but what's equally important is how that location contributes to your expected lifestyle.

We advise prospective homeowners to consider asking/answering these questions when determining “Where”. These involve: Who is (would be) my neighbors? How close is it to work? What amenities are available? And, what do I have access to? 

Understanding these play a crucial role in determining how quickly you can enjoy the ‘location’ benefits. A home that’s closer to your workplace, schools, or social amenities not only reduces your everyday expenses but also allows you to break even faster and enjoy a more balanced life.

This is why when we say: “location, location, location.”, it's not just buzz words—it’s the difference between waiting 40 or 9 years to see a return on your home and enjoying financial freedom.

The True Return on Homeownership.

So, is there an ROI for private homeownership? Absolutely! 

Though the commercial property market promises attractive financial ROIs, and that’s great for business, when it comes to private homeownership, the true ROI is found in stability, quality of life, and long-term financial independence. Your home is more than just an investment. It’s a foundation for growth, peace of mind, and a better lifestyle. 

That’s the real return. 

In Scenario B, not only do you break even faster, but the reduced commute gives you more time with your family, more energy for personal projects, and even the flexibility to invest in new opportunities. But let’s take it one step further. Imagine you decide to rent out that home instead of living in it. The (marked-up) rental income would allow you to make a financial return much sooner. However you approach it, homeownership gives you options—whether that’s improving your life now or earning money in the future.

Owning a home brings a sense of freedom and control over your future.

Owning a home may not make you rich overnight, but it can give you something far more valuable. Think about this for a moment: the money you save by owning a home (when rightly planned) doesn’t just sit there. It returns opportunities—perhaps you can take up a new hobby, enroll in courses to advance your career, or even buy a second property. 

When planning to buy or build a home, don’t just consider the financial gains—think about how it can transform your life. 

Thank you.

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