When it comes to finding the right apartment to reside in on lease or permanent basis, many of us misplace our priorities. And due to the excitement of finally getting a place after months of rigorous search especially in a densely populated place like Lagos, we fail to ask the right questions, now that’s just a part of it.
There are some questions a landlord will never ask a prospective tenant or wouldn’t even want a prospective tenant to ask. These are facts that when exposed to a tenant will take him/her on a soul searching trip, and at the end of it all, reality will dawn on the tenant.
In today’s article, I want to share with you questions your landlord will wish you never answered!
Let me start by saying this: have you heard this expression-that a lot of people cannot afford what they want… and they don’t want what they can afford? Hmmm… what a tragedy!… and that has been the bane of many people remaining as tenants throughout their life time.
Well, in this article, I am going to present to you a set of questions which if well understood and appropriately answered, will enable you speed up your journey to becoming a landlord.
How do I mean?
These set of questions and answers will help you get real fundamentally. They will also help you identify what you can afford while leaving you with the choice of wanting it. Plus, I feel good within me because the fact that you are reading this piece suggests to me that you are already interested in seeing where you’ve missed it… so let’s move on.
In our modern day society, especially Nigeria, for you to legitimately own any property, you need to be above the age of 18(eighteen). This makes you an adult by law and I want to work on the assumption that I’m communicating with those that have legal right to own property.
However, before I get into the nitty-gritty of today’s work, I would urge you to get a pen and a pad to scribble down your answers because you will be needing those answers in subsequent questions that will come up as we go on. You will also need to do some minor arithmetic work in the process… so question number one goes thus:
Hold on a sec…just before that, again I encourage you to provide your own real answers to the questions. I will use hypothetical answers to enable you better understand the questions and be able to offer your own real answers.
Now to the crux of the matter:
QUESTION 1: How old are you?
For the purpose of this article, let’s use 30 years as a hypothetical age to answer this question.
QUESTION 2: Where would you like to live?
Is it in Lagos State? If Lagos, where in Lagos… is it Ikeja, Okokomaiko, Ikorodu, Epe, Lekki, Mushin, Agege, Surulere, Victoria Island,Ikoyi, e.t.c. Where exactly would you like to live?
QUESTION 3: What size of property would you love there?
Let’s say for instance, Isolo is the preferred location of my place of abode. What type of property would I like to live in there? Is it a flat, a bungalow or a duplex? What size of house would I really want? Is it a room, a room and parlour or a self-contained apartment? You need to specify the size of the house. Let’s say, for a certain Kunle, a flat in Isolo will do and don’t forget,…the age in retrospect is 30 years old.
QUESTION 4:(a)What do you think would be the cost of your type of house? (b)Are you going to buy or build it?
At this stage you may need to do some research if you don’t have the answer at your fingertips. How do you go about this? Just go to the internet and log on to any property search engine such as: www.findnigeriaproperty.com, that’s one option.
Another good option is a newspaper, preferably the Monday edition of The Punch or Guardian. On flipping through, you’ll see some property ads. On the other hand, your best bet could be a well populated property journal. If you can lay your hands on one, run through it and see what a flat in Isolo is being advertised for.
This gives you an idea( and an idea is all you need at this stage) of what price it may go for if you are to buy.
Now, let’s assume that our hypothetical case of a 3-bedroom flat in Isolo is selling for N8.5m; this statement portrays that Kunle is buying the house instead of building it. And that answers question 4(b),
That leads us to the next question …
QUESTION 5:What is your expected total earning this year?
Since this year is still running, let us use last year as our guide. So let’s rephrase the question; What was your total earning last year?
Let’s take a look at this scenario; Kunle is a salary earner and his total emolument in 2016 came to about N6m which is a total representation of everything that he took home from his salary as well as every other venture that he dabbled into.
To answer this question correctly, you should be able to identify the other streams of income that you have and how much each of them fetch you annually so that you can add this up to your other sources of income and get a total inflow of what comes in for you every year.
With this in mind, let N6 million be the answer to the question of what Kunle’s hypothetical earning for the previous year was.
QUESTION 6:What is the 33% of what u have in question 5?
Simply put, the question here is the 33% of Kunle’s total income? Remember, we are working with a hypothetical case of N6.0m per annum.
Therefore, 33% of N6m is:
N(6,000,000 X 3)= N1,980,000
Having answered this, my next question goes thus:
QUESTION 7:How many years do you have left to work before you clock 60 years?
We are using 60 years for our analysis because that is the retirement age. Now at 30 years which is our hypothetical age as stated in QUESTION 1, how many years do you have left to work before you turn 60?
These questions are very vital because they will help determine certain things in this process.
Therefore; (60 – 30) years = 30 years.
So, for instance, Kunle is 30 years away from 60 and this answers QUESTION 7.
QUESTION 8: Multiply what you got in QUESTION 6(N1,980,000) by the answer in QUESTION 7(30 years).
N(1,980,000 X 30) = N59.4m
Now, this is where we are going…
By these simple steps, I have just determined the limit Kunle can achieve in terms of property by any legal and reasonable means currently. That is to say that even if Kunle can access mortgage and borrow to the maximum limit that he can, and that maximum limit is a figure that would not take more than 33% of his earnings to pay for his loan over the rest of his estimated work life before he retire.
Note that we’ve not worked in interest here, because if we work in the interest element, of course, the total figure will increase. But the limit of N59.4m that we got is really the cap and so interest must be inclusive in such a price for it to fly.
What this simply says now is that the property Kunle can buy with his earnings if he has to take a good mortgage now should not have a loan repayment that is more than N165,000 per month. Otherwise, he won’t be able to pay within his present means.
The 33% limit is because the internationally accepted expenditure on property is put at a maximum of 33% of an individual’s income.
Overall, these calculations and deductions translate to say that getting a 3-bedroom flat for N8.5m in Isolo(which was our hypothetical case) should be child’s play. Kunle should be able to achieve it with his eyes closed!
I am quite sure you found our discussion interesting and very simple, however, the value must not be lost in its simplicity. The earlier you settle down for what you can afford, the better for you because as you advance in years, your age determines your chances… and where your earning potential is not increasing at a progression that is higher than the rate which you add on years, then your affordability rate may be dropping.
A lot of people reach a peak in their earning at a particular age; and if they’ve not secured property at that particular age, it implies that as they’re going forward age-wise, what they can secure as property using any possible legal means will be diminishing in value.
I hope and wish that you study and apply these steps sincerely as these are questions that your landlord is praying to God that you do not have to answer. Why? The answer is simply because if you can and start to answer these questions, you have started on your part to SACK YOUR LANDLORD TM.
This is why this question and answer procedure is called the #SackYourLandlord Test. It is the first stage of your house ownership dream…SEE YOU IN YOUR OWN HOUSE!!!
MD/CEO, Realty Point Limited
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