How To Buy Your Home Without A Mortgage Loan [1/2]

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I’ve been collating content for this article for some time. Truth is, I’ve been mulling over whether or not to post it because my intention was to share how I bought my home without a mortgage loan. I feared it may be too personal so I changed tack and focused on other ways one can own a home without a mortgage. From my research and conversations with others who have ticked this box on their financial journey, I found that there’s more than one way to achieve home ownership besides paying for the house outright. I was slowly putting the words together, then I came across an article on Nairametrics.com the other week. It’s almost as though the author had gone through my notes. Very well written by the way, Chacha; I couldn’t have done a better job with it.

So I spoke with the nice people at Nairametrics.com and they’ve given me permission to cull from their article. What I’m going to do is share my home ownership story in part one of this post, then share the other ways according to Nairametrics.com in part two.


Flipping Your Way To Home Ownership

This is how I got to pay for a house without an expensive mortgage loan and I came about it purely by luck. I put down a 15% deposit on a house back in 2006. It was an off-plan unit in an estate along the Lekki peninsula in Lagos. The developer had barely cleared the land back then but the 3D models looked great (as they always do). As the months went by, the developer missed a milestone or two, I missed a few payments and so did some of my co-investors it turned out.

The project had stalled and about a year after my initial investment, I got a letter from the developer saying that the N38 million cost which we had agreed and signed off on was no longer feasible. It read, “Costs of materials have skyrocketed, blah, blah, blah” and in summary, I was given a choice of either agreeing to the new cost of N45 million or I could have my money back with 8% interest.

By this time, I started to catch on to the benefits of flipping. I could flip my way to a house on Banana Island at this rate I though.

I sought advice from my Old Man and others and they all said the same thing, “Take the money and find something else.” So I did. The developer cut me a draft and I found another off-plan unit in another estate and made a 20% deposit this time. This was a bigger house in an estate that had a few completed units and still in the Lekki axis. I made a few more payments, got a generous loan from the Old Man and about a year later, I got another letter. “Agree to the price hike or take your money with interest”.

I made the same decision and got another off-plan property in an even nicer estate, closer to Victoria Island. This was 2008 and property prices were about to go crazy. After I had made 80% of the payments and the house was about 80% complete, I got an offer I couldn’t refuse.

All the units in the estate had been spoken for except for a few, still owned by the developer in an up and coming wing. They were just completing the foundation stage, if my memory serves me right. Some moneybags banker or oil magnate came along, offering the developer 33 % of what I and other co-investors had originally agreed to pay for our units. The developer saw a good deal for himself too and called a number of us who had units near completion to offer us the deal.

When he called me, I hesitated at first because I didn’t want to go through the mess from the last two transactions but the developer sealed the deal by offering me one of the new units in the new wing at the same price I agreed for the first one. It was a great deal all round. I made profit on the sale, savings on the new house and Mr. Moneybags got his house.

By this time, I started to catch on to the benefits of flipping. I could flip my way to a house on Banana Island at this rate I though.  Developers had also caught on by this time too. When I found a buyer for my fourth flip and contacted the developer to execute the change in the title, he told me that there would be fees. It didn’t make the transaction unattractive but I knew that this gravy train was coming to an end.

I sold again and got another property; this time, an older, completed house in a well-established estate. The estate is known for its serenity, low fences and high level of security. I had 100% of the asking price and still had cash to spare for renovation and furniture.  This should be the end of the story right? Well, the lady who sold the house got greedy. I had made the first payment and while I waited for some fixed deposit maturities, she went and agreed a higher figure with someone else. The day I met up with her pay the 2nd tranche, (this was 2011 by the way, online transfers from your bedroom and SMS alerts were not common) she had cut a draft returning my first payment. Her greed was perhaps the best thing that happened to me.

She was later disappointed by her new buyer and by the way she called me months later to see if I was still interested, I had made a down payment on the property I call home today. It was off-plan unit like all but one of my earlier acquisitions but it cost 10% more than the cash I had. Luckily, with the milestone payment plan, I had something like 36 months for the cash to earn interest and I wasn’t out of pocket at the end of the day.

I finally moved in, New Year’s eve 2015, roughly 10 years after my first deposit for a house.

Enough Talk, Act Now

There are a number of caveats if you want to try this method. Firstly, you may not have 10 years to wait. I was lucky not be have a rent burden at the time. Secondly, the real estate market is very different now. Flipping may not be as effective in the Lekki axis anymore because house prices aren’t rising as quickly as they were over the last 10 years; some would even say houses are somewhat overvalued. You might be better off further down towards the Free Trade Zone or closer to Epe.

Also, developers have caught on to the flipping business and they will not be left out of any gains you intend to make. They are also a lot more ruthless; if you miss one too many milestone payments, they will simply reallocate your property and refund your money without any hesitation.

Lastly, there is the issue of land titles. Every property I bought was in an estate and the title was a “deed of allocation” issued by the land owner/developer. This means that there was a global “Certificate of Occupancy” for each estate. Stay away from land or property that has a title which takes time to transfer or that require searches, Consent  of the Governor or anything like that. But do your due diligence on the developer.

I may not have gotten a long term mortgage but I did get loans from family and bridging facilities for when my cash flow was low. Short term finance may seem expensive in the short run but they are not as expensive as interest rates of between 20% and 30% over  a decade; not to mention the fees that the banks charge you on top of that.

I hope this has inspired somebody out there to take the plunge. I was incredibly lucky and I started in my 20s. This may not work if you already have other significant financial obligations, especially to your family.

Read Part II here.

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