Building A House Could Be The Biggest Mistake of Your Life

Ask yourself; should you really buy a plot and start building your dream home? Well, unless you have something like K500, 000 cash sitting idle in your bank account it’s highly advisable that you quickly get building materials and hire contractors to start working on your house. But if you don’t have that kind of money, perhaps building a house is simply not for you.

As luxurious as it may seem, building or buying a house when your financial position is not solid is not a wise investment because the house doesn’t pay you back immediately.  In fact, as a home owner you have to spend money on it almost every month through refurbishments, repairs and general maintenance. In the actual sense a house is not an asset, it is a liability. Owning a home cannot be a good investment if the returns are slow and the expenses are variable.

In a practical sense; if you buy or build a house at the cost of K280, 000 assuming this house is in the provincial capital Lusaka, after all property transfer has been done and all paper work sorted you will either move into your newly acquired home or will consider offering the house up for rentals. Your tenants will be paying you perhaps K3, 000 per month depending on the location and as per custom you will demand three months advance payment. In a year (12 months x K3, 000) you will earn K36, 000 off your house meaning that to return your initial investment of K280, 000 you will have to rent out the house for 8 years (K36, 000 x 8 years = K280, 000). Be objective and realize that in order to reach break-even (zero loss and zero profit) off your house you have to lease it out for 8 years and any amount you receive after 8 years is your profit. Before 8 years, whatever you earn will just be a recovery of what you spent in the first place. But wait, do you honestly believe that your house will remain in good condition after all these years considering the fact that different people are moving in and out? Repairs will need to be made often, your tenants will call you to paint the premises, they will call you to repair leaking roofing sheets and broken water pipes, they will demand additional features and upgrades which will all come at a cost.

Many people in Zambia have been brainwashed into believing that building or buying houses is the best investment. The ugly truth is that this is merely a myth generated by the middle class and this distorted irrelevant myth is upheld by outdated thinking and the media. Indeed buying or building a house may have worked well for previous generations but we need to admit that old ways of doing things are no longer viable in the year 2016. We are not in the year 1964, life and dynamics have changed but people simply refuse to adjust. Building a home when you don’t have the adequate financials required will lead you straight to poverty and serious regret. What’s worse is that when you do decide to give up and sell off your project; finding a ready buyer may take quite some time eventually leading you to reducing your asking price just to discard the burden.

A house is not an investment, but there are other investments that you can make that are in line with your available financial resources. If you wish to start investment, start by investing in yourself. First focus on growing your income streams. Put that growing income into an investment that will pay you and pay you within acceptable time, then you will be living like the rich do, not like the middle class.

In the short term, focus on income and invest in an income generating activity such as a business that should have fast cash turnover. When you have enough resources plan and build your dream home otherwise while you still earn to consume, building a house will be the worst mistake you will ever make.

Most Zambian’s have been made to believe the myth that getting rich is almost impossible or not important. If you look out into the world you will obviously see that the only group of people that are safe in case of even an alien invasion are the rich. And the rich certainly didn’t get rich by “buying a house”. You can judge them, blame them, accuse them of satanism, hate them, despise them, but the fact is that they are safe and everyone else is at risk. They will survive economic inflation, real estate busts, low liquidity, lack of available credit, high unemployment rates, political unrest and whatever else is thrown at them. They have investments that pay them within reasonable timing.

Clinging onto the middle class idea of just “being comfortable” or “surviving” is very risky venture in the year 2016. If your hope is in a house, sorry to say but you will be greatly disappointed. I’m all for entrepreneurship even when the vast majority believe that for one to be successful, a university or college education is a must. But even with those social trends being upheld; many people have gone to university and into massive debt eventually finding themselves unemployed even homeless.

Don’t get stuck in the old notion that a building or buying a house is your ticket to wealth. A house, along with a university education, has been fed to this country as the way to financial prosperity. It may have been true in the past, but today it’s all a myth unfortunately.

The opinions in this article are the opinions of the author and not Manic Zambia, the author does not discourage anybody from buying a house but simply cautions on the dangers of rushing to make a long term investment without properly analyzing the risks and rewards. Additional informative data was obtained from Grant Cardone, an international sales expert with over 25 years experience in multi-family real estate investment. Image Credit.

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Author: Andrew Zaraki Nguvu

Andrew Zaraki Nguvu is a business consultant specialized in all areas of accountancy, management, recruitment, finance, sales, legal, venture capital and marketing. He is an award winning social entrepreneur, innovator and business enthusiast.

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