Loans Can You Take A Loan To Build A House, Then Repay Back With Rents?

Sherman198

VIP Contributor
People can literally collect loan from a bank to expand whatever business they have been doing, that's not moving. Or collect loan to make their business be up to standard or to collect a loan to start a business or anything they want to solve.

People have several reasons for turning to loan. Even though there are some wrong reasons why some people take loans. We live in a world where disasters looms, and some people can be victims of this disasters. If, no financial succor, is forth coming to save them, they probably would resort to loan.

As we have an unending reasons why people take loans, I have come across someone's comments some where on a different platform, where the person says "He is looking to taking a long term loan to build an expensive house, then he will rent it out, then he will be using the rent to be paying the loan back".



Now, how do you see this, taking a loan to build a house, not ordinary house, an expensive one, then the money from rent will be use to be offloading the debt of the loan.

Let's consider the loan term(duration) to be btw 15-30 years.


Your opinions......?
 

sincerem

VIP Contributor
That will surely make you paying in excess when it comes to repaying back the loan taking from the mortgage bank. The bank can offer that, but in a specific duration of time, since you got reason for the utilization of the loan funds. Such funds can take some years for its repayment interest. Cos you'll earn from tenants, I don't think their is any mortgage bank willing to offer us loan with such proposal.
 
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Sherman198

Sherman198

VIP Contributor
That will surely make you paying in excess when it comes to repaying back the loan taking from the mortgage bank. The bank can offer that, but in a specific duration of time, since you got reason for the utilization of the loan funds. Such funds can take some years for its repayment interest. Cos you'll earn from tenants, I don't think their is any mortgage bank willing to offer us loan with such proposal.
Definitely, anyone seeking a loan from a mortgage bank should be prepared for an excess interest because all these loans firms are in it for the gains too. And I think it's still doable if you will be willing to mix some of your saved cash with the amount you borrowed then continue with the project. Just know that you are building an expensive house and the rent is going to be worth it. What matter most is the duration.
 
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Augusta

VIP Contributor
This wouldn’t be a bad idea provided one is careful enough to execute only what it was planned not diverting the money. I can do this if I have the opportunity because landed property like houses are good investment. You can really go broke when you have houses that you can receive yearly rents
 
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A K Rao

Verified member
Taking a loan for building a house is nothing new and people have been doing it for many decades now. But the problem with such loans is that repayment of the loan is not possible every time with the rent as the rent the house fetches depends upon the many factors like locality, quality of construction, and the need of the party. In case when the party renting the house is getting less rent than the part of the loan has to be paid from the pocket which may be quite taxing.
 
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Sherman198

Sherman198

VIP Contributor
This wouldn’t be a bad idea provided one is careful enough to execute only what it was planned not diverting the money. I can do this if I have the opportunity because landed property like houses are good investment. You can really go broke when you have houses that you can receive yearly rents
Exactly! There's no shortage on this, since you have a certain and guaranteed means of repayment, not that you are starting a business new, that you are not sure if it's going to be successful or not. But you have a sure means of refunding the loan. Eventually this is going to be profitable! So far the duration or the term of the loan is long enough.
 
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Augusta

VIP Contributor
Exactly! There's no shortage on this, since you have a certain and guaranteed means of repayment, not that you are starting a business new, that you are not sure if it's going to be successful or not. But you have a sure means of refunding the loan. Eventually this is going to be profitable! So far the duration or the term of the loan is long enough.
My point exactly when once it is put to the use it was intended for, then paying back will be as easy as possible. The good thing here is that the duration of repayment is even long so before finshing the payment more revenue will have been derive fro the rent of the house
 
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Sherman198

Sherman198

VIP Contributor
My point exactly when once it is put to the use it was intended for, then paying back will be as easy as possible. The good thing here is that the duration of repayment is even long so before finshing the payment more revenue will have been derive fro the rent of the house
You got it my brother! This is exactly what some of these white people are doing. Imagine you get a loan worth of 15 to 16million naira loan. You get yourself not too expensive land maybe 800,000k to 1.5m worth of land, you know maybe 2-3plots....Then, you built 4bedroom flats, with normal standard materials, then rent is 400k or more per year. And your loan term is 15years, someone can still survive this but risky. What do you think?
 
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Augusta

VIP Contributor
You got it my brother! This is exactly what some of these white people are doing. Imagine you get a loan worth of 15 to 16million naira loan. You get yourself not too expensive land maybe 800,000k to 1.5m worth of land, you know maybe 2-3plots....Then, you built 4bedroom flats, with normal standard materials, then rent is 400k or more per year. And your loan term is 15years, someone can still survive this but risky. What do you think?
Sure you would still survive especially that you have a Long time to pay back. When it comes to risk taking there's no business that is devoid of that you must always encounter some risks all you need do is just to focus your thought on.spending wisely then finish the project on time to start paying back
 
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sincerem

VIP Contributor
Definitely, anyone seeking a loan from a mortgage bank should be prepared for an excess interest because all these loans firms are in it for the gains too. And I think it's still doable if you will be willing to mix some of your saved cash with the amount you borrowed then continue with the project. Just know that you are building an expensive house and the rent is going to be worth it. What matter most is the duration.
I think so too, cos even in the movie you'll see where an individual uses bank loan to build a home then pays gradually using his monthly stipend. It is very much possible dear, to borrow money from bank long time to build a home and even pay in installments until the amount you borrowed is cleared. Cos bank will gain it too based on the long term increase rate.
 
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btaliat

VIP Contributor
Just like some intellects have commented, the problem will lie with the repayment. Apart from the fact that there will be excess interest rate, it will also take time to repay such a payment because house rent may take time to cover up such a loan. But this will be eased of the loan is sourced from mortgage banks rather than commercial banks.
 
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Sherman198

Sherman198

VIP Contributor
Taking a loan for building a house is nothing new and people have been doing it for many decades now. But the problem with such loans is that repayment of the loan is not possible every time with the rent as the rent the house fetches depends upon the many factors like locality, quality of construction, and the need of the party. In case when the party renting the house is getting less rent than the part of the loan has to be paid from the pocket which may be quite taxing.
Good points! I definitely know that the repayment will be hard, everything has it's risks. But I believe the house will be built in a town not in a local area and moreover in my country, house rent are getting costly each year, it's appreciating and this pushes people to building houses for business purposes.

So with this, rent of the said house increases with time which is another advantage.
 
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Sherman198

Sherman198

VIP Contributor
Just like some intellects have commented, the problem will lie with the repayment. Apart from the fact that there will be excess interest rate, it will also take time to repay such a payment because house rent may take time to cover up such a loan. But this will be eased of the loan is sourced from mortgage banks rather than commercial banks.
Yes bro....it's always the interests that kills stuff like this because this banks are there to take their profits too. But it's still possible if the rent is high and you know every year rent of houses keep soaring. Though, I would not capitalize on that, but it's advantage too. But it's more reasonable in some of these foreign countries because their terms or duration are much longer.
 
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Alexandoy

VIP Contributor
This topic is a cute premise. I have to admit that I have thought about it when I had a lot of my own. If I borrow money from the bank to build an apartment then I probably could pay back the loan with the rent. My computation was verified by the loan officer of the bank and I had it all wrong. The answer is no. You have to put a certain amount of equity like 25% of the cost of the construction before you can do that.
 
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Mika

VIP Contributor
If you have an income source (job or a business) and if you have something that you can give as collateral, you can easily get a house loan in my home country. You can use the loan money to build the house. Even though the bank does not wait for loan repayment until your house is complete, you can use the rent amount to pay the loan when your house is rented.
 
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Sherman198

Sherman198

VIP Contributor
If you have an income source (job or a business) and if you have something that you can give as collateral, you can easily get a house loan in my home country. You can use the loan money to build the house. Even though the bank does not wait for loan repayment until your house is complete, you can use the rent amount to pay the loan when your house is rented.
People are doing that exactly. And I know many people would have used that to build so many houses. I think this is a nice investment strategy. Even after the completion of the first one, you can be using this one as the collateral for the next loan, which you may use to build another house or do another project.
 
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Sammyesx

Verified member
It is a very good ideal but it will depend on the duration of the loan because it might take a lot of time before one can get the full amount used in building the house, which might exceed the time giving by the loan firm, though if the house is located in a very good area then the rent will be high which will make it easier to get back the money used in building the house
 
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Sherman198

Sherman198

VIP Contributor
It is a very good ideal but it will depend on the duration of the loan because it might take a lot of time before one can get the full amount used in building the house, which might exceed the time giving by the loan firm, though if the house is located in a very good area then the rent will be high which will make it easier to get back the money used in building the house
You are right bro....it's doable as you have said. But the loan terms and duration will be the judge. If the term is up 15years then the house will be like 4flats with selfcons then the house will be moderately expensive, which will make the return tangible and enough to offload the loan on the long run
 
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