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Is Real Estate Investment For Lazy People ?
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itz
#11 Posted : Saturday, February 25, 2012 4:14:11 PM
Rank: Member

Joined: 3/20/2009
Posts: 348
young wrote:
guru267 wrote:
simplicity wrote:
The way I look at it is if you buy a 2.5m unit in Kenya and pay it off, you will have rent of 16k (+ Rent appreciation) or more a month for the rest of your life. It gets better, your kids inherit it after you kick teh basket and continue reaping the fruits and remembering you for your sweat and that can continue for generations. You can never beat that.


Since you are talking about holding investments for life and passing them down, wouldn't it be much easier to buy bluechip stocks for this purpose and avoid the maintenance cost that comes with owning a rental unit¿¿

Based on returns of 16k per month it equates to a return of 192k per annum on your 2.5million investment... This is before deducting maintenance cost of your unit

If you invested this 2.5m in blue chipz your return in terms of dividends would be:
1. BAT = 250k p.a and 20.8k per month
2. BBK = 215k p.a and 18k per month
3. STANCHRT = 215k p.a and 18k per month
etc etc..

Statistics show that equity returns trump real estate over the very long term (30 years) by a very significant margin.. Whats even better is they require zero maintenance once the selection process is complete...







Where I totally disagree with @guru analogy she is looking at the 2.5M capital deployed in face value that is only what it returns but not only what it grows into over time. The value of the property will continue to rise consistently full time without any value added but stocks value is subject to fluctuations either up or down.
However @guru as a stock analyst it is impossible to predict the effect of external influences on the value of stocks in this part of the world. A stock can return salutary results but the value remains static we have seen that severally in different markets.
The main subject matter of this thread is the ease in which one can make gains or grow his portfolio in real estate in a very consistent and predictable way quite unlike stocks and other asset classes.
Here practical experience counts not theories.

I always advise new entrants to investment do not be all out for stocks which looks enticing. Balance it with real estate as a leverage. On the flip side do not be all out on real estate because of liquidity problems, balance t with stocks for a leverage.


@young.am sure you know real estate goes with cycles just like the markets.it is very important at what point you enter that cycle.if you enter at the top then it stagnates or goes down you wait a long time to recoup your investment and make money.Question is what part of the cycle is real estate in and what part of the cycle is the market in.I think you are in the couple last innings in real estate and in the early innings in market to use a baseball analogy.
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Gordon Gekko
#12 Posted : Saturday, February 25, 2012 4:43:06 PM
Rank: Elder

Joined: 5/27/2008
Posts: 3,760
@itz, I thought innings is a cricket term, not a baseball onesmile

On real estate and equity, rent income is subject to 30% tax in Kenya while dividends are only subjected to 5% if you are a local investor. So in my books equity outperforms real estate.

To answer the question @young, real estate is not for lazy people, but for passive investors, those who have no time to keep an eye on reuters and rick.co.ke
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  | | Edit by user: Saturday, February 25, 2012 4:45 PM | Reason: Not specified
itz
#13 Posted : Saturday, February 25, 2012 5:00:38 PM
Rank: Member

Joined: 3/20/2009
Posts: 348
Gordon Gekko wrote:
@itz, I thought innings is a cricket term, not a baseball onesmile

On real estate and equity, rent income is subject to 30% tax in Kenya while dividends are only subjected to 5% if you are a local investor. So in my books equity outperforms real estate.

To answer the question @young, real estate is not for lazy people, but for passive investors, those who have no time to keep an eye on reuters and rick.co.ke

@Gordon Gekko http://en.wikipedia.org/wiki/Innings i guess you learned something new todaysmile
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muganda
#14 Posted : Wednesday, February 29, 2012 10:28:25 PM
Rank: Elder

Joined: 9/15/2006
Posts: 3,907
Well @young, another older man agrees with you. We may need to differentiate between 'land' (lazy) in our setting and 'real estate' (productive). He states:

1. Currency based investments like cash, bonds, money market funds, bank deposits are safe but often do not beat inflation especially after factoring in personal income tax each year (say 30%)

2. Lazy assets or assets that do not produce anything like gold, land, (or Tulips in the 17c). This type of investment requires an expanding pool of buyers, who, in turn, are enticed becuase they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce but rather by the belief that others will desire it even more avidly in the future.

3. Productive assets whether shares, businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver OUTPUT while retaining its purchasing-power value.

http://finance.fortune.cnn.com/...hire-shareholder-letter/
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  | | Edit by user: Wednesday, February 29, 2012 10:31 PM | Reason: Not specified
Marty
#15 Posted : Friday, March 02, 2012 7:27:34 AM
Rank: Veteran

Joined: 3/31/2008
Posts: 761
Location: Nairobi
I am realtor and I think the biggest problem with most real estate investors is investing for capital gain as opposed to investing for cash flow purposes. Majority face liquidity issues but a wise real estate investor must consider investing for purposes of cash flow. I'd also say that a good investor can actually invest in any vehicle and make money.

One distinct advanatage real estate has over stocks is control. with stocks, the performance of a particular counter is depended on other people somewhere unless you are a majority shareholder or a decision maker for the said company. When I do my real estate ventures am 100% in control and will most likely influence my direction, simply put I got control.

Real estate is never for lazy people. I put in a lot of time and effort and that places me head over shoulders above speculators/ passive investors who buy plots and go to sleep awaiting capital gain.
When I admire the wonder of a sunset or the beauty
of the moon, my soul expands in worship of the Creator.
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  | | Edit by user: Friday, March 02, 2012 7:28 AM | Reason: Not specified
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