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Stocks vs Buying a house - A tale of two kenyans
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FRM2011
#21 Posted : Thursday, January 15, 2015 12:16:50 PM
Rank: Elder

Joined: 11/5/2010
Posts: 2,459
@mtumishi, thanks for the post. There is a guy called @maichblack, and I can bet he will be very excited once he reads this.

First, an apartment going for 14m in kileleshwa is likely to attract rent in the range of 60-70k. Which basically means its overpriced. Our in-house architect, A4architect had recommended a price to rent ratio of between 150-200. I.e. a house fetching 100k in rent should cost between 15mn to 20mn, which represents a payback period of 12 to 16 years.

Finally, and I make this appeal on behalf of my immediate and extended family, some of us sell homes for a living. This kind of hypothesis might be interpreted as "kunyang'anya mtoto chakula ikiwa kwa mdomo"
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sparkly
#22 Posted : Thursday, January 15, 2015 12:34:22 PM
Rank: Elder

Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
mtumishi wrote:
After 20yrs, he has paid the bank the principal figure of Sh. 13m plus interest of Sh. 23,553,164 for a total payment of Sh. 36,553,164.


This interest amount is enough to buy another apartment.
Life is short. Live passionately.
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lochaz-index
#23 Posted : Thursday, January 15, 2015 12:40:28 PM
Rank: Veteran

Joined: 9/18/2014
Posts: 1,127
FRM2011 wrote:
@mtumishi, thanks for the post. There is a guy called @maichblack, and I can bet he will be very excited once he reads this.

First, an apartment going for 14m in kileleshwa is likely to attract rent in the range of 60-70k. Which basically means its overpriced. Our in-house architect, A4architect had recommended a price to rent ratio of between 150-200. I.e. a house fetching 100k in rent should cost between 15mn to 20mn, which represents a payback period of 12 to 16 years.

Finally, and I make this appeal on behalf of my immediate and extended family, some of us sell homes for a living. This kind of hypothesis might be interpreted as "kunyang'anya mtoto chakula ikiwa kwa mdomo"


First off a mortgage in kenya doesnt make any economic sense since annual interest rates are way above annual rental yields. The only scenario it would be of any economic benefit is if one took a mortgage for a house an off plan stage and hope it substantially appreciates in price before completion( initially new units outpace old ones in the same locality) sell the house at a profit, repay the mortgage in full and pocket the balance.
Secondly, the current price to rent ratio is 170-230% with the figure going as high as 250%.the only real estate property capable of returning your capital in 12years or below is block of flats or a commercial building. This is because current land prices have outpaced rent rates over the last few years.
The main purpose of the stock market is to make fools of as many people as possible.
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Act
#24 Posted : Thursday, January 15, 2015 9:40:26 PM
Rank: Member

Joined: 1/14/2009
Posts: 5
Your hypothesis is good but to derive rent to be paid in 20yrs we need some hint on annual rent increment rate e.g. a long Thika apartment rent is increased by 1k - 2k per year.
On the other hand, with that kind of saraly why do you want to be a slave for 20yrs. I think young people should realise circumstances have changed when our parents had to wait for retirement so that they can build a permanent house. By 55yrs may be your kids will be moving out to university or to start their own life and it is the time you are getting a 4 bedroom massionate. This does not make sense any more. I would rather take some calculated risk to get a house for my family within 5yrs and the same time retain a room to save/invest some surplus. Life must go on.
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Gordon Gekko
#25 Posted : Thursday, January 15, 2015 10:15:37 PM
Rank: Elder

Joined: 5/27/2008
Posts: 3,760
sparkly wrote:
mtumishi wrote:
After 20yrs, he has paid the bank the principal figure of Sh. 13m plus interest of Sh. 23,553,164 for a total payment of Sh. 36,553,164.


This interest amount is enough to buy another apartment.

There's a phenomena known as 'time value of money'. The value of ksh 23m in 20 years isn't the same as it is today. What you need to find out is the present value of ksh 23m then see if it can buy you an apartment today.
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Mukiri
#26 Posted : Thursday, January 15, 2015 11:05:30 PM
Rank: Elder

Joined: 7/11/2012
Posts: 5,222
I'm surprised no one has mentioned this but one rarely retires in their first house... Grow into your house ie bedsitter to studio to apartment to mansion to farmhouse to beach house.

The scenario as initially mentioned, can be argued from a different perspective.

Capital.

Mortgage should not be necessarily a bad thing if

1. The guy continues courting other investment vehicles (The lesson here being 'Don't put all your eggs in one basket')

2. The guy uses the mortgage as 'Capital' ie buys the apartment, looks for better offers, sells it for a profit, get another (with mortgage+profit) sells it etc etc... Use mortgage money as capital in the real estate business, and make money from it while avoiding paying rent

Doable but tricky.

And all the while, he grows to his dream home. Not retiring to some apartment.

Proverbs 19:21
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whiteowl
#27 Posted : Friday, January 16, 2015 7:31:02 AM
Rank: Veteran

Joined: 4/16/2014
Posts: 1,420
Location: Bohemian Grove
Lolest! wrote:
Kihara joni wrote:
Mortgage equals very bad idea unless the house is paying for itself which currently in Kenya is story of giants

Lool!! Story of giants!!
You just made my morning joni

Laughing out loudly Laughing out loudly
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Siringi
#28 Posted : Friday, January 16, 2015 10:39:39 AM
Rank: Elder

Joined: 6/8/2013
Posts: 2,517
Ok good exercise Mwalimu Mtumishi...

Now do illustrations for those earning 800K+
500-799
250-500
100-250
50-99

etc etc smile smile
"😖😡KQ makes money for everyone except the shareholder 😏😏 " overheard in Wazua
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shrewdinvestor
#29 Posted : Friday, January 16, 2015 11:08:36 AM
Rank: Member

Joined: 9/12/2014
Posts: 120
Location: Nyali
Siringi wrote:
Ok good exercise Mwalimu Mtumishi...

Now do illustrations for those earning 800K+
500-799
250-500
100-250
50-99

etc etc smile smile

sure!that would save us lots of trouble and make us rethink our investment decisions.Haya boli kwako mtumishi!
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Swenani
#30 Posted : Friday, January 16, 2015 4:29:50 PM
Rank: User

Joined: 8/15/2013
Posts: 13,237
Location: Vacuum
shrewdinvestor wrote:
Siringi wrote:
Ok good exercise Mwalimu Mtumishi...

Now do illustrations for those earning 800K+
500-799
250-500
100-250
50-99


etc etc smile smile

sure!that would save us lots of trouble and make us rethink our investment decisions.Haya boli kwako mtumishi!

Laughing out loudly Laughing out loudly Laughing out loudly Laughing out loudly Laughing out loudly Laughing out loudly Laughing out loudly

Why haven't you included those earning below 50K? or they are not supposed to invest
If Obiero did it, Who Am I?
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