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Stocks vs Buying a house - A tale of two kenyans
Rank: Elder Joined: 11/5/2010 Posts: 2,459
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@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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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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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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Rank: Veteran Joined: 9/18/2014 Posts: 1,127
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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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Rank: Member Joined: 1/14/2009 Posts: 5
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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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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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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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Rank: Elder Joined: 7/11/2012 Posts: 5,222
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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.
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Rank: Veteran Joined: 4/16/2014 Posts: 1,420 Location: Bohemian Grove
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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 
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Rank: Elder Joined: 6/8/2013 Posts: 2,517
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Ok good exercise Mwalimu Mtumishi... Now do illustrations for those earning 800K+ 500-799 250-500 100-250 50-99 etc etc  "😖😡KQ makes money for everyone except the shareholder 😏😏 " overheard in Wazua
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Rank: Member Joined: 9/12/2014 Posts: 120 Location: Nyali
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Siringi wrote:Ok good exercise Mwalimu Mtumishi... Now do illustrations for those earning 800K+ 500-799 250-500 100-250 50-99 etc etc sure!that would save us lots of trouble and make us rethink our investment decisions.Haya boli kwako mtumishi!
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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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 sure!that would save us lots of trouble and make us rethink our investment decisions.Haya boli kwako mtumishi! 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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Rank: User Joined: 1/20/2014 Posts: 3,528
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Swenani wrote: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 sure!that would save us lots of trouble and make us rethink our investment decisions.Haya boli kwako mtumishi! Why haven't you included those earning below 50K? or they are not supposed to invest Let them invest in daily expenditure Formal education will make you a living. Self-education will make you a fortune - Jim Rohn.
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Rank: Elder Joined: 6/2/2011 Posts: 4,818 Location: -1.2107, 36.8831
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whiteowl wrote: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 Direct Translation. Ng'ano cia marimù. Receive with simplicity everything that happens to you.” ― Rashi
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Rank: Elder Joined: 7/23/2008 Posts: 3,017
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Anyone who took option 1 and placed their monthly savings into KQ, Uchumi, Mumias, KenGen etc must be wondering why they joined Wazua "The purpose of bureaucracy is to compensate for incompetence and lack of discipline." James Collins
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Rank: Veteran Joined: 6/23/2011 Posts: 1,740 Location: Nairobi
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Rank: Member Joined: 8/17/2007 Posts: 294
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streetwise wrote:They say long term they haven't retired yet
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Rank: User Joined: 8/15/2013 Posts: 13,237 Location: Vacuum
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Obi 1 Kanobi wrote:Anyone who took option 1 and placed their monthly savings into KQ, Uchumi, Mumias, KenGen etc must be wondering why they joined Wazua Obiero If Obiero did it, Who Am I?
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Rank: User Joined: 1/20/2014 Posts: 3,528
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Rank: Member Joined: 12/1/2007 Posts: 539 Location: Nakuru
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Obi 1 Kanobi wrote:Anyone who took option 1 and placed their monthly savings into KQ, Uchumi, Mumias, KenGen etc must be wondering why they joined Wazua I did For investors as a whole, returns decrease as motion increases ~ WB
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Rank: Veteran Joined: 4/27/2010 Posts: 951 Location: Nyumbani
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Had not read the post but all in all Kenyan banks scr**w people big time. Apart from charges while accessing your monies , the intrest rates are so high.I will not even complain coz if i were to go to a bank hapa majuu and ask for the same amount in loan i would get an interest rate of kitu 2.5% .I would end up paying about 18 M at the end of 20 yrs while a kenyan will pay more than 36 M more than 20 M in interest peke yake. There are even countries at the moment like Sweden that have -ve interest rates, sijui kama watakuongeza pesa ukiomba One of the reasons given by Kenyan banks is the job security , but do civil servants enjoy less rates? No wonder billions in profits is the norm.
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Rank: Elder Joined: 6/23/2009 Posts: 13,568 Location: nairobi
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Patience needed
COOP 70,000 ABP 15.20; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Stocks vs Buying a house - A tale of two kenyans
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