VituVingiSana wrote:House for 6mn with a deposit (down-payment) of 1mn = Loan for 5mn
Assuming no principal payments in Year 1 means interest at 16% [HFCK] before other closing costs is 800,000 per year OR 66,666 per month.
Add the following: Land Rates/Rent, Maintenance, Security, etc which can easily add 3,333/month to the cost.
So the minimum cash outflow in Year 1 is 70,000. At a tax rate of 30% the 'owner' needs to make 100,000 per month just to pay the mortgage. What about other expenses???
After doing some calculations i realised it doesnt make economic sense to chase owning a house in Nairobi. It may be the only thing you do till you retire. Either land prices will come down or stabilise and incomes catch up.
What sense is there in buying a house that is double its real cost and taking a mortgage that will see you paying double the cost at the end of the term loan? this is just making banks and existing land owners filthy rich at ones own expense
The investor's chief problem - and even his worst enemy - is likely to be himself