Mainat wrote:
(hope you get this time Heri)
Objective: Build 15m worth of rental houses.
Masembe Borrowed 15m
Githendu Spent own 15m
Masembe’s cost and returns
Cost vs Return
Month 1 180k 140k
Month 2 180k 140k
Githendu’s cost and returns
Cost vs Return
Month 1 15m 140k
Month 2 15m 140k
I.e. cashflow-wise, you are so worse off spending your own cash to invest
@mainat..your calculation is not accurate.In Githendu's case,where does the 180K disappear to now that he is not paying any loan? For his case,it should be
Cost Vs Return
15M 320K
I think thats a good return for a 15M investment.We can then assume that Githendu will have an ROI within 4 years.He will then be reaping profits in addition to his building.To me thats an perfect investment.
On the other hand and I stand to be corrected ,I think one of the main reasons why investors choose loans rather than their own cash is to beat the taxman.Considering KRA taxes rental incomes at 30%,then it would be wise to ensure that a part of your income is viewed as a cost hence not taxed..the tax gurus can advice more on this...but still rentals/RE will remain amongst the best investments one can make..
Hope is not a strategy