It’s like trying to convince drug addicts to put down the needle
The guy is assuming ceteris paribus…
Your problem you usually try to act clever but you are not… Hio Zimbabwe how is the rent when economy collapse ?
Let’s come now during Covid-19 period now… Which landlord ameongeza rent sai?? Nipee mmoja tu. Govt bonds if I bought it in January 2020 for 5 years I’m secured for that 5 years… Wewe you finished building your rentals in January 2020. Between the rentals and Govt bonds who is more secured in this period?
Hio inflation unalia sana, SAI YOU LANDLORD wa January 2020 mimi bond holder wa 11% net of Tax for 5 years who’s better… Wewe, sai you’re dealing with NON OCCUPANCY plus HIO INFLATION and collapsed economy hio unasema.
Tell me in easy points how you as a RENTAL OWNER in January 2020, you are better off than me a bond holder in 2020 for the next 5 years I’m waiting for your reply
I know someone who sold his real estate in Gigiri two years ago and went to invest Manufacturing in Kilifi.
Having a diversified portfolio is a basic principle for any serious investor. As it stands now the government is very cash strapped so it’s going to be borrowing very heavily domestically. As a country we’re also witnessing an increase in population so there’s going to be a need to low income housing. The key word is low income housing.
If you make an intelligent assessment of both, starting out as an investor in the bond market makes more sense simply because there are less barriers to entry. All you need is a CDS account with central bank and you’re set. In contrast, property investment requires ownership of land, government approvals for construction. You have to chase contractors around and the price of building inputs is rather high. As a young person I’d opt to put my savings into short term government paper that rolls over quickly and then using the returns make a careful entry into the real estate market with a view to satisfying demand for affordable housing. This would be at a point where I’m on fairly solid financial ground so I’m not in a hurry to recoup my investment and rather want to build a decent real estate empire.
The never ending debate. A balanced portfolio is ideal. Property has its pros such as ‘appreciation’. A good stock can however have way better appreciation than property. Think of someone who bought USD 1M Safaricom shares at KES 2 and someone who built rentals for the same amount. Remember Bill Auckman made 100 fold very recently in the money market. Impossible to do so with property. Property unlike shares and securities are however, not easy to liquidate. There is also no guaranteed return.
Inflation ikichapa it doesn’t spare real estate. I was working with government of South Sudan when inflation reached 400% in 2016. Real estate totally collapsed. We used to rent a single room for $3,000 per month na ilishuka upto $500 per month within a short period. If you want to make money in real estate in Kenya then buy and sell. Not rentals.
Nimesema inflation, not an economic collapse. Even stable governments decide to devalue currencies from time to time through printing. Lakini wewe you are so eager to discredit me that hata hujui difference ya inflation na economic collapse. Read and understand before getting emotional about a subject. Inflation often happens when the economy is collapsing, that doesn’t mean that inflation=economic collapse. Stable governments with good economies can decide to devalue a currency to increase exports, that hurts bond-holders like you who have limited knowledge about economics. By the time unachukua your 10M in 2030, it will be worth 3M today.
On to the second part of your question. Real estate (rentals) is a long-term investment. You can’t just pick two optimized data points from January to Dec 2020 and make conclusions that bonds are better. Hiyo swali itajibiwa in those 5 years, sio after 1 year of covid-19. I reiterate, real-estate is a long-term investment na huwezi jibu hii swali before January 2025.
Ukona rentals wapi bro? Weka hapa picha tu. You are talking hogwash.
Value of property appreciates :D:D:D:D:DThe House depreciates in value as land appreciates which ultimately they negate each other really. If you build a 40 million House on a 10 million land after 5 years the house pekee will be worth around 30m (using 5% standard depreciation rate, even in accounting standards ni hivyo) your land will appreciate also with around 2-5% in value BUT REMEMBER appreciation on PROPERTY is based on WHAT ANOTHER PERSON CAN PAY FOR IT, THAT PRECISE MOMENT. Also remember in that 5 years you will NEED TO MAINTAIN that HOUSE, THAT LAND, Also the issue of occupancy WILL NEVER BE 100% IN 5 YEARS.
As shown below, CBK offered 40Billion in Bonds last time… Kenyans OFFERED 105Billion… More than 65 Billion more. Why can’t those Billions be used or invested in Real Estate? Which is a “safe investment”
Dont say its banks investing in bonds, that they are not permitted to invest in real estate, WHY DON’T THOSE BANKS or PENSION FUNDS lend to YOU REAL ESTATE Guru then pay those loans bank… Juu essentially banks are in business, if your rental business is more profitable than lending to Government then they will not hesitate to lend it to you ama???
Don’t think you are more clever than people WHO HAVE 105 BILLION somewhere to invest :D:D:D:Dwho go for Bonds than anything else.
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Landlords are ASKING BANKS for loan repayment holiday SAI, have you heard Kenyan Government asking for Bond repayment Holiday??? That should show you who is at more risk
Just for example,
A 1Billion property now, say in Upperhill has issues with rent payments, occupancy levels etc…
A 1 Billion 5years bond using the above info is 11.492% , it will give you a 97 Million in a year return. In 5 year it will be 488 Million in interest Guaranteed. That’s almost a half of the billion amount.
Wewe nipee what you think the UPPERHILL property can achieve in that 5 years with this COVID-19 situation.
Hahahahaha so Zimbabwe is a inflation issue not economy collapse?  What a good example.
Then hio real estate operates in a vacuum that government devalues its currency but rents go higher???
Now answer my question also… I’m waiting
Where i come from, the prime investment is “mbuloti yakwa ama mũgũnda wakwa” .
Again, you are putting words in my mouth. I did not talk anywhere about Zimbabwe’s economy. You still can’t differentiate between inflation and economic collapse. Bure kabisa.
About your question, yes!! If the government devalues the currency (obviously through printing), rents will increase to match inflation. Kama ulikuwa unalipa 50k and the government doubles the money supply, utalipa 100k (this has been overly simplified). Assets (such as rentals) protect the investor from inflation. Bonds don’t protect you from inflation.
Kunywa chai… Best business is build and sell. Uza nyumba kama mandazi but rentals is the very last investment especially when you are young person.
Even now, during Covid-19 situation, who between Landlords and Bond holder are asking for loan holidays, reducing rents, having occupancy issues
Kenya huwezi jenga rentals na loan. If you do that the investment is not viable. So, ukiona nikisema rentals are sound investments, nasema when built using cash, not loans.
:D:D:D:D:Dwewe ni Fala sana. I won’t argue with you anymore.
Using “Zimbabwe style” meant what? Tell me a country which has printed money Zimbabwe style and the economy has not collapsed?
Then mbona sai hakuna landlord ameincrease rent to match the “inflation”
And who is buying a bond with loans? ZERO.
And Who builds rentals with LOANS? I can bet more than 60% of Kenyans.
Another question, I’m waiting
na ukweli usemwe ROI ya rentals iko slow
You’re right that nobody is building rentals without loans but that’s what happens all over the world. There isn’t a country on earth where people would use cash to finance an entire real estate project unless ni choo wanajenga.
You can as well have invested in the bond market and if your portfolio is large enough use that as collateral to invest in real estate.
How is it a fair comparison if you use loans (which affect ROI) on one and not the other??
Building rentals with loans in Kenya is not a smart idea, but that doesn’t stop people from doing it. It is their wish.
Let’s do the math:
Investor A (Bond)
The guy buys a bond at 11% p.a.
in 2030, he will have received 55M in payments and he will redeem 50M.
Net worth in 2030 assuming zero expenditure is 105M.
Investor B (Rentals)
Guy builds rentals with the 50M in cash. Gets a return of 1% per month i.e 500k. This is a fair estimate.
In 10 years, the guy has collected 60M. This ignores all future rental increments for 10 years. If I include them, the return will be much higher.
This is the interesting part now. The investment cannot be worth 50M in 2030. It is probably worth 2X i.e 100M. 10 years ago, a bedsitter in Kahawa wendani ilikuwa 5k-6k. Leo probably ni double that figure. That is just an example.
Total net worth in 2030 ni 100M (equity) + 60M rent i.e 160M.
Note: The bond holder ignored inflation and calculated his return in absolute terms, that’s why he lost this battle. A bond-holder will ALWAYS underperform a real estate (rentals) investment in the long run because he is not protected from inflation. His principal has zero upside. His interest is also fixed. Real estate prices rise to match inflation. Rents also rise to match inflation over time.
At this point kama hujaelewa please find a teacher akufunze. Nuff said.
Sijakataa boss. My point is when inflation hits,real estate inauma temporarily which is true and so is bonds permanently … but after economic recovery your bonds you had will still be worthless.
Someone who had bond in sudan pre inflation had bonds worth let’s say 1M giving a return of 10% a year translating to 10,000 a month )and I had houses generating rent to me for 10,000 a month…sawa? We are same here mimi na wewe.
Then inflation hits . Your 1m bond still remains 1m with central bank of sudan but it cannot buy as many things as it could have during pre Inflation (becomes worthless ) . On the other side I’m forced to collect rent of 1000 instead of the 10,000 I was used to before inflation .
Then 6 years the economy recovers. Your 1m bond with central bank will still be worthless because price of most of stuff have gone up. But I abba as a landlord will say now I can no longer collect 10,000 because the economy is doing good . I have to increase rent to 50,000.
At the end of the day real estate suffers the shock but the structure still remains for a better time. But pesa ya bond …hapana …its as good as the economy is good. Ikienda south the money worth also goes south.