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Is Taking a Mortgage the WORST Decision Ever??
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MaichBlack
#61 Posted : Wednesday, May 07, 2014 3:40:18 PM
Rank: Elder

Joined: 7/22/2009
Posts: 7,910
McReggae wrote:
Highrise Mabagathi Way for a two bedroomed house:
1991 - Kes 700,000
2014 - Kes 3,500,000

15% pa ni ngumu kupata!!!!

Comaprison:

If somebody invested 700,000/= at a return of 25% p.a. he would be having a portfolio worth 17,460,372/= today.

=FV(25%/12,13*12,0,-700000,0)

He/she can then use 3,500,000 to buy a similar house in cash and remain with 14,160,372/= to continue investing.

Who's smarter now?

NB: I believe 25% return p.a. in the stock exchange is a modest return for a serious investor. But wazuans [Na sio wa buy, buy, buy. Sell, sell, sell] can weigh in on this by quoting their annual target returns and actual returns in the NSE to see if I'm being overly optimistic/pessimistic.
Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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earthvoice
#62 Posted : Wednesday, May 07, 2014 3:48:57 PM
Rank: Member

Joined: 1/29/2011
Posts: 257
MaichBlack wrote:
NB: I believe 25% return p.a. in the stock exchange is a modest return for a serious investor. But wazuans [Na sio wa buy, buy, buy. Sell, sell, sell] can weigh in on this by quoting their annual target returns and actual returns in the NSE to see if I'm being overly optimistic/pessimistic.

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"All intelligent investing is value investing -- acquiring more than you are paying for. You must value the business in order to value the stock." - Charlie Munger.
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githundi
#63 Posted : Wednesday, May 07, 2014 3:54:55 PM
Rank: Veteran

Joined: 11/19/2010
Posts: 1,308
Location: nairobi metropolitan
chip cards vs bar codes cardsLaughing out loudly Laughing out loudly Laughing out loudly Laughing out loudly hr]
MaichBlack wrote:
KenyanEconomist wrote:
The value of the house is independent of how you financed it, mortgage or not. If we say that Real Estate property value will increase by 15% over time, then the value of the 10m house will be ~200m in 20 years:

=FV((15%/12),20*12,0,-10000000)

And since we know from your earlier calculation that the total mortgage payment will be ~31m, I will end up with ~170m of value at the end of the 20 years.

The value of a house [especially at current] cannot increase by 15% p.a. over a period of time.

Land, yes if you get in early in a place that is just opening up. But not a 10m house!

You need data to prove the 15% not "if we say...". We can say a lot of things!

How much was the price of a house in Buruburu (for example) in the year 2000? How much is the same house going for now? Do the math.


Kwani that house is on the air or water? Any land that has been developed ie with water and sewer line in place even if the hse on it is run down is worth more than land with no infrastructure in place(access to roads etc). I recommend you search for a thread by Gordon Gecko*sp here on wazua, this topic was discussed then
[/quote]
have you seen the houses guys are buying at 10m+ Huko 5th floor. Divide the total land area by the number of units and see how much land you can lay claim to![/quote]
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Democracy does not belong to the dead
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mv_ufanisi
#64 Posted : Wednesday, May 07, 2014 4:03:47 PM
Rank: Member

Joined: 1/15/2010
Posts: 625
Taking a mortgage in Kenya is a death wish. There's a good reason why we have such few mortgages. If something happens in Kenya interest rates could hit 30%-40% and then suddenly your mortgage obligation is higher than your salary. If you want peace of mind, invest the money and once you're comfortable, buy cash or buy land and build.

@Maichblack the assumption of 25% pa over 20 years is too optimistic. I'd move that much lower to say 12%.
Here's why: you can start with 1M and get 25% a year for two years and then on the third year the stock market goes down by 50%. The result would be that you're down to 0.78M on the third year despite two stellar years.
20 years is a long time to enjoy such amazing returns especially in Kenya where something crazy could happen anytime. Also after your portfolio becomes big enough, you start running into liquidity problems and NSE capacity issues.
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knight026
#65 Posted : Wednesday, May 07, 2014 4:04:17 PM
Rank: New-farer

Joined: 1/3/2014
Posts: 32
Finally, guys are getting my point. The originator of this thread wants to cherry pick when it comes to share trade but not for real estate. If that is the case, lets get the statistics for 20 year period average rate of return for both real estate and NSE.
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knight026
#66 Posted : Wednesday, May 07, 2014 4:09:00 PM
Rank: New-farer

Joined: 1/3/2014
Posts: 32
kiwaru wrote:
d'oh! I met a guy who told me that he bought half an acre in Kile at 1m in 1981.

Recently it was valued at 100m

#dothemath



Do the Maths.d'oh!
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deadpoet
#67 Posted : Wednesday, May 07, 2014 4:14:35 PM
Rank: Member

Joined: 9/27/2006
Posts: 506
knight026 wrote:
kiwaru wrote:
d'oh! I met a guy who told me that he bought half an acre in Kile at 1m in 1981.

Recently it was valued at 100m

#dothemath



Do the Maths.d'oh!


Adjusted for inflation? That 1m at that time is probably worth the same as 100m now.
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knight026
#68 Posted : Wednesday, May 07, 2014 4:43:32 PM
Rank: New-farer

Joined: 1/3/2014
Posts: 32
Big names,not all rosy, and the assumption that one will never make a mistake is a fallacy.

KQ-11.25(1996)
Kengen-11.90(2006)
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MaichBlack
#69 Posted : Wednesday, May 07, 2014 4:53:11 PM
Rank: Elder

Joined: 7/22/2009
Posts: 7,910
deadpoet wrote:
knight026 wrote:
kiwaru wrote:
d'oh! I met a guy who told me that he bought half an acre in Kile at 1m in 1981.

Recently it was valued at 100m

#dothemath



Do the Maths.d'oh!


Adjusted for inflation? That 1m at that time is probably worth the same as 100m now.

Using a 1981 price is extremely misleading to say the least. Have we forgotten what happened to the value of our currency in 1992?? 1 million pre 1992, not even in 1981 was one hell of a fortune!
Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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a4architect.com
#70 Posted : Wednesday, May 07, 2014 5:13:28 PM
Rank: Veteran

Joined: 1/4/2010
Posts: 1,668
Location: nairobi
In Kenya, commercial real estate in prime area performs better than stock due to scarcity of land/poor land laws.

In developed countries eg USA, stocks outperform real estate since there is an over supply of prime land for development.
As Iron Sharpens Iron, So one Man Sharpens Another.
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  | | Edit by user: Wednesday, May 07, 2014 5:14 PM | Reason: Not specified
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