Fyatu wrote:Lets take a hypothetical situation of two different Kenyan employees earning a net salary of 70k each with a wife and one child in kindergarten..
Employee AB - a long suffering Kenyan in his mid-thirties aspires to one day own a home. He is more biased towards the buy-a-plot-and-build-own-house route.He has shopped around and can only find plots priced at 1.5 million(50X100). He has not enough savings to pay for the plot cash and hence has no otherwise other than take a loan. He reckons he can pay-off the loan in 60 months(kshs. 25000 plus interest).Once done paying this loan, he will take another one to build the house and hence in the next 10 years this man will have a house but with little liquidity(cash and other liquid assets e.g., stocks).
On the other hand, Employee BA - another weathered and battered Kenyan in his mid thirties buys Kenya power shares worth ksh. 25,000 every month for 60 months without fail. Assuming Kenya power shares never go up and remain at the current price of 4 bob in the next 5 years, employee BA will have accumulated 375,000 shares with a paper value of 1.5 million. If say after the 5 years Kenya power resumes paying its 0.5 cents dividend employee BA will be making a cool ksh. 187,500 per year or ksh. 15625 per month. If this is re-invested in the same Kenya power shares(assuming they remain at 4 bob) he would have accumulated a cool 975,000 kenya power shares(value = 975000 * 4 = 3900000). If the market one day irrationally or rationally decides to value Kenya power shares to an amount equal to today(Jan 2019) book value then you can guess who will be laughing all the way to the bank....
However, if the stories we are hearing from the "1 million invested near Nairobi 10 years ago thread..." happened 10 years from now, then Employee AB will also be a happy man.
So, the thrifty Mugundaman a.k.a LosAngeles-254 awachane na sisi watu wa kununua mbuzi(stocks) alafu baadaye zikizaana tutanunua ng'ombe(real estate). As he(Mugundaman alias LosAngeles) correctly states, most of us are employed by tightwad wahindis and can only buy real estate through loans which means that in all our working lives we might end up with one buloti with a poorly built house.
You have a gift for comedy my buradzee.
1. On AB. Hahitaji loan hata kamwe. I been preachin' hapa for a full year that nobody should take even one kobo (ndururu) in loans to get to paradise (DC). Iko kito naitwa INSTALLMENT PLAN for pulotis. You pay kedo 50k down and then as little as 10k a month and you are good to go. A few years later you own the plot clean. After that you just do your progress mdogo mdogo with the same money you were using to pay for the plot. Anza na fence. Then pay the architect, then pay for approvals, then buy your first trip of sand or kokoto (a joyful moment for first timers) hivo hivo until dream house is done. 70k is a LOT of money ma broda. I bet those who earn it though spend 20 of it on fombe and nyamchom and then cry they can only get ahead with loans. Disabuse yourselves of that myth. Inawezekana na itawezekana ESPECIALLY in DC.
2. On BA - You have a point on Shilling-cost averaging KPLC. Ubaya these mbuzis and nyanis are unpredictable my broda. All it takes is one big thief or scandal and huyoooo you hear KPLC is being wound up and your hundreds of thousands of shares are worth zero. The biggest mistake in life is to invest in an asset you have zero control over except a piece of paper saying you are a "part owne." People shilling-cost averaged Mumias to the skies. Some had MILLIONS of shares. Some cried that gava will NEVER let a company it owns a huge chunk of shares in to collapse. Wapi? Billions in bailouts later, that mkebe is worth a very round zero 10 years down the line. They are not crushing cane, not producing ethanol and electricity was shut off juzi juzi. Yet some are still buying the shares
Bottom line I will say it for the LAST time.
Real estate in Kiinya is the path of LEAST RESISTANCE in the wealth building ladder in Kiinya.
-Low risk
-You have control
-Hard to liquidate on impulse (capital preserving/land banking)
-Unmatched and STEADY appreciationg potential
And all this is a no-brainer in a DEVELOPING country that has HIGH HOUSING DEFICITS and a HUGE GROWING POPULATION that will need a piece of land to sleep on, eat on, conduct business on and even walk on yet no new pieces of land are being created except at Lamu port.
Ni hayo maoni yangu tu!