I have done my math and it points to the fact that if one is disciplined enough to invest each month in the stock market the equivalent of what they would pay in mortgage; they would eventually come out ahead.

Let me illustrate.

Sam and Tim both have the ability to invest Kshs 50,000 per month.

Sam takes out a morgage which eats into the entire Kshs. 50,000 each month.

Tim invests Kshs 30,000 each month without fail and rents for Kshs. 20,000.

With Real Estate appreciating only single digit figures over the longterm whereas stocks appreciate by double figures. I can bet you that if Tim remains disciplined, he will own stocks worth much more than Tim's house in the long term.

if both were on cash basis investing cash at the stock exchange and investing on house, i believe Sam would have been better off, but on the current senerio Tim is better off

imo.. renting also has medical factors such as stress which will have to be accounted for! in addition, if there is a family involved, financial security will need to be considered, as stock volatility is for individuals to bear, not an entire family!

consider the risks of investment too.

consider time of entry into the market. Houses that were going for 6m in kilimani/kileleshwa etc areas is now worth more than double that right now..... not sure if Shares would have given that return considering 360k investment every year.

For an 8% rise in value of house you will require roughly a 13.33% rise in your share value....

In some instances, when you want to pull out of the market, you might find it easier pulling out of the real estate market than in shares. Let me explain.... though it may take some months, in the current market, you can still find someone to buy your house, and a higher value than you bought it.... you can even decide to rent it out and move to a cheaper house if need be.... with the shares, if you invested in AK @35, you can only burn your fingers by pulling out if there was no averaging down... and even with averaging, you could just recoup the capital if the market is not bullish enough...

Well, i bet there are many factors to consider for both markets. Stocks have their positive side too.

I personally just can't get enough of this issue - always turning in my mind. Just a quick reference to when it last came up...

Do our perspectives change with time?

Jun16, 2010 SHARES versus REAL ESTATE

Apr06, 2010 Best long run investment