sparkly wrote:Wakanyugi wrote:sparkly wrote:MugundaMan wrote:Mike Ock wrote:High end rentals are nowadays making zero sense in terms of time to break even. But most of the money in the high end wasn't really looking for a quick return anyway.
Depends on what you mean by "break even"
I personally do not even look at rental yield as a factor in Kenya given the nature of cost structure in the industry. If you buy a 30m apartment for example and then hope to "break even" on the rents soon, you might be waiting decades. But what you lose in rental yields you gain in cap gains. This is why you are absolutely correct to say money in high end is not looking for a quick return (cash flows) and are very happy to wait 3, 5, 10 and even 20 years+ to make their
real mint.
Buildings depreciate and in 20 years the apartment is half way through its useful economic life.
I think you are stretching this accounting fix to unreasonable levels.
I bought a house in 1997 for 2M. According to you it should now be worth less than 1M. Yet recently I got it valued, on orders of a Bank, the best accountants there is.
Value? 18M. Where has your depreciation gone?
Have a look at the valuation report. It reads something like this:
1. The land is registered as Title xxxx located at yyyyy in use as zzzzz.
2. Tenure is freehold/leasehold with unexpired term of aaaaa.
3. Conditions of the buildings thereon is bbbbb.
4. Encumberances (if any) are ccccccc.
5. Our valuation for land is ddddd and buildings eeeeee.
Stop being a desktop accountant and live a life.
Property movement schedule is better.
Revaluations indicate the building is on steroids and is growing young like molleybdinum titinium steel alloys kama hile ya reli ya mkoloni. Kaa hapo na depreciation, if u still don't believe old is Go-old.
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Valuation techniques
Most popular are in order of highest preference
1. Quantum method
2. Replacement cost minus depreciation
3. Discounted cashflows etc
,Behold, a sower went forth to sow;....