Today I begin by apologizing for the hitch we had in the last two weeks. Our newsletters came to you late due to a technical hitch in our email server. We are sorry we had to burden you with 2 newsletters at the same time. Technology is a challenge when my IT expert is engaged elsewhere.
Today come with me we unpack the truth about investing in property where most of us sink our money. We borrow to invest in plots and houses. Much of the loans from Saccos go to school fees and in plots. It becomes dead capital. It is sad that our middle class continue investing in property even when the numbers do not add up. We are in the era of big data. We can choose our investments wisely if we learn how to process data. The business daily this week brought this to us.
This report on price of land per County brings it home. It shows that nationally, land prices increased by an average 7.37% in 2017 and inflation was at 8%. This left those who invested in property with a negative balance. The price appreciation for 5 years 2013 – 2017 is even worse. The highest appreciation was 14.72% in Kiambu County. For a full 5 years!!! This means that for every 1 million invested in Land, the owner gained only 140,000. This is 28,000 per year or 2.8% annually.
This is a very low return if you factor in inflation was 8%. Factor in capital gain tax and other charges like survey fees and land transfers. Add the broker’s and legal fees and you are left with nothing if not a loss. Why do we all troupe to buy land surely?
In Azima Wellness we demonstrate to our members there is no money in property. It is a hype created by smart advertising. Maina Kageni is tops in this game. The middle class listen to him and just buy without crosschecking. The truth is he is doing a job that is paid for but emotions make us buy. The vernacular stations take it to another level. The kikuyu TVs call them “buroti maguta maguta”. This is a smart way to use emotions in marketing. We become emotional buyers and our money becomes dead capital instead of going to productive sector. Try disposing a plot and you will agree with me what you have is dead capital.
However there are better opportunities to invest in. Let us compare appreciation of capital invested in stocks against land. All the top 20 counters in 2017 when land appreciated at 7.35% recorded an appreciation of over 50%. This means for every 1 million you invested, you gained 500,000+. This is good passive income. Just buying and hold like with land. Those who were actively trading made even better returns.
This 50% is on value appreciation alone. Add dividend for the year to get the full amount gained. It only require a CDSC account to invest in NSE. In Azima Wellness, we offer training and advise our clients how to pick stocks and when to exit a counter. This is an easy way to make money.
Another option I recommend for passive investment is to lease land and plant trees. To lease agricultural land cost 10,000 per acre annually. Those who planted trees in 2013 are about to harvest. The demand for trees is at its highest peak now. Tea factories use firewood to cure tea. Most schools and hospitals use firewood to cook and boil water. Kenya power need posts for powerline extension. Construction industry is the biggest consumer of tree products from fencing plots to making ladders and for shatter and timber. Even the Government had to stop harvesting of trees because we are not planting. We like everything instant?
It bothers me that we are okey paying a mortgage for 20 years but we cannot wait for trees to mature in 7- 10 years.
Why are we wired for convenience??
To be continued next week. Keep it here…
With profound regards,
Founder and CEO
Azima Wellness Consultants LTD
Conference Speaker & Corporate Trainer in Total Wellness.