Kenyans’ obsession with owning property doesn’t always lead to a handsome reward

Better return

You will have to raise your rent in order for you to get a better return, which is a very unlikely scenario where there are plenty of rental properties competing for the same clientele.

It is at this point that I expect those of you doing feverish calculations on your own investments to argue that actually, you bought the property for capital growth prospects and not for the rental yields.

Using the same example then, the property whose market price has moved from Sh10 million to Sh12 million has appreciated by 20 per cent in one year.

If you decide to sell the property there and then, assuming that there are no costs to the sale such as legal costs etc for purposes of this example, then you will have made a return of Sh2 million on your total investment of Sh5 million (remember your bonus payment into your mortgage counts towards your equity) or a 40 per cent return using the bank’s money.

However, let us call a spade a spade: just like it is in the scorpion’s nature to always sting, it is the typical amateur property investor’s nature NOT to realise the gain on the investment and to sit tight awaiting an even higher property price.

Strangely, even doing the above math does not dissolve our emotional attachment to property investing.

Only a property market crash will crystallise the sting of missing past opportunities to realise investment gains.

Carol.musyoka@gmail.com