Are you planning to retire early but need to know what can help you with that idea? You may be considering real estate vs. other investments in Kenya.
Well, this guide will show you the right path to follow to help you realize your dream of retiring early. You should make the right investment decisions when planning your future, especially during unpredictable economic times.
Now, you should understand this guide to know the pros and cons of various investment ideas in Kenya.
Should You Consider Real Estate in Kenya?
You can invest in multiple types of real estate in Kenya. However, each type's return on investment varies from the other.
But you can try it because
Once you invest in real estate, you are actually planning for future survival. And this fact is rare with other investment types in Kenya.
The land is always appreciating, no matter the rate, since the price is never constant. As a result, the property also appreciates as time goes by. That's why you can make lots of profit in the future after investing in property today.
REITs allow you to invest in real estate without direct involvement. Your only job is sending the initial investment and waiting for annual returns from the REITs company.
Real Estate vs. Other Investments
Real estate vs. Stocks
A Stock market like the Nairobi Securities Exchange (NSE) allows individuals to buy shares at different companies without possessing millions of money.
The stock markets consist of publicly traded companies, governments, and corporates that sell their shares. These companies raise extra capital for the expansion and running of their businesses.
The NSE allows potential Kenyans to hold shares in the country's big companies. At least, buying shares ensures that dormant funds are out in circulation, building the economy.
The stock market buyers earn through dividends which they get each year. However, some buyers trade expecting the stock market prices to escalate in the future, though it's not promised.
These capital-oriented individuals sell their shares when the prices increase and gain profits.
Investing in the stock market is good for investors with little money. However, the biggest disadvantage is that the stock prices can reduce, companies can become bankrupt, and investors lose in this case.
That's why commercial real estate investment is a better choice in terms of reliability than the stock market.
Real estate vs. Cryptocurrency
Cryptocurrency involves trading digital currency assets. Unlike the stock market, crypto traders do not become partial owners of the coins like Bitcoin after buying.
Cryptocurrency is also not regulated by a body like the Central Bank of Kenya, which means any law does not protect the traders. As a result, crypto trading is among the most volatile markets in the world since no one controls what happens to currency exchanges.
The predictions could go wrong, so big investors can make lots of losses. However, increments could make you a millionaire with just a few clicks.
Since the risks outweigh the benefits, investing in real estate has lesser risks than crypto is better.
Real estate vs. REITs
Real estate investment trusts (REITs) are companies that pool funds from interested public participants and invest them in residential, commercial, or industrial real estate. They can invest in buy-to-let or buy-to-sell real estate investments.
The investors earn a percentage of returns from the rental income or profits from sold properties. As a beginner, investing in REITs is easier since you don't have to buy and manage the property, which is challenging.
Being a REIT investor can also help you learn a few things about real estate, such that you can invest in property.
REIT investment poses a lesser risk compared to real estate investment since you'll earn profits passively. However, they are short-term compared to real estate since those REIT companies can become bankrupt due to poor management.
Real Estate vs. Mutual Funds
Mutual funds are companies that pool money from individual investors and invest it in stocks, bonds, or short-term lending.
Investing in short-term lending could pose a greater risk if the borrowers have lousy credit scores. Once they default, investors will lose their money in the mutual fund.
In addition, investing in stocks also poses a risk in case traded companies go bankrupt.
Bonds are issued by the government when they want to raise a certain amount of cash. The government pays the bond interest twice a year. The Central Bank of Kenya (CBK) auctions treasury bonds annually.
The good thing about mutual funds is that you don't need much cash to invest. In addition, long-term mutual funds could earn higher returns than real estate investments.
However, real estate is more secure than mutual funds since the property appreciates, unlike stocks which can reduce in price.
Bottom line
As you've seen, other investment types pose a more significant risk than property investment. Real estate investment is an excellent way to secure future financial freedom. Although you need lots of money or a mortgage to invest in real estate, it's always worth the trial.
Frequently Asked Questions
Is real estate better than stocks?
In terms of security, real estate is better, and it's also less risky than stocks. In addition, real estate investors can take loans against their property equity to reinvest in other ventures. Furthermore, real estate investment in rental property provides a long-term passive income.
Which grows faster than real estate?
Throughout history, stocks have had a higher growth rate than real estate, which makes it a better way to grow money faster. However, that doesn't make them less volatile.
Is real estate a good investment?
Well, every investment has risks. That's why you should learn fast about real estate before investing. Learn about the best locations where you'll experience fewer vacancies. Remember, wrong location choices can bring negative cash flows and leave you with unpaid mortgages.
