Before you jump to conclusions, let’s slow down and analyze the numbers.
If you had access to Ksh 17.4 million for investment, would you:
- Take a 15-year loan to buy a rental property earning 8.3%, or
- Channel it into a Fixed Income Fund like Arvocap Almasi Fund returning 20% annually?
Let’s break it down.
Mortgage / Loan Details
- Loan Amount: Ksh 17,349,939
- Period: 15 Years
- Total Repayment: Ksh 37,481,116.80
- Total Interest: Ksh 20,131,177.80
- Monthly Repayment: Ksh 208,228.43
Option 1: Buy a 2-Bedroom Townhouse – 8.3% Rental Yield
- Property Value: Ksh 17,349,939
- Monthly Rent: Ksh 120,000
- Monthly Deficit: (208,228.43 – 120,000) = Ksh 88,228.43
This means your loan repayment burden will be lighter — you’ll only need to pay Ksh 88,228.43 every month.
After 15 years, you will have paid the property and have a constant monthly income:
- Total Monthly Income: Ksh 200,000
Option 2: Invest Entirely in a Fixed Income Fund (20% Return)
Instead of buying property, you invest the Ksh 17.35M directly into a Fixed Income Fund and pay your monthly loan installments (Ksh 208,228.43) from other income.
After 15 years:
- Future Value: Ksh 182,846,174.47
- Growth: Ksh 165,496,235.47
- Net Return (after total loan repayment): Ksh 145,365,057.67
If you then invest this amount at a 10% annual return:
- Annual Income: Ksh 18,284,617.45
- Monthly Income: Ksh 1,523,718.12
The Verdict
Keeping all other factors constant, the Fixed Income Fund outperforms the rental property by a wide margin —
Ksh 1.52M vs Ksh 200K monthly income.
That’s a difference of Ksh 1,323,718.12 every month!
Important Notes
- Property appreciation not factored in.
- Fixed Income Fund return assumed constant at 20%.
- Rental income assumed static for 15 years.
- You can also explore other investment options such as Special Funds, Infrastructure Bonds, or Money Market Funds (MMFs) for similar analyses.
Bottom Line
Numbers don’t lie.
If your goal is maximum growth and cash flow, the financial asset beats the physical asset hands down.
Now, tell me — if this was your Ksh 17.4M, which option would you take, and why?
