Income Stability Comparison
While treasury bills offer perceived safety, commercial real estate provides superior income stability and tax efficiency for long-term wealth preservation.
Treasury Bills (T-Bills)
- Yield: 10-12% (91-day), 12-14% (182-day)
- Tax: 15% withholding tax
- Stability: Government guaranteed
- Liquidity: High (daily auctions)
- Inflation Protection: Limited
- Effective Yield: 8.5-11.9% after tax
Commercial Real Estate Leases
- Yield: 8-10% net annualized
- Tax: 5-15% on distributions
- Stability: Contractual obligations
- Liquidity: Low (long-term holdings)
- Inflation Protection: Rental escalations
- Effective Yield: 7-9% after tax + appreciation
Why CRE Wins for Long-Term Investors
- Inflation Hedging: Rental income escalates with inflation
- Capital Appreciation: Property values increase over time
- Diversification: Real assets vs. government paper
- Tax Efficiency: Through trust structures and depreciation
- Legacy Benefits: Generational wealth transfer
Risk-Adjusted Returns
5-Year Performance Comparison (Hypothetical KSh 100M Investment)
| Metric | T-Bills | CRE Leases |
|---|---|---|
| Initial Investment | KSh 100M | KSh 100M |
| Annual Income | KSh 9M | KSh 8M |
| 5-Year Total Income | KSh 45M | KSh 40M |
| Capital Appreciation | KSh 0 | KSh 25M (25%) |
| Total Return | KSh 45M | KSh 65M |
Tax Efficiency in Practice
Commercial real estate investments can be structured through trusts and holding companies to minimize tax leakage, often resulting in effective rates below 10% compared to T-bill withholding tax of 15%.
Conclusion
While treasury bills provide liquidity and perceived safety, commercial real estate offers superior long-term wealth preservation through income stability, inflation protection, and capital appreciation. For investors focused on generational wealth, CRE provides a compelling alternative to traditional fixed income instruments.