16/10/2023
Investing in Real Estate: Building a House in Zambia vs. Creating and Selling a Website or Newsletter
When considering investing in real estate, two options emerge for generating profit: the traditional route of building or flipping houses, or the more modern approach of creating and selling digital assets like websites and newsletters. In our globalized, tech-driven world, the latter may seem like the smarter investment given lower barriers to entry and the ability to sell products at scale. However, nuances across markets and models mean the better option comes down to context.
This analysis will compare and contrast building a 3-bedroom house in Lusaka, Zambia’s capital and largest city, versus creating and selling a website or newsletter priced equivalently to such a house. We will examine market conditions, startup and operating costs, monetization and profit potential, scalability, risks, and other factors that impact return on investment (ROI). While subjective preferences and risk appetite also play a role, we will focus on objective measures to judge which offers the better ROI.
The Zambian Housing Market
In recent years, Zambia has experienced solid economic growth of around 4% annually, including through the pandemic. It has relative political stability and its urban population is expanding at 4% per year as part of broader urbanization trends across Africa. However, it remains a lower-middle income country with high poverty rates.
This provides a growing market for affordable housing, however demand outpaces supply. There is a housing deficit of around 1.5 million units nationally, concentrated in urban areas like Lusaka. Residential rents average around $500 USD per month for a 3-bedroom property.
Construction costs are quite high, given import costs for materials and relatively high local labor costs. Building a modest 3-bedroom bungalow costs $200,000-$350,000 on average. Selling prices depend on location but top-end properties run $300,000-$500,000 in prime areas.
Mid-range properties of $150,000-$300,000 likely provide the best ROI. They balance attractive margins with sufficient demand from Zambia’s small middle class. With limited mortgage financing available, homes mostly sell to cash buyers.
Website Model
A basic website with quality content costs around $15,000 to develop, including design, copywriting and technical implementation. Ongoing expenses like hosting and maintenance add up to around $500 per month.
For a website to sell at prices equivalent to Zambian homes, from $150,000-$500,000, it would need to cater to a high-value niche and monetize through channels like premium subscriptions, virtual courses/coaching, or digital services.
Popular niches span industries like business, investing, marketing, and tech. Topical sites on blockchain or AI could also fit this premium model. The buyer would be an individual or company willing to pay substantial sums for specialized knowledge, data and tools.
Such a site could feasibly generate $50,000 per year in profit, which translates to a 3-4x multiple on a $150,000-$200,000 sale price. There are few examples of sites selling for $500,000+ outside of industry-specific businesses.
Newsletter Model
Launching a newsletter costs little upfront—a free provider like Substack suffices initially. Ongoing expenses are negligible beyond the creator’s time.
Like websites, newsletters demanding premium prices focus on high-value niches. A paid subscription model is common, such as $10-$100 per month. Top newsletters earn up to mid-six figures annually.
One recent trend is creators selling their whole newsletter business. Reported sales span $300,000 to low seven figures for the largest ones. This suggests a newsletter could plausibly sell for $150,000-$500,000 based on comparable income multiples. An individual or company acquires the intellectual property, subscriber list, brand authority and monetization model in these deals.
Comparing ROI
Based on this analysis, creating and selling a website or newsletter in the $150,000-$500,000 range offers a superior ROI to building and selling a house in Zambia in the same price range, for several reasons:
- Lower startup costs - $15,000 to build a website or near-zero for a newsletter, versus $200,000+ for a house. This allows testing ideas and models without major upfront investment.
- Wider customer base - A website or newsletter can sell globally, whereas the Zambian housing market is still developing. This enables access to more potential buyers.
- Scalability - Digital products can be sold again and again with minimal incremental costs. In contrast, each house requires full re-investment in construction.
- Shorter time to market - Websites and newsletters can be built and sold in under a year, while a house takes 1-2 years to construct before selling. Speed to positive cash flow favors digital.
- Lower overhead - Websites and newsletters have minimal operating expenses, while houses incur maintenance, utilities and other costs.
- Lower risks - Digital products avoid risks like weather, theft, regulations that can delay or increase the costs of housing construction.
- Easier exits - Websites and newsletters can be sold remotely online or via brokers. Selling houses involves lengthier legal processes.
- Repeat customers - Digital products allow for recurring revenue through ongoing access fees. Houses are typically one-off purchases.
The main advantages of housing are leverage from financing, and more limited competition currently versus the endless digital space. But for an investor focused on maximizing ROI, websites and newsletters appear superior given much lower costs and friction to scale up profits.
Monetization Models
Websites and newsletters must monetize smartly to command the equivalent sales prices of Zambian homes. Some proven models include:
- Paid subscriptions - Users pay a monthly/annual fee for access to exclusive content. Works best for highly specialized, high-value information.
- Affiliate marketing - Earn commissions by promoting or selling other companies’ products. Requires extensive trust and authority.
- Sponsored content - Get paid by brands to create and integrate promotional content. Needs substantial traffic or influence.
- Advertising - Display ads through providers like Google AdSense. Requires very high visitor volumes to earn serious income.
- Consulting/coaching - Sell your expertise through 1-on-1 consulting sessions or group coaching programs. Leverages personal brand.
- Virtual courses/communities - Offer online classes, workshops or private community access for a fee. Can be highly lucrative.
- Digital products - Sell info products like eBooks, templates, toolkits, graphics, music, videos. Low incremental costs to scale.
- Services marketplace - Connect clients to freelancers offering digital services like web design, marketing, consulting, etc. Earns commissions.
The most profitable model harnesses “creator economy” dynamics to build a personal brand and sell knowledge, access and experiences. This can command premium pricing. Selling digital advertising or purely ad-driven models rarely achieve high multiples.
Key Factors for Success
Based on precedents of top-earning websites and newsletters, here are key ingredients needed to justify a $150,000+ sale price:
- Strong brand and community - Build an audience emotionally invested in your work. Focus on quality over quantity of followers.
- Specialized, high-value niche - Target audiences willing to pay premium prices, like executives, entrepreneurs or specialists. Avoid mass consumer topics.
- Diversified income streams - Combine a mix of subscription income, affiliate sales, ads, products, and services to increase profitability. Don’t rely on a single monetization stream.
- Very engaged audience - High interaction and low subscriber churn indicates you’re providing extreme value. This metrics boosts valuation.
- Personal authority - As the face of your business, you need to establish credibility and trustworthiness to persuade followers to buy from you.
- Business infrastructure - Develop solid tech, sales, support and legal foundations so the business functions professionally if acquired.
- Successful track record - At least 1-2 years of growing revenue and audience. New efforts won’t attract serious buyer interest or valuations.
With the right combination of monetization model, audience, branding and infrastructure, building a digital product business can certainly generate higher ROI than constructing housing for the Zambian real estate market. But it requires skill in both technical ex*****on and cultivating a highly engaged community, which takes time to hone. The hands-off nature of housing investments may still appeal to less technologically-adept investors despite lower profit margins. But for investors able to navigate the digital landscape, websites and newsletters present a superior opportunity.
Risks and Challenges
While digital products promise better ROI potential, they come with their own unique risks and challenges that could compromise profits:
- Fickle audiences - Followers freely shift allegiances, unlike housing tenants. Maintaining loyalty takes continual engagement.
- Changing algorithms - Platforms like Google and Facebook frequently update algorithms in ways that can tank organic traffic and discovery overnight.
- Scale challenges - Serving 1,000 digital subscribers isn’t radically different from serving 10,000. Housing units create incremental profit.
- Churn risks - Users easily cancel and resubscribe month-to-month. Long-term revenue stability is harder than fixed tenant leases.
- Cyber threats - Hacking of data, identity theft, piracy and other cyber risks can disrupt operations and revenue. Physical assets are more secure.
- Platform dependence - Reliance on third-party platforms like Shopify or Stripe adds risks of policy changes, violations causing account cancellation, lack of direct control.
- Legal exposure - Digital businesses face risks like copyright infringement, libel, or lack of disclaimers or terms of service. More operational landmines than housing.
Mitigating these threats requires constant platform monitoring, security vigilance, legal protections, and reinvestment in content and products to keep audiences engaged. While homes come with their own maintenance needs, many digital risks stem from the inherent intangibility of websites and newsletters.
Digital businesses also face greater competition, given the abundance of free information online. Standing out enough to compel premium payments is challenging. Housing in Zambia’s supply-constrained market faces less direct competition for its core value of providing shelter and stability.
In summary, while the Zambian housing market offers a fairly reliable path to profit for investors willing to manage construction and ownership challenges, websites and newsletters built around high-value creator-driven models promise much stronger ROI potential.
Their lower startup costs, negligible ongoing expenses, scalability, speed to market and wider customer reach give properly executed digital businesses superior economic advantages. Just one successful website or newsletter investment returning 4-5x could match or exceed profits from building dozens of mid-range houses in Zambia over a much longer timeframe.
However, the volatility and high rates of failure in building successful digital brands means this higher upside comes with commensurately higher risk. Consistently profiting from websites or newsletters requires skills in technology, marketing, content creation, community building, branding and business management that traditional real estate investing does not.
Given the steeper learning curve and specialized expertise needed to mitigate the risks of digital, housing retains an advantage for less tech-savvy investors. There ultimately is no universally “better” option—the optimum channel depends on individual investor capabilities and risk tolerance.
Those able to navigate the digital landscape adeptly stand to reap outsized rewards compared to more modest housing profits. But traditional homes retain appealing stability that digital’s fast-changing nature lacks. Weighing these trade-offs allows investors to strategically allocate into models that best fit their strengths and desired balance of profit and risk.
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