If you have a quarter acre plot that you want to develop, should you take a bank loan to build your apartments or should you grow your money to build it?
If it were up to me, I would use the title deed to borrow money from the bank for a business, but not to build rentals.
If you borrowed 10 Million from the bank to build one bedroom units in the same plot, you would probably just build 10 units if each unit costs you Ksh.700,000 to finish plus the perimeter and other amenities.
If you rent out the units at Ksh.7,000 each, it gives you Ksh.70,000 per month. This is equivalent to Ksh.840,000 per year.
If you were to commit 50% (assuming) of your income to repay the loan and interest, you would need to pay Ksh.35,000 per month for 24 years to repay the loan. This mean your 10 units only gives you Ksh.420,000 per year.
All you have is the pride of being a landlord but broke and miserable.
You’ll be having the pressure of trying to impress your friends since they think you’re a baller. You’ll get a nice car to match your status and sink further into debt.
There are people servicing 25 year loans while breaking their backs unable to quit their abusive work environments because of loans.
They become good candidates of mental health issues such as depression, lifestyle conditions such as alcoholism and High Blood Pressure and Ulcers. This in turn makes them absolutely unable to find value from their property or income.
All this while your title deed is living inside a bank vault with auctioneers ready to come and make your life worse. It becomes a vicious cycle which many don’t want to admit.
A bank loan is not your ticket to being a rich landlord. Its a ticket to your stress.
If you want to develop your property using banks, then use the title deed as collateral to get smaller amounts which you can flip into a practical business and generate enough money to either start 50 percent of the project by yourself and negotiate lower rates from a financier or to build it cash all by yourself and enjoy your earnings.
What if on the same quarter acre you buy 10 good Friesian cows at Ksh.150,000 per cow.
Fresians go upto Ksh.1 million per cow but let’s go with the common average fresian cow.
Every hotel, home, school, business needs milk and milk by products on a daily basis.
Each Fresian cow will give you approximately 15L per day. (Fresians are known to produce as much as 50L per cow per day or more)… But let’s assume you’re a startup farmer and not yet equipped to make good yields.
If you sell 150L per day to the local market, at 40bob per liter then your 10 cows can earn you Ksh.6,000 per day.
So, your 10 fresians that costed you 1.5 million to buy now gives you a total of Ksh.180,000 per month.
Using my own experience I can deduce that each cow will spend about Ksh.3,000 on feeds and supplies per month if you haven’t grown any hay or grasses, and your farmhand could cost you Ksh.8,000 in salary (he steals kidogo milk per day anyway but it’s ok)…
So with a capital of 2 Million which is cost of 10 fresians plus cost of construction of a simple but efficient zero grazing unit that takes up very small space, with good supply of water and chaff cutters etc, you’re making Ksh.180,000 gross per month.
If you deduct your expenses and remained with Ksh.150,000 a month, you’re making 1.8 Million a year.
You can repay your entire loan in just one year if you were to dedicate every coin back into the loan.
With a quarter of an acre you still have space to grow some grasses in rotation to supplement feeding or if you rather buy all the feeds you can still keep chicken on one corner of the walled property and earn extra income from eggs which can pay your bills.
So, you look foolish with your cows while your neighbour has flashy apartments next-door…
*His income per month is Ksh.70,000 gross.
*His annual income Ksh.840,000 gross
*His loan repayment per month Ksh.35,000.
*His annual income net Ksh.420,000
*His net income per month is Ksh.35,000
*His utility bills… Who knows.
*His loan duration 24 years
*His loan 10 Million
*His happiness level Minus 10
Your income per month Ksh.180,000 gross
*Your net income per month Ksh.150,000
*Your annual gross income 1.8 Million
*Your total loan 2 Million
*Your happiness level plus 10.
You can live free and smile every day holding a bible and quoting verses while your neighbour will hire twitter bots to smear you at how corrupt or criminal your enterprise is.
It’s because modernity has made many blind to practical money making solutions.
You may have a known salary as a receptionist, but your side hustle can make you park a Lexus 570 next to your boss in the company executive parking lot and your noisy colleagues will call for your lifestyle to be audited.
Don’t be a slave to indoctrinated methods of growing money, start flipping your thoughts today.
Retire your ego, close your eyes and take a leap of faith in order to stay focused on your goal of being richer
*Written By*: Justine Nyachieo
Business Man & Mentor
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