Buying vs Building a House - Pros and Cons

First of all, we can all agree on one thing. If you are an honest Kenyan working or doing legitimate business. There are 4 conditions which must be met for you to have financial freedom. All 4 conditions must be met:

  1. You eventually own the house in which you live in when you retire. Whether in Nairobi, near Nairobi or in Shags
  2. You have at minimum 1 other house in a gated estate giving you substantial rental income.
  3. You have educated of all your children and none of them is financially dependent on you in adulthood.
  4. You are debt free.

If you have not met all 4 conditions and are driving a 2,000CC or above car or a car worth over 1 Million, you are living beyond your means. Even if you own a prime plot in Runda and those four conditions have not been met, you are living a fantasy life because if things go south you will have to sell your land and go through the 4 conditions above.

So point number 1 is, IF YOU ARE A TENANT AND YOU OWN A PIECE OF LAND THAT YOU HAVE NOT DEVELOPED OR ARE PLANNING TO COMPLETE BUILDING WITHIN 12 MONTHS, just go and get your head checked. No amount of preaching about land appreciation will change the fact that you have made a bad decision. If you get a serious problem(cancer, long term job loss), the only way for you to get cash is to sell your land and that process takes time and has it’s own risks. Sawa sawa kina @Randy ? hehehe. It is okay to own land, but you should only do this if you are planning to COMPLETE building a house on that land within 15 months.

Secondly point, if you are below 45, there is no point building your dream retirement home. You would rather buy an apartment or house in a gated estate which are in places where you can rent out. You can buy one, live in it as you clear it’s loan…or rent it out and use the rent to pay off the loan. It is important that this is in a gated community because statistics have shown that tenants prefer living in gated estates where their kids can play with other kids, there is security and common services. A house you build for yourself will either stay vacant coz of low interest from tenants, or you will get very little rent. Build your dream home when you have retired.

Thirdly, your children grow up, go to school and move out. If you build a 4 or 5 bedroom mansion when you are in your thirties, you will only need 1 bedroom on most days when you retire. You also need to know that the older you get, the more difficult it is to climb stairs and the more vulnerable you are to diseases and being on a wheelchair. You will have an big empty expensive and aging house when you are in your later years of life. You or your wife may also struggle or be unable to go upstairs. Wait until you are mature so you build a house which is just enough for you and your spouse to live in when you are in your older age. This is why it is better to first buy apartments which you can rent out before building your house.

Forth, if you build your dream home before you hit 45, it just shows you lack ambition and you are not progressive. A serious young person should be thinking about progress every few years. Every 5 years, you should be moving from your current house to a better house. When you are 30 years old and you tell us that you have built your dream home in Kitengela, Ruiru, Juja then there is something wrong with you. As cities expand better neighbor hoods become accessible and you will want to live in these better places. It shows you have accepted that you do not want to put in effort to keep progressing to more affluent neighbor hoods.

Five, selling or renting a house you have built is not a joke. Just go to Syokimau, Ruiru, Kitengela and look around. There are many people who built serious mansions on eighths and quarters and they either retreated to the village or got better income and moved to more affluent areas and now they have big mansions which they get 20k rent, 30k rent and struggle to get tenants. It is better to first own houses in areas which are gated than to spend money building houses.

Six, land which you own or plan to build on in more than 15 months is wasted money. If you have a piece of land and for the last 5 years you have been saying you will build a house. Or wewe ni wale unaweka foundation then 6 months later ndio unaanza ukuta, you are losing a lot of money. Even if your land appreciates, a big part of that appreciation is being wiped out by the rent you are currently paying. Anyways, apartments and houses in gated estates ALSO appreciate in value…check the statistics. Appreciation is not something special that is limited to plots in Kitengela, Juja, Ruiru, Syokimau, Kamulu and so one…you will be shocked to know that most apartments double their value over the years as the owners collect rent or live in them.

Seven, in your older years, you need cash flow. When you get older, it gets harder to run up and down chasing deals, employment opportunities become harder to get and chasing money remains a young persons game. You want to just collect rent without alot of hustle and running up and down. If you own a house you have built, but you do not have another house in a gated estate bringing in rent, you will not be satisfied. If you own land in your older years and you get cancer, the chances are that you will sell your land for treatment at a throw away price because you will need the money urgently. However, if you own the house you live in and have another house giving you steady rent, the cash can go a long way to help you get start getting treatment.

Eight, you are not Jomo Kenyatta. If you happen to die before you get old and leave you young children plots in most of these places. Those plots will be sold to educate them and in no time that money will be gone. You already know how cash just vanishes in no time. However if you leave them with apartments which they can collect rent, the guardians can keep your kids in schools even if they have to downgrade the schools the rent will be able to educate and feed them. Try and be abit calculating as you build wealth. Better to leave your kids a house to live in and a rental income.

Conclusion, it is fine to buy a plot and build your dream house. But it is better to first own an apartment or two and then build a house. There is no right or wrong approach as long as all 4 conditions are eventually met. This post is targeted at average Kenyans doing legitimate business. I am not talking about those from wealthy families and those who engage in corrupt deals to get windfalls. This is not targeted at people who can afford to build blocks of apartments when they are 30.

Best regards,
Uzito.

some good news here pewa mzinga kwa bill yangu

Why is everyone into apartments nowadays? Teach your kids to invest not just on some goddamn substandard rental building with a lifespan of 45 years. Teach them to be educated, wise farmers and above all, politicians.

Mzito, good advise albeit a bit utopian to expect a kenyan of average income to be able to afford to buy a house in a gated community or an apartment at current prices… and not lose it somewhere along the topsy turvy economic climate that we live in the modern world…

The tried and tested route is to grow slowly…

  1. find affordable land in a controlled development hood, with strict clauses on the type of developments and a clear urban/physical zoning land use plan… so that you are assured future developments will reinforce the value of your property and not kill it… of course, don’t buy near a proposed future dumpsite or land designated for a future sewerage plant…

  2. build your pigsty pole pole tuu… the race is not to the swift nor the battle to the strong… bite what you can chew, or as other elders before us famously said, he who swallows a coconut has faith in his anus…

  3. If you see an elephant on a tree, trust me, run. You don’t belong there… because as a person of average income, you do not qualify or cant afford in getting entertained by the spectacle of elephants on trees… otherwise in the fine print you will shed premium tears…

  4. I agree with any, or all of your points that are not contradictory to the above pieces of age old wisdom…

@byro We are talking about sustainable income for retirement. Unataka kukua 50 years old unabeba jembe kwa mgongo? Politics for most is a zero sum game, you spend money to campaign, you win the election, recover your money and you spend it again on the next campaign. Only thieves survive politics. My points are about housing…unaweza fanya thready ya making money from farming na politics, hehe.

Check the market, there are small apartments worth 3 Million, studios worth 2M and bedsitters and 1 bedrooms worth 1 to 2M. target areas like Rongai, Athi River, etc…life is about progress. You start with the affordable ones and gradually get more convenient ones. Ukifutwa job sai would u rather have a house in Rongai where u dont pay rent or have a pig sty with a foundation only?

When you build your pig sty pole pole, you actually lose money especially if you are paying rent as you build. You would rather earn interest on the money than take a long time to build. Or save the money and when you are ready to build, but a plot and build mara moja, even if the plot will be slighltly is more expensive.

Ur third point, these things need sacrifice and courage. If you always fear to take small steps and stretch yourself abit, you will not have financial freedom.

But I see your point of view.

I agree with you actually on general context but what am talking about is leaving behind a system that will work for you and your generation considering most inherited Kenyan businesses lack proper functional systems to last them a decade. Farming can be mechanized and established in a way that your future generations will have to continue with the tread, it shouldn’t be trashed(Actually i will make a thread about it).
I am giving politics and rental example because as Kenyans we lack substance, dwelling on what looks profitable in the long run forgetting in that long run its not sustainable change in demographics, bad politics and natural causes cannot be taken for granted.
What am challenging not just the author but everyone is to come up with more creative and better ways .

Very interesting if this indeed exist, I would imagine the profile of a person able to finally think in terms of buying or building a house is someone who is ready to, or has settled down with a wife and child on the way or two… and inadvertently his requirements would certainly be more than a bedsitter, a studio or a one bedroomed apartment… That said, unless he were to get a windfall he would be resorting to financing… if we work with your 2M loan that amortises to circa a repayment of 60k per month for 6yrs… that does not seem like a favourable comparison to a rental of 25-30k per month which is the practical and average rental income/expenditure for a person of said profile, living somewhere in a two bed apartment or a 3 bedroom own compound gated community…

Land values in kenya are such that every 4yrs the land buying price has likely doubled or approaching double, if you bought strategically… How long do you think a kenyan of average income is going to take to save up, even while earning interest on savings, to double his savings in order to buy and build instantly?.. in a utopian world, maybe I guess?..

we are in agreement kabisa in most of your points, just in the practicality of application ndio iko kizungumkuti kiasi… from my observations…

If the profile is paying rent, he or she cannot escape the need for housing. It is better to start with a bedsitter they can rent out if the other houses that meet his needs are beyond his reach. Better a small house giving rent than no house.

If the land price doubles and you are paying rent, and even if it triples and you are paying rent and don’t have a house of your own, it is not worth it. You may make profit when you sell it, but you will sell it to buy another property which will also have tripled in value.

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Mzito you are SPOT ON…these are the kind of threads that make us grateful we joined this forum.How about buying acres in kajiado interior and waiting for growth in a couple years to sell?

You do your thing I do my thing and I promise the results we be out in a few yrs … you will try catching up but you will not come close.

Uzito…pole i misspelt

You have got to be practical in buying in such an area… you must have key selling points that will ensure you are buying in a growth area… for example, upcoming roads not a superhighway or SGR… proximity to schools, shopping/trading or admin centres, security installations,… You must look at the Physical development plan for the locality you are interested in and see what intentions gava has for the area… so that you can decide whether it will eventually grow as per your vision and within the timelines of your investment projections’ ROI…

And then you may also initiate the whole process by designing your acre subdivisions and introducing development control clauses in your sales agreement and have them enforceable by the local government planning departments in the event of future transfers of ownerships…

Upcoming roads NOT super highway or SGR i hear you

Unapenda RE sana. I have noticed you have a very soft spot. What is your story…

Heheh…years ago, I used to think like you because I didn’t know any better. That A+B+C = D. Life is not that structured and linear my friend. There are lots of moving parts. There is no single bullet proof approach to life. Everyone has his/her own best path based on personal circumstances and interests. What you just typed is YOUR own truth. Another guy will tell you that he speculated on a plot and sold it 10X to some supermarket or whatever in 3 years. People can use different paths to reach a destination.
With that in mind, my truth is that the only constant in life is the need for money. Therefore, rentals are the holy grail in my opinion for cashflow reasons. Someone else may prefer building their own house first, and they may or may not be right.

Azor i WISH i had a STORY …Am just a typical middle aged Nairobi mum almost panicking about best investment for my kids and myself…yaani!! Yaani ninaanza saa hii and have collected enough data! Btw Azor huko kajiado like 50km after ngong one can get an acre for like 400k so buy like even 10 acres…but like you said to know the location is an art.

The best laid schemes o’mice an’ men. Sigh!

You’ve made so many assumptions key of all, that life will always continue as it is or was, pre-pandemic. If you are a student of history you should know that stuff happens, major bigly stuff. I’m sorry if I sound like a conspiracy theorist but the world is due for a hard reset. The well defined life we got accustomed to is not going to continue, so you have to take all these factors into account. The greatest wealth you can have for the future is a nice acreage land in the country side with a getaway house, water and source of energy.

Huko kuna land issues na wamaasai wajinga sana. I would never invest there alone juu it would exceed my risk parameters. However, it sounds like something I would pitch to my investment group and we share the risk for 10+ acres.

Ohhh i did not know there are land issues there Lord!