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