Low-cost rental houses continue to be in demand. With a housing shortfall, you can take advantage of this.

Driving a new vehicle every two years. Having 3 different offices in the city. A holiday every time schools close. This is the life we desire but do not have. Yet.

And I know someone who has this and today, I will share the secret with you.

I have a relative who is a good giver during our family gatherings. He is a form 4 leaver. Unlike us who have degrees. And it always seems he has bottomless pockets.

Recently, I had a very fruitful interaction with him. His secret? Low-cost rentals.

He walked me through how he makes his money and gave me his 3 million rule. And this is how he does it.

1.     He looks for a plot in an area where the plot is available for under 2M. You can find these in Joksa, Malaa, Kangundo, Kitengela or in the counties.

2.       He uses one million to build mabati structures, single units. The total he spends on both land and construction must be 3 million or under.

3.      At an average of Ksh 2,000 per mabati house, with 20 mabati houses, he will make a cool 40,000 per month. If you take away 5,000 per month to bills and potential vacancies, you will be left with a cool 35,000.

4.     And he repeats this a lot of times.

Now, lets take what me and you would do.

We would want to use the 2M to buy a plot. Great.

We then go to the bank and take out a 10M loan to put up a 4-storey building. The bank makes us jump hoops, mortgage our relatives and every property we have before loaning us the money.  We then show our friends our new hustle. We are now the envy of our circle.

Once the loan lands in our account, we need to make a Ksh 130,000 payment per month for 25 years. And this is if we are lucky to get a mortgage at a negotiated price. Not market rate.

We put up the building, a bunch of classy one bedroom and bedsitters. By the time they are fully occupied, we have sold our vehicle to meet the monthly repayment.

Once the building is complete, we shall be lucky to have a new income of Ksh 100,000. Not with KRA sniffing in our backs. Not with the current economy. And what do we do?

We find an additional 30,000 as the income cannot match the monthly repayment. We do this for three years.

Ulcers start creeping in. Non-remitted tax increase. We raise the monthly rent to keep up. More tenants vacate. We sell another property. The bank reports increased profits. We move children to a cheaper school.  We get more miserable at work, but we cannot resign.

All we have is the pride of being a landlord but broke and miserable. We now have to keep impressing our friends as they already elevated us to landlord status.

Depression kicks in. You check out if Mathare takes walk-in customers. You find they do not. You walk to your local. EABL reports increased profits. You don’t.

How about betting to try to meet the shortfall? Arsenal loses. You do too. You did a deeper hole.

Garam Auctioneers give you a call. Depression kicks in.

Solution?

Finance the project by yourself or use family and friends.

Finance at least 50% of the project by yourself or use family and friends.

Try unsecured loans.

If you want to develop your property using a bank loan, get small amounts and build incrementally. One floor, one room at a time. Negotiate lower loan rates. Look for fixed-rate mortgages.

Do you have a friend for whom this information would be useful? Share with them.