Money and Me: Buying Land with No Salary

Something interesting happened to me almost exactly two years ago today. The recent Madaraka Day celebrations took me back to a point in my life when I lost everything.

The pandemic was now serious enough for the government to call for curfews, closures and all. This inevitably led to job losses, and like many, I ended up as a statistic.

Headlines like ‘Kenyans Struggle to Pay Rent’ spoke to me directly as I was on a daily cat and mouse adventure with my building’s custodian.

Tip-toeing to and out of the place had become something of an art. I had memorised his schedule right down to when he strolled around the court for some Vitamin D. Entertaining guests was now foreign, curtains were almost always drawn, and locking/opening the metallic latch without making a sound was added to my many ‘ninja’ skills.

Prior to this unexpected adventure, five or so years before, I had been saving up to buy some property upcountry - Kitui, at a place called Kwa Vonza.

I cannot claim to be an expert of land or even investment, but I just felt like this particular area would offer a good return down the line.

Identifying Viable Land

Kwa Vonza was just another sleepy village. Up until 2016, it was only famous for its colonial British settlers heritage, such as the founder of the town, locally called Vonza, whose grave is believed to be at a cross found at the peak of the famous Kwa Vonza hill.

However, the establishment of two universities transformed the rural set up of Kwa Vonza into a vibrant urban community.

The South Eastern Kenya University (SEKU) and Kenyatta University (KU) set up campuses in the area and everything changed.

The population increased fivefold from 7 000 in 2009 to 35,000 in 2018, which went to 50,000 in the year 2020. Today, over 20,000 of Kwa Vonza’s residents are students and staff from the two universities.

In just under a decade, an acre of land had gone from an average of 100K to the current state where 950k will only get you a 50x100 plot in the area.

I was looking to get in on the act early but I just didn’t have the cash, discipline or even basic financial knowledge to know how to raise the money I needed.

However, thanks to a few friends who can be argued to be titans in the real estate industry, I knew prime land when I saw one.

The route to riches in real estate investing does not come with a map. However, there are steps you can do to put yourself on the right track and increase your chances of success.

Here are some of the checklist items provided by the friends I mentioned. I used this in my ‘research’ on Kwa Vonza.

Find rental properties in emerging neighbourhoods 

The area in question easily ticked this box. One can take advantage of tax incentives and growth possibilities in emerging neighbourhoods. 

Also, a buyer that invests in emerging towns/neighbourhoods can easily maximise profits and ensure that their revenue matches their costs.

Do your homework before listening to paid advisors 

Your trusted and paid experts (broker, wealth manager, tax accountant, etc.) may advise you to avoid real estate entirely in your portfolio.

They usually provide the same tired excuses, such as 'illiquidity' or' management-intensiveness.'

However, it never hurts to trust your own gut and make your way to the actual site for a physical visit. 

On a dreary, wet day, pay a visit. Look for possible water issues in the region. Is the area prone to flooding? Such things play a key role when it comes to investing in land.

Join a local networking group 

Thousands of REI (real estate investing) groups can be found around the country. Join one or two of them. 

Choose the ones that include the people and issues that interest you. Look for organisations that don't just 'sell' but actually educate and mentor you in the areas that interest you.

In my case, I was already leveraging the expert advice I could easily access via WhatsApp from friends who had already established deep roots in the world of real estate.

Examine your ‘circle’ and identify friends whose area of expertise could be an asset to you, and actively engage them.

Get to know your market 

When it comes to investing in real estate, it's important to educate yourself and become an expert in the area you've chosen.

Knowing current trends, such as decreases or increases in average rent, income, interest rates, and even unemployment/crime rates, will help you evaluate the present market situation and plan for the future.

In this era of ‘maguta maguta’ it is extremely important to gather all relevant knowledge regarding your area of interest. Ignorance is not bliss in this particular line of investment as you could easily find yourself crying online after purchasing a swamp.

Treat your investments like a business 

This has to be one of the most important tips I got from my friends.

Real estate investing is a business, and it, like any other business, involves deliberate strategy, execution, and management.

Learn about market cycle theory 

Invest in the right stage of the cycle at all times. This is not speculating, but rather attempting to predict what will happen to real estate prices over the next five years.

Property Financing 

Now, when it comes to securing finances for something as big as real estate, my knowledge was rather limited.

I only had my savings, which I quickly burned through, and without a steady stipend and the end of each month, banks weren’t exactly clamouring at my feet with loan offers.

It was during this time that I regretted not ensuring every single dime I made from side gigs went through my bank. This greatly boosts your credit worthiness but I was young and addicted to mobile money.

However, this rookie mistake opened me up to the world of Saccos and how one can use established ones (with the right connections) to get a shoe in.

Whoever said ‘network=networth’ was on to something.

Your circle, more often than not, usually has the solutions to most of your problems. In my case, I have a friend who has been actively directing money to his Sacco for almost a decade. He was willing to have me add my own money to his monthly contribution and once he was cleared for a financial facility, he’d then front me the cash I needed.

There are countless other ways to secure financing when it comes to real estate, however, if you don’t have a salary, creativity is your friend.

First, Join a Sacco

You can then save and take out low-interest loans to purchase the land.

Usually, after saving for a period of six months (some require just three months), one can get up to four times the amount of money for a loan with low-interest rates, which you can use to purchase the identified parcel of land.

Go through the list of Saccos in Kenya and identify those that offer a package that works for you.

For example, if you save Ksh10,000 per month in a Sacco that offers loans 5 times worth your savings, in 6 months this could grant you access to Ksh 300,000 and double that in one year.

The key is to find Saccos that work for you. In my case, I opted to piggyback on a friend.

However, if there is one thing that can ruin a friendship, it’s money. So before you go for this particular option, you need to make sure that everything is in black and white. Grey areas breed mistrust.

The beauty in the path I chose is that I didn’t have to start from scratch. I used my networks as leverage because when it comes to investing in land, timing is everything.

Just look at the surge in land prices in Isiolo over the last few years, for instance.

At the end of the day, your discipline when it comes to saving is directly tied to your success when it comes to raising capital for whatever venture you are looking to invest in, it’s as simple as that.