Rentals vs dairy farming: See which will make money if started with a loan

Rentals vs Dairy Farming: This post was written and published by Kiprono Kalya: If you have a quarter acre plot that you want to develop, should you take a bank loan to build your apartments there or should you grow your money to build it?

If it were up to me, I’d use the title deed to borrow money from the bank for a business, but not to build rentals

If you borrowed 10M from the bank to build one bedroom units in the same plot, you’d probably just build 10 units if each unit costs you 700k to finish plus the perimeter and other amenities. If you rent out the units at 7k each, it gives you 70k per month. This is equivalent to 840k per year.

If you were to commit 50% (assuming) of your income to repay the loan and interest, you’d need to pay 35k per month for 24 years to repay the loan. This mean your 10 units only gives you 420k 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.

NCBA Group: Inside look at growth and success of one of Kenya’s largest banks

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.

In the same quarter of an acre, someone who builds 20 cheap bedsitters worth less than 1M in development, can earn 1500 per room netting him 30K a month. He is making 360k a year without stressing for 20 years earning the same amount with all the demons of high life.

Forget mabati bedsitters, assuming the area your property is cannot sustain such. In property development, land use and zoning is a factor to consider that’s why I always advocate that you go to low income areas in smaller towns to make your costs cheap and to fall within municipal regulations.

What if on the same quarter acre you buy 10 good Friesian cows at 150k per cow. Fresians go up to 1M per cow but let’s go with the common average fresian cow.

Every hotel, home, school, business need milk and milk by products on a daily basis and despite the first family controlling the mass market, you can control your locality.

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 6000 Bob per day. So, your fresians that cost you 1.5M to buy now gives you a total of 180k per month. Using my own experience I can deduce that each cow will spend about 3k on feeds and supplies per month if you haven’t grown any hay or grasses, and your farmhand could cost you 8k in salary (he steals kidogo milk per day anyway so he’s ok?)…

So with a capital of 2M which is cost of fresian 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 180K gross per month. If you deduct your expenses and remained with 150K a month, you’re making 1.8M 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 corner of the walled property and earn extra income from egg which can pay your bills.

So, you look foolish with your cows while your neighbour has flashy apartments next-door…

His income per month 70k gross.
His annual income 840k gross
His loan repayment per month 35k
His annual income net 420K
His net income 35k
His utility bills… Who knows.
His loan duration 24 years
His loan 10M
His happiness level Minus 10

Your income per month 180k gross
Your net income per month 150k
Your annual gross income 1.8M
Your total loan 2M
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 nosy 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