With a salary of Sh252,000, how can I raise Sh7m in three years for real estate?

Contributor

My name is Ezekiel. My monthly net salary is Sh252,000 per month. Every month, my expenses are as follows:

Rent: Sh45,000

Your total savings amount to Sh70,000. This is 28 percent of your net pay. Your rent expense is only 18 per cent of your net pay, which is lower than the recommendable 20 per cent. There are two options that you can go for from January 2023. One is a Sh7 million bank loan at a monthly repayment of Sh121,000 for 96 months. This can be serviced by the Sh60,000 monthly savings plus the Sh61,000 that will be freed when your loans are paid off in six to eight months. Would you want an expensive loan for projects that you can execute cheaply? No. The other method is raising part of the amount from aggressive savings in the sacco. Move the amount you save in the bank (Sh60,000) to the Sacco Bosa account for the medium-term plot and house projects. By December 2022, your account should be worth Sh500,000, inclusive of sacco interest. Add the Sh61,000 that will be freed when your loans are paid off to the sacco savings. That will amount to Sh121,000. You can continue saving Sh10,000 in a withdrawable account for emergencies.

Interest earned from the sacco, plus monthly deposits of Sh121,000, can easily pull off the entire project cost of Sh7 million. Continuous saving in the sacco, plus reinvestment of interests, will easily add up to Sh3.6 million by December 2024. You will be able to make a partial withdrawal of Sh1.8 million from your sacco. Using a three-times loan multiplier on the Sh1.8 million balance, you could take a Sh5.4 million loan. This loan will cost you about Sh100,000 monthly for 72 months. You can reduce the monthly Sacco savings to Sh21,000 to be able to service the loan. You will continue earning interests on your Sacco deposits as you execute your projects without changing your lifestyle. Meanwhile, if you don’t experience any unforeseen financial setbacks, your emergency savings will have accumulated to Sh300,000 by December 2024. Consider moving this to a money market fund account. Do not use it for anything else apart from emergencies.

Save towards the project in a financial instrument that will earn you interest. For example, you can save in a money market account earning you 10 per cent interest per annum. In 36 months, with savings of Sh180,000, you will have saved Sh6,480,000 and earn a cumulative interest of Sh905,264 less withholding tax of 15 percent. You can also increase your savings in the Sacco and earn. This is a medium-risk investment avenue with medium returns. You may also opt for a side business such as a consultancy to increase your income. This can give you very good returns but it is also high-risk. Other risky ventures would include speculative buying of securities and joining an investment club or chama that is dedicated towards investments in buying and selling of land. This might take longer than three years to get maximum benefits. After clearing the pending loans and updating your savings, you could borrow Sh7 million from the Sacco. Repay this loan at 155,711 shillings for 60 months. However, there are factors to consider before borrowing the loan such as job security, alternatives to repay the loan if there is no more salary, collateral for the loan, cost of the loan, and disposable income to repay the loan.

With a salary of Sh252,000, how can I raise Sh7m in three years for real estate?

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