My name is Lewis, and I am 45. I’m divorced and live alone, and I have children. I feel I’m not aligned in my financial journey. I would want to own a home in three to four years, and have a passive income of Sh120,000 per month. The target for the house is Sh6 million. It can be either an apartment of Sh6 million or a plot of Sh3 million and construction of Sh3 million.
My net income is Sh110,000. My budget is as follows: Rent: Sh17,000, Electricity: Sh2,000, Water: Sh1,000, Wifi Sh3,000 (This I need since I use it for side hustles), School fees Sh20,000, children’s food/upkeep Sh10,000, Parents Sh5,000. My shopping and groceries are Sh5,000 (these are mostly taken care of by side hustles). Transport is taken care of by the company. Miscellaneous and entertainment I cover from side gigs.
I faithfully save and invest 50,000 per month. I have an emergency fund of around Sh1 million in MMF. I have Sacco savings of around Sh300,000 but I don’t save regularly since I don’t have guarantors there. I’m there for the dividends and maybe will use the Sacco to buy me that land or home. I have Sh2 million invested in government bonds, which generate passive income of an average of Sh60,000 for four months, the other eight months are not covered.
I have plots of land which can fetch Sh3 million if liquidated and I’m not planning to build on either of them since they are not in ideal locations. So how do I achieve these goals that will also be in line with my retirement?
Alex Kibebe, founder of Rubiani Wealth Management Ltd and investment consultant and business development coach
Your current budget is quite prudent and your disciplined approach of consistently saving Sh50,000 per month—about 45 per cent of your net income—is a solid step toward achieving your financial goals.
To reach your objectives of owning a home in four years and generating Sh120,000 in monthly passive income, I propose a strategy that will focus on growing your passive income through the purchase of more Treasury bonds and then selling off your plots to fund either buying a piece of land for your home construction or making a down payment for purchasing your home – depending on your choice of whether to buy or build a home. You can then take a Sacco loan to fund your home construction or pay the balance to purchase your home.
To implement this strategy effectively, consider setting up a separate money market fund (MMF) account specifically for accumulating funds for purchasing additional Treasury bonds. By channelling your monthly savings of Sh50,000 into this account, you can accumulate approximately Sh600,000 by the end of 2025.
Add the expected interest of Sh240,000 from your existing government bond investment, approximate interest of Sh100,000 from your emergency MMF account and roughly Sh60,000 interest earned from your new MMF account in the year. This will bring the total funds in your new MMF to about Sh1 million to invest in Treasury bonds.
I recommend investing in infrastructure bonds as they are zero percent tax rated (as of now) thus maximising your returns. Currently, infrastructure bonds issued in 2023 and 2024 are trading at a net yield of around 15 per cent in the secondary market (Nairobi Securities Exchange). Investing Sh1 million at this rate would yield approximately Sh75,000 every six months.
If you continue reinvesting your monthly savings and all interest earned from Treasury bonds and MMF accounts in 2026 and 2027, your Treasury bond portfolio could grow to approximately Sh5,450,000. This would generate an estimated annual return of around Sh810,000. To ensure a steady monthly cash flow, you can structure your bond investments so that interest payments are spread across different months.
In the meantime, you could sell your plots hopefully at the estimated market value of Sh3 million and use these funds to either purchase land in your preferred home ownership location or make a down payment to buy a house, depending on whether you decide to buy or build.
You can then take a Sacco loan of Sh3,000,000 to finance either the construction of your home or to pay the balance to purchase a home. Many Saccos are now offering competitive home development loans without requiring guarantors, so it would be worthwhile to check if your Sacco provides such options. If you take a loan of Sh3 million at 12 per cent interest for five years, your monthly repayment would be around Sh67,000, which could be covered by the income generated from your Treasury bond investments.
Once you have repaid the home loan, you can continue building your passive income by reinvesting in Treasury bonds. In addition to this, consider diversifying your portfolio into other passive income options such as an individual pension plan (IPP), insurance annuity or even rental real estate. This diversification will strengthen your retirement funding.
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