MBA

 

Build your house and get an MBA

 

In my father's day, an average civil servant could buy a house if he planned his income well. He could also afford a mortgage and get a housing company to do the planning for him. In those days the government would pay you to live in your own house. Today the thought of owning a house is beyond the means of the average income earner. It is a dream. Mortgages are available, but you need an upper level six figure incomes to access them. Anyone with a five figure income or lower six figure salary must find another to their dream house. In reality, a house is not a dream, it is a necessity.

 

When you consider that rent consumes between 30 -60% of your income you know you need a house. If you are not living in your own house, you are working very hard for your landlord – your family comes next. By owning a home of your own you can recover the money which you give away as rent. Renting a house is not an investment. Rent does not make you rich. However, it does make your landlord wealthy. When you arrive at this point in your career you are ready to build a house. If you never come to this financial understanding of your circumstances you will never build a house.

 

Now that you are psychologically ready and sufficiently motivated to own a house, the obvious place to start is check with a mortgage companies. After a thorough search of what is on offer in finance institutions you will realize that it will take you 15-25 years to own a house - if you can keep up your current salary and maintain your current expenditure for all those years. Two problems make you think carefully about whether you can successfully service a mortgage. One is that you will be retired before 25 years are up. Two, the rising cost of living and your growing family will not allow you to contain your expenditure the way you would like.

 

The option you have remaining is to build your own house. A friendly contractor will price your dream house at a figure close to the offer made to your by the housing company. This may make you give up your dreams but because you are serious about building, you sit down and work through "how to build a house". You will find that there are five elements to the process. There is land, design, materials, manpower and management.  The price of the house will be determined by this building mix.

 

If you insist on building in a high cost area, the price of building the house will go up on account of the land. If you choose some "undeveloped" freehold land, you will significantly reduce your land cost.  Choose a modest house design if you want to build and move into your house during your lifetime. In the old days our people built houses with mud and sticks. Many of these houses not attractive by today's standards lasted many years. These days' people insist on cement. There is no difference in function. Both these structures provide a dwelling place. My point is that there are major cost and labor implications based on the material you will use. You will need specialized manpower to build your dream house if you are not a contractor. And finally you can save yourself a huge amount of money by becoming the project manager yourself. Tailor your dreams to fit your reality. Now you are ready to begin.

 

The process I have just described in the previous paragraph also outlines the process steps of actually building your house. You will first of all need some money to buy some land.  If you have some savings – great! If you are a member of a cooperative this could also be your first stop for finance. If you have experience in buying a car or other large asset, you already have the competence to successfully manage asset finance. Use that skill to arrange your finances to obtain the money you need. Tip - Do not go for the loan before you have identified the land.

 

The process buying land is a tedious for a beginner. Be warned that the process is fraught with conmen. There is a legal process for buying land in Kenya. I plead with you to engage the help of a friendly lawyer who will advise you on the process of purchase and acquiring a title deed. Your lawyer may charge you for the services, but you will never regret the services of a good lawyer. Many people have lost their money and the dream of owning a house because they chose to save money by not engaging legal help. Year one.

 

The design process is one you can begin at home with your spouse and family. Draw sketches of what you would like. With the help of a builder or designer you can quickly come round to what you can afford. My only tip here is plan the house to be homely. Don't build a house just to impress your neighbors. Make it simple, manageable and a place you could live in forever. During this year plant trees on your land. Toy with ideas of landscaping and begin to enjoy your purchase. As often as you can take your family to the land for picnics. Make your family part of the dream. Ask them to work with you and help you save for the building project. Enjoy the journey with them do not make it stressful. By the end of the year you will have paid back a significant part of the money on the land and will have settled on a manageable design. Year two.

 

In your third year start gathering materials. You will find that you can set up a site house and begin to accumulate the basic materials such as stones and sand, identify a hardware store where you can make arrangements for supply of building materials. Consider all the logistics you need to put into place like water for building and transport for the materials so that when you start building you are not held up by undue delays.

 

Identify a competent builder who can interpret your plan and build the house and guide you on the building process. You may want to have your designer supervise the construction process too. All this is preparatory work. Make sure the builder quantifies the costs of the four phases of construction as accurately as possible. Foundation, walls, roofing and finishing. As a rule of thumb the cost of the "foundation" and "finishing" are the largest. This knowledge will help you plan your cash flow to manage the building process. You can take a short break at the completion of each phase. Year three.

 

Begin the works in year four. You will have saved up money to transfer the plan from paper to the plot. If you had taken a cooperative loan you will have finished the land loan and be ready to take a building loan. This is the year you take up your project manager role. Supervise all stages of building and be on hand to correct any queries that come up during the building process. Expect to spend evenings, weekends, much of your free time and extra money on phone calls making decision about the building. You will have two jobs – your regular job and your new job as site manager. Year four.

 

Year five will be an exciting year. You will want to move in as soon as the house is habitable. You will be filled with joy as you thank God that you have nearly completed the impossible. You will need to keep the discipline and determination to finish the job properly. Some people are happy with 80%. Put in that extra effort to finish it well. The attraction of moving in and saving all that annual rent is overwhelming. Congratulations! Year five.

 

 By the end of year four, you will have developed excellent project management skills. I can guarantee you that building your own house will not just build you a house, but also make you a better manager, organizer and leader. It will not be the only house you will build in life. You will confidently manage family, church, community projects, business assignments with excellence because you had the courage to build a house. You will have gained competence you never knew you had in you. As you move into your house you will have earned your MBA (Master of Building Abodes). Building your own house builds you as a person.

 

 

Allan Bukusi

August 2010