How to use Banks to finance Real Estate investments in Kenya.

Currently, most Kenyan banks are offering loans at an average of 15% p.a interest rate.

There are methods whereby someone in Kenya can invest in Real estate whereby the interest rates automatically cancel out with the monthly income.

This way, an investor can sit back, relax, and watch the bank buy the real estate investment while the investment pays back the loan to the bank.

Average apartment cost.

The average apartment or 2 bedroomed house for sale in the Nairobi surburbs, middle class areas eg Syokimau, Kitengela, Kiambu, Ruiru e.t.c costs kes 5m.

This apartment or bungalow can bring in at most a monthly rental income of kes 25,000 on the higher side.

This means the average monthly income of a kes 5m investment in Kenya is around kes 25,000.

Using the below Coop bank loan calculator, a kes 5m loan will require payments of kes 70,000 monthly for the next 15 years.

This means an investor for the kes 5m property will need to pay the bank kes 70,000 which he offsets with the kes 25,000 rent. The investor will need to collect the kes 25,000 rent then add a further kes 45,000 from other sources eg salary to pay off the bank for the next 15 years.


Solution to the above is for the investor to find a real estate investment option whereby the monthly loan repayments are equal to the rental income. This means the investoer will only need to sign the sale contracts then sit back and watch the investment monthly income compleytely offset the bank loan repayments till the loan is fully repaid.

Such an investment is the Hotel room sale at the Southern Sunshine hotel along the Southern Bypass, Nairobi.
See the hotel documentation here

When an investor buys the hotel room, the worst case scenario of income is calculated as below.

Hotel monthly income calculation for worst case scenario.

The daily rates per night are estimated at the worst case scenario of KES 1,400 Daily.

This brings the total income per room to kes 1,400 x 30 days =kes 42,000.

The occupancy rate is also estimated at 80%, bringing the income to 80%x kes 42,000=kes 33,600.

The hotel running costs, toiletries, water bills, salaries etc bring this down by 20%, to bring the income to kes 27,000.

The take home amount monthly for the investor is kes 27,000 at the worst case scenario.

Using the Coop bank loan calculator below, the kes 2m investment will require a monthly loan repayment of kes 27,000 for a 15 year period.

2 options available.

The investor therefore has 2 options.

Use kes 700,000 personal savings to buy the hotel room then borrow kes 1.3m from the bank as a personal loan to repay in 6 years. The repayments will be approx. kes 27,000 for the next 6 years which can be easily offset automatically by the hotel room monthly income of the same amount.
This way, the investor will have used their kes 700,000 savings then the bank enabled them to acquire the full property in 6 years without the pinch of heavy monthly loan repayments.

If possible to get a 15 year long term loan, the repayments at 15% p.a interest rates are kes 27,000 per month, equal to the minimum possible income earned from the hotel room investment.

Using the above methods, a real estate investor in Kenya can easily , smartly and smoothly harness the power of banking loans to become an owner of a real estate investment that can earn them good money and financial freedom over the years.

Francis Gichuhi Kamau, Architect.

Francis Gichuhi (692 Posts)

Architect Francis Gichuhi . B.Arch. University of Nairobi. Registered Architect, Kenya. Member, Architectural Association of Kenya. Contacts. email Telephone +254721410684


  1 comment for “How to use Banks to finance Real Estate investments in Kenya.

  1. Peter
    March 31, 2016 at 7:35 pm

    Awesome knowledge…

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