Who says you can’t retire at 40? How one couple did it
By Winnie Makena | August 11th 2021
In 2016, Leonard and Emily Mcharo, then aged 42 and 37 years respectively, achieved financial independence and retired from their careers.
Financial independence means having adequate assets that generate enough cash flows enabling one to live well from a passive income. In this state, one doesn’t have work to meet their living expenses.
Prior to retirement, Leonard was an architect while Emily worked in finance and both rose from earning entry-level salaries to high figures as they rose in their careers.
They started saving and investing for early retirement in 2004 after setting up an ambitious 15-year financial goal to find economic autonomy and earn Sh500,000 passively.
And after building their real estate company, Tsavo, and surpassing their target, they now focus on teaching and enabling other investors replicate the same in their own lives.
Tsavo is a real estate investment company that designs, builds, sells and manages apartments specifically for investment. With a focus on only studios and one-bedroom apartments, they do not borrow from banks but from investors, selling thirty percent of the project before breaking ground.
They own apartments in Athi River, Embakasi, Thindigua, Rongai and Roysambu and others are under construction.
Why Leonard and Emily decided to retire early
Leonard (L): We knew each other in college back in 1998. I was at the University of Nairobi (UoN) studying architecture while she had enrolled in a Certified Public Accountant (CPA) course.
Emily (E): We met before I was a banker and then got married but we’ve always worked together.
L: When both of us were getting into college, our families were supporting us. We weren’t doing too well financially. Both our families had a rags-to-riches story, so we started out life planning very seriously for our future. I wanted us to start something that if we lost our jobs, we had a passive income to fall back on.
E: The idea for building hostels came from campus. My family lived in Bungoma while I was in school in Nairobi. So I would see my mother pay Sh2,500 for hostel accommodation which was a high amount then.
How they started
E: I was earning about Sh30,000 monthly and Leonard didn’t have much either. Fortunately, at the time my husband had just finished a project and had about Sh400,000. So we went to Athi River to look for land near Daystar University, with the vision of building student accommodation. We got one acre that was going for Sh1 million and the seller, a woman, knew we could not afford it. She extended the grace for us to pay for the land slowly. We made instalments of Sh27,000 a month. I had to work extremely hard to pay it off. We had to live a simple lifestyle earning little, paying that loan, saving in a Sacco and still meeting our needs.
L: We got married early when in college. We had our firstborn in college. We had been together for five years when we had our second born. Yet we both didn’t have jobs but we ate, drank, paid our bills and at the end of the month had no savings or investments. I secured a job as at the university at a basic salary of Sh15,000. My wife also got a job but we still had no savings or investment. It is from discussions at this time that we knew how we were living was the fastest way to poverty. As for how much could be saved, we are taught to save a percentage of our salary but out of Sh15,000, I could not reconcile what that percentage would be. So I saved my whole paycheck and relied solely on my wife for everything from rent to my fare and lunch money.
E: In two years, we were done with the loan and started to think about building. We decided to seek partners and start construction.
L: With my salary increments and consistent saving, I could now borrow Sh1 million from the Sacco. We ventured to build twenty-three rooms which was the hardest thing I had to do, as I had never built before. I was 31 at the time. A year later, the building was complete but we could not get tenants. Three months in, we had just one tenant and our equity partners were getting worried. However, we were still thinking long-term, keeping an eye on the prize and not just a quick turnover. The partners needed their money and we had to start borrowing to pay them. At the time, loans were only offered for buying homes or land and not for business. I had to convince my father to give the family land to my wife as collateral for a loan. We convinced the bank to give us a loan and then we bought out our partners.
How they became financially independent.
E: 23 rooms were good, but they were not enough. We wanted enough to be able to take our kids to Harvard and live a financially free life. I took more loans and built more rooms, over and over again. We did not diversify any of our investments. A lot of people take personal loans but cannot tell where the money went because of consumerism. You go on holiday and buy things. We can confidently say we were the most disciplined we have ever been and all our loans went to the building.
L: Things got better, salaries increased, we got bonuses but we decided early on to cap our lifestyle and prevent lifestyle creep. We decided where we live, what car we drive and how much we spend which was not to change regardless of how much we earned. All the money would go to the investment. For about 12 years we built on this until we got to 100 rooms.
Lessons on the journey to financial independence
E: With so many obligations, we had to live a simple lifestyle. In about three years we were done. In that season, we learned so much as a couple, because we knew we had to do it together. We had to be very transparent about our incomes, little as they were. We tell our children especially women to have a separate account that your husband does not know about but for us, we had to be extremely honest about how much we make, how much is needed for the house and how much could be saved.
We also had to communicate constantly as well as find creative ways to make more money to push towards our goal.
Throughout the journey, we read finance books like ‘Rich Dad Poor Dad’. We wanted to learn how to be financially independent. Work was getting busier, the pressure was insurmountable and there was no time for our children and that pushed us further to strive to have passive income so that we could finance a less stressful life.
L: My partners and I made an investment decision to buy cows for about Sh700,000. At the time it felt like a brilliant idea until drought-hit and all the cows died save for about twenty per cent of them. I learned a lot about taking risks from that investment.
L: As I was turning 40, I started to question my life. As an architect, I had spent my whole life’s working and the values at work did not match those at home. I looked at the Nairobi Securities Exchange (NSE) for listed firms and could not find architectural ones. I looked at companies with the highest turnover and architectural companies would not have much compared to the rest. I pondered on my future in this space. My own weaknesses played a role. I was neither a deal maker nor an extrovert and that was detrimental in my line of work. My partners and I eventually shifted from architecture to design which is our core business now.
E: When we got into real estate we were very clear that we were not contractors or property sellers. We are in the investment business. We decided the advantage we enjoyed on our coming up, could we do the same for other people. At that time we did not believe people could buy studios. We instead built one and two-bedroom units.
People in their 40s, our friends mostly, were our first customers. And they took up the one-bedroom units quite fast. We then did market research and found out that studios and one-bedrooms were the most in-demand.
We launched our pilot project in Embakasi during the worst time possible, just before an election. Yet between the two elections, we had sold over 80 per cent of our units. We pulled people in their 30s, investment groups and even family groups.
Our investments change lives. An example is a couple that invested in Laiser Place, our first project. After completion, they started letting out and of course started earning rental income.
Here’s the trick: “Don’t eat the children of your investment.” They reinvested in the 90 Degrees project but now are paying less monthly instalments than before as their first project was bringing in money. 15 months later, ‘90 Degrees’ in Embakasi was complete and letting. They now started investing in Coral Bells by Tsavo at Thindigua, Kiambu Road. Paying even much fewer amounts in monthly instalments. Currently, they have invested in Tsavo Skywalk, their sixth project and they aren’t paying a single coin. Their investments are doing that for them.
Their price range is attractive for instance at Embakasi a studio apartment is about Sh1.4million and a one-bedroom costs between Sh2.1 to 2.6 million. In addition, they offer a payment plan of 20 per cent deposit and about Sh27,000 instalments in commemoration of their payment plan 15 years ago when they began building their empire.
Quick tips when you are striving for financial independence
- Reading books to learn the art of saving is very important. But save your money where it can help you. We don’t prefer banks, which are designed to milk you. Try SACCOs which are designed to help you grow.
- Always spend less than you earn. If there is a raise in salary, maintain your living standards and raise your investment cash.
- The steps to financial independence are a mindset shift then action. A mindset shift is from consumerism driven thinking to an investment-based lifestyle. This is the only sure way of escaping ‘The Rat Race.’
- Action is through discipline. If you have disciplined thoughts and disciplined actions, you can invest in cash flow generating assets and re-invest the profits - “do not eat the children of your investment.”
- To invest correctly, focus on meeting the needs of people. Great ideas come from solving someone’s problems. Listen to what the market is saying and what people want.
- How long will it take if I start now? Be generous; give yourself time to build wealth, target about 15 years. Depending on your discipline, dedication, and the level you are beginning at, you might achieve it sooner. Sacrifice.
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