How Dairy farming is more profitable than rental houses

Let’s assume you have a quarter piece of land that you want to development and you’re torn between setting up rental houses and venturing into dairy farming – which one would you pick? 

From the face of it, many will choose rentals over farming – largely because there is an increasing demand for rental houses – especially in urban areas. 

However, this article will show you why opting for rentals over dairy farming would be a huge mistake – investor wise. 

An individual that goes for setting up rentals will require to have capital to build those houses – let’s use Ksh10 million. 

This means you will need to go and get a bank loan to finance that project. Ksh10 million can do like 10 one bedroom units, including a perimeter wall and other amenities at the plot. 

Once complete, as a tenant you say every house is Ksh7,000 per month which brings a total income of Ksh840,000 annualy (assuming all the units will be fully occupied all through the year). 

That amount sounds a good income right? Well, it is, but remember you have a Ksh10 million bank loan that you need to repay. 

You have your own bills to pay, expenses that you incur ona daily basis among other financial abligations to meet daily or monthly – how much can you commit for the loan repayment? – let’s say half of the total income. 

This means you will be making Ksh420,000 a year. 

For you to comfortably repay the loan, you will need to make Ksh35,000 repayment monthly for 24 years. How sustainable is that? Are you guaranteed of maintaining that income for over two decades? It’s up to you to tell. 

Now lets assume on the very same a quarter an acre plot you decide to invest in daity farming – 10 Freshians to start with, how much will you be making? 

A Freshian cow can cost about Ksh150,000 – this means you will beed like Ksh1.5 million.  

Add that with Ksh500,000 costs of setting up a structure for the cows (for zero grazing) and expenses on feeds.You will only need Ksh2 million loan and you’re good to go. 

On average a freshian can give you 15 litres of milk per day (for a starter) which translates to 150 litres daily. 

If you sell that milk at Ksh40 per litre, you end up making 6,000 per day – an equivalent of Ksh180,000 monthly – all that from 10 Freshian cows that cost you Ksh1.5 million. 

Each cow can cost you about Ksh3,000 on feeds and let’s say Ksh10,000 for manpower. 

If you deduct expenses and remain with Ksh150,000 annually – be sure you are able to clear the Ksh2 million in a year – remember the guy who set up rental had 24 years to repay his/her loan. 

And I have not mentioned the fact that that the cows o the a quarter an acre, you still have space where you can set up a small unit for chicken rearing an earn some extra cash from eggs. 

So at the end of the day, an individual with rentals looks better off (from the eye’s of the peers) but in reality he/she spends almost the entire life on loan repayment. 

Make you choice wisely on how to invest in the whatever little you have.