EP19 | Building Our First TSAVO Apartments | Leonard Mcharo & Emily Mcharo (Founders, Tsavo City) – Transcript

00:00And we fought and he came and took his money. Cuz he had paid. He had paid in full. >> So we had to refund him. >> In full. Yes. He said, "I want my money now." I said, "By the way, that guy is right." I really hated that cuz it was like a 1 and 1/2 hour conversation. A very aggressive guy.

00:16Like, but the guy is right. >> >> So the there's there's two things. I don't know what happened before the other. The conversation of the purpose and someone Was he called Richard? One of the separate So as we were looking for the purpose. So one of the separate said, "You have attained financial

00:43independence. Your own financial independence by investing in hostels." >> Wow. >> Or small apartments. Why don't you help other Kenyans to become financially independent by investing in real estate?

00:59That was it. Someone asked. Someone asked. >> Boom. Discussion of 18 months. Boom. That's it. >> That was it. >> And everybody felt it. >> And the guy >> Even I [clears throat] felt it. Even though you've been talking about this. >> And the guy left. >> left. >> What?

01:14>> Yeah. >> That was the purpose to come and drop the seed. >> Yeah. Yeah. And we were like What? >> It's been here >> all along. Why hadn't we thought about it? >> So what we are doing for ourselves, we did not relate it to this new thing. >> completely. Completely.

01:29>> It gave us It gave us the way to dream, but we didn't think that this is it. >> courage >> us the courage to dream. >> Yeah. >> Cuz of course you tell them you've attained financial independence. Of course they know. Don't worry. We've not got any jobs, but they're still getting salaries.

01:44>> They're still getting salaries. Where is the money coming from? From the hostels. Yeah. In addition to >> thing she said we are looking for this thing in the circle. We are looking for it in the standardized plans. We are looking for it in this. We are looking for it and we are not getting it. But every day we learn and we iterate and we were getting the business model, we are learning about marketing quickly.

02:04We are in a meeting with NCBA, with Deloitte, with this >> But then the days the days I was here, I think yeah, me and Khalid, we we walked around and selling What were we selling? >> We are marketing >> Selling for more chairs, we are selling some of studios, I mean some of interiors, we are marketing. We are marketing.

02:20>> Exactly what is it that you are marketing? WE ARE MARKETING. >> >> MARKETING MARKETING >> EXACTLY. >> But remember, I'm an accountant. So I had never marketed anything. So when I'm doing all these rounds, even without a product, I'm learning.

02:34>> She's learning. >> I'm learning. >> I was asking her, "Come to Sarvo not to be an accountant. Our money is too small." Any bookkeeper, an intern can do our money. Come here to be a sales person.

02:47Because Chalo is a noisy philosophy field convincer. Nobody will believe him. >> >> You are quiet, you are calm, you are factual. People will believe what you say.

03:02I can I can walk people up in the office, but out there you are more believable. >> I'm I'm an I'm an introvert. What am I coming to sell? >> But that But those the time now we are searching, she was learning. >> I was learning.

03:17>> And she's a deadly sales person. >> So now the day this vision becomes >> crystallized >> crystallized, that's the word. >> Exactly. >> That must have been just like >> Like a yeah, a hard moment. Yeah.

03:32>> So what happens after that? >> So how do we actualize it? So we Our first project So our first project >> to gear your This is we go we we Yes, because you see again it's not neat. Just in case somebody is looking to have meetings and then it comes.

03:49So we are learning core values and whatever, we are learning strategy. We are learning business model. We are thinking of doing big things. We are doing all that. Then I started learning about money. Somewhere along the way.

04:03Just what is money? To understand money. I remember one day I came to the office all of those things. You know, you get to the bathroom then I come back. >> >> I went to the office one day. I just hired some architects. >> [snorts] >> I went there told them from today onwards we are no longer an architectural company. We are a bank.

04:23Those architects quit. >> >> Yeah, because we had to understand how money works. So, as this guy is coming up with that idea, how do we actualize it? We already have understood money.

04:37We have seen the landscape in Kenya, real estate. So, there are all these little cues. You know, there was that Chinese guy who says when the student is ready the teacher appears. So, as we are asking the questions, every cue you get answers this question. You forget that this is about health. You take a health question and put it here. You take this this and put it there. Yeah, sorry.

05:00>> That's so good. No, I love the fact that it's not neat. >> But but but who who comes up and tells people we are not an architectural company, we are a bank? Like even me I was looking at him like now you're mad.

05:15Like do you know what a bank is? >> >> But yeah, um So, yeah. So, we start our first project. Um it was not in the shape and form that it is now. It was more two bedrooms and one bedroom.

05:30>> In the Soko Pamoja model. >> In the Soko Pamoja model. So, So, so, so this landowner wants to build, but they don't have money. And so, we were busy trying to find how will you get the funding. And um as you're trying to figure out how will you get the funding, clearly bank loans we know, at market rate, it's very expensive.

05:49>> Mhm. >> Uh remember our stories about being auctioned and losing money? My story with the banks was was nice, or it sounds like a good story, because I was getting the loans at 5%. >> Mhm. >> But anyone who's getting it at market, that's too expensive. >> Yep. >> So, like this landowner, there's absolutely no way he'll be able to pay this interest. So, we said, "Okay, let's think differently."

06:09The biggest cost in that development was interest. But the intention is to build and to sell to this investor. So, we said, "Why don't we cut out the bank?" >> Mhm.

06:23>> "Cut out to the bank, go to the investor, and ask them to invest early >> Mhm. >> as we start building. >> Mhm. >> Hence, off-plan." What that means is a house that, you know, with bank financing, the same unit that we were selling, say, for example, for 4 million, the two-bedroom, probably have sold it for 6, 7 million.

06:43>> Because of bank interest. >> Yes. >> So, we go to them and say, "No, no, no, this same unit for 6 million or 7 million, we will sell it to you at 4 million." And guys are like, "Ah, that's a no-brainer. I just need to do my monthly payments. How long do we do the monthly payments?" So, at the beginning, we had 24 months.

07:00>> Mhm. >> Like 2 years. Yeah. So, so they started I mean, we started selling now to particular investors. So, we have a project, we have land. >> Yes. >> Isn't it? We have designs. So, we have the concepts, you have typologies, we price it, and then we go out to market.

07:16>> So, I want to layman this. I want to repeat this just to make sure I've understood. There's a guy who has land. You guys don't have land. >> Yes, we don't have land. >> have land. >> Remember, we only bought one land. The orange county one. >> Now, this guy with land >> Yes.

07:32>> doesn't have the money to build. >> Yes. >> And if he wants to build, >> Yes. >> he the only way to do it in his current model >> is to get a bank loan. >> is to get a bank loan. >> Yeah. >> But now that out prices the buyer.

07:44>> Yeah. The person to buy but you are calling them investors because this person have you already decided they are not buying to live? >> At that point >> No, we don't have we have not crystallized the thing yet. >> Oh, you just want a customer. >> Yes.

07:59>> Yes, but it's not even it's a customer. Whatever you will do with this house just pay us our money. >> Yeah. >> But then now you guys are just like okay, even we don't have money. >> Yes. >> So let's because interest will increase the price of this house.