Most of the self-help books I read say that you should start investing in your twenties, and because I want to be rich later in life, I decided to follow their advice. I asked around and did some research on the internet about the best places to invest in Kenya and in the process, I discovered an unbelievable claim made by a group called Cytonn Investments.
They were saying that they could give me up to 16% returns each year. All the other options I had come across were much lower. Cytonn even went so far as to guarantee that 16%. I was intrigued. Was it a scam? I had to do a little more digging.
I found an interview where Cytonn CEO, Edwin Dande, explained his company’s model. He claimed that what Cytonn did was very simple: they removed the “middleman”.
Amara Ridge in Karen, Cytonn’s development delivered in 2018
Usually, when you put your money in a bank or other financial institutions, they will pay you interest, probably between 0 – 8% per annum, depending on the bank. If you give them Kshs 1,000,000, for example, it means that every year you are getting an interest of Kshs 80,000 or less.
In the meantime, the bank is lending your money to people or companies who need capital. The kicker is, these loans attract the high interest of up to 14 percent depending on the bank, and this was much higher before the loan rates cap. So, from your one million shillings, the bank could be earning about Kshs 140,000 each year. After they pay you your Kshs. 80,000, they are left with Kshs 60,000. Note that the bank has earned this Kshs. 60,000 from your money. This is how banks and other financial institutions are able to make a profit.
What Cytonn does is, instead of getting a loan from the bank and paying them that interest, they borrow directly from you. So, if you give them that Kshs 1,000,000 instead of letting it sit in the bank, they invest it for you. They put it into their various projects, in real estate and private equity. In return, you earn Kshs 160,000 (16% of your investment) for every year that they have your money. This is more than double what the bank would have given you. Afterward, when you feel it is time to take back your one million shillings, they return it to you. It is that simple.
The Alma in Ruaka, Cytonn’s development to be delivered in 2019
I was still skeptical, especially when I found out that many of Cytonn’s real estate projects are still under construction. How was I going to make any money from something that had not even been built? The answer, as I found out, was that those real estate projects are sold off plan, meaning that they are still making money even as they are being built. One example is The Alma, whose buyers will get their returns when phase 1 is handed over later this year.
I was curious to see whether this was actually true, so I read up on real estate and buying off-plan in other countries and I must say, I am now thoroughly convinced. If I’m going to invest, I might as well make the most out of it, right? And so begins my investment journey.