REAL ESTATE INVESTMENT OPPORTUNITY IN KENYA. HOSTELS AT PANGANI.Budget. 10m
Working on an assumed budget of kes 10m, its possible to venture into hostel investment by renting out a block of flats in a neighborhood near a learning institution and converting it into student hostels.
The average rent for a 2 bedroomed flat in Pangani is kes 35,000.
This room has a kitchen, living room, bathroom and 2 bedrooms.
The Kitchen and living room can be converted into accommodation units. The living room can fit 3 beds sharing. The kitchen can fit 1 or 2 beds with double Decker. Each bedroom can fit 2 beds on a double Decker if the bedroom is small or 2 beds side by side if the bedroom is large.
NUMBER OF STUDENTS PER 2 BEDROOMED UNIT.
The maximum potential number of students per 2 bedroomed house will be as below.
Living room. 6
A charge of kes 4,000 per student brings the rental value to kes 64,000.
Similar hostels in the same neighborhood charge around the same e.g this one below for 12 people sharing on deckers near Equity Bank Ngara for kes 3,500 per month each.
This brings out a profit of kes 64,000-kes 35,000=kes 29,000 per month.
The advertising ,cleaning ,electricity and management costs will be offset by the profits from the sale of food to the students.
NUMBER OF UNITS IN A BLOCK.
On average, a 1/8th acre block will have a minimum of 20 units.
The maximum profit derived per month will be 20 units x kes 29,000=kes 580,000.
Initial startup costs.
The initial start up costs will be as below
1. Rent plus deposit . =kes 35,000 x2 x20=kes 1.4m
2.Legal fees to negotiate and secure a minimum 5 year lease. Kes 100,000.
3.Double decker Beds=16 x 20=320 beddings x kes 20,000 per bedding including bed=kes 6.4m
4.Employees to manage and clean the hostel. 3 employees at kes 20,000 each =kes 60,000
Total =kes 8.5m.
The balance of kes 1.5m will be set aside for any contingencies that may arise e.g more additional units, seats, wardrobes, partitioning, council license fees e.t.c.
With a budget of KES 10m, you can comfortably enjoy a monthly income of kes 580,000 per month for the next 5 years till when the landlord agrees to extend the lease.
Serious marketing is needed so as to win the confidence of parents. A church based religious theme would come in handy for such a venture which should include christian moral guidance to the students eg FANUSI hostels near University of Nairobi Main campus opposite BOX women hostels or Flora Hostels in Upper Hill area of Nairobi.
Francis Gichuhi Kamau, Architect.