Most Profitable method of investing in Kenyan rental Real Estate.

Most Profitable method of investing in Kenyan rental Real Estate.

As the cliché saying goes, investing in Real estate is about 3 issues.
1.Location.
2.Location
3.Location.

Example.

KES 1m land.

An investor buys land worth kes 1m per 1/8th and develops bedsitters for rent. Such land can only be found in places such as Kiserian pipeline, Joska, Juja farm etc. The land will most probably be over 1km from tarmac. The rental yield per unit will be in the range of 4,500 per month.

KES 2m land.

Another investor buys land worth kes 2m per 1/8th and develops the same bedsitters at the same construction cost. This land will most probably be between 0.5 to 1km from tarmac. The rent per unit will be in the range of kes 6,000 per unit.

KES 3m land.

The third investor buys land worth kes 3m per 1/8th acre and develops bedsitters at the same construction cost. This land is most probably between 0.5 to 0 km from tarmac. Rent per unit is kes 7000.

Return on Investment.

All the 3 investors will have the same return on investment in approximately 10 years.
See calculations here

http://a4architect.com/2013/06/22/real-estate-investment-3-land-price-options-kes-1-2-and-3-m-per-plot/

Occupancy rate.

With good well planned rents, all the 3 investors will derive near 100% rental occupancy rates.

Monthly rental income.

The 3m per 1/8th acre investor will derive the highest rental income of kes 7,000 per month. Therefore, the best returns will be within the 3m per 1/8th price.


Opportunity to invest.

For each of the options, to construct a building that can bring in rental income, the land must be purchased first. Investors must fork out the 1,2,or 3 m per 1/8th acre to begin construction.
This 1,2 or 3m can become a hindrance to rental income investment.

Solution.

To remove the need to purchase the land, a4architect.com have come up with plans that enable a 1/8th acre plot to be constructed to fit 12 units of 20m2 plinth area bedsitters.

These 12 units can then be converted into 12 shares in a Limited Liability Company. The LLC can then purchase the land and have 12 shareholders.

In this case the land worth kes 1m will now cost 1m/12=kes 83,000 per 1 share.

The land worth kes 2m can now be accessible per 1 share costing 2m/12=kes 170,000.

The land costing kes 3m can now be accessible for 1 share costing 3m/12=kes 250,000.

Any investor with kes83,000,170,000 or 250,000 can now access land to construct a bedsitter unit for rent.

Construction.

For the investor who has bought into 1 share of kes 1m worth of land, he will need approx. kes 500,000 to construct a rental unit that can bring in kes 4,500 monthly.

For the investor who has bought 1 share within land costing kes2m, he will need approx. kes 610,000 to construct and gain from kes 6,000 monthly rent form the bedsitter.

For the investor who has bought into kes 3m worth of land, he will need to add kes 610,000 to construct a unit that can bring in rental income of kes 7,000 monthly.

Check bedsitter monthly rents currently in Nairobi here
http://www.olx.co.ke/q/bedsitter/c-363

Conclusion.

To invest and in 1 share and earn kes 4,500 monthly rent, the cost of land plus all construction is kes 580,000.

To invest and earn kes 6,300 monthly rent, the cost of land plus construction is kes 780,000.

To invest in 1 share and earn kes 7,000 monthly rent, the cost of land plus construction will be kes 860,000.

On top of monthly rental gain, the investment will appreciate at a rate of 20% per year. In 5 years, the investment will have doubled if you opted to sell out.

To start investing, visit http://a4architect.com/discuss/ to learn more or contact info@a4architect.com.

Francis Gichuhi Kamau, Architect.
info@a4architect.com
0721410684

Francis Gichuhi (692 Posts)

Architect Francis Gichuhi . B.Arch. University of Nairobi. Registered Architect, Kenya. Member, Architectural Association of Kenya. Contacts. email info@a4architect.com. Telephone +254721410684


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