Development of Flats at Ngong. Return on Investment in Sale vs Rental options.

Development of Flats at Ngong. Return on Investment in Sale vs Rental options.

Cost Item

Kshs

%

Land

2,500,000.00

2.945889894

Preliminary/council approvals

294,000.00

0.346436652

Construction

63,000,000.00

74.23642534

External Works

3,150,000.00

3.711821267

Contingency

1,260,000.00

1.484728507

Professional fees. 4%

2,520,000.00

2.969457014

Project Management fees. 1%

630,000.00

0.742364253

Marketing

170,000.00

0.200320513

Financial Charges. 18% p.a interest

11,340,000.00

13.36255656

Total

84,864,000.00

100

Financing Plan

Kshs

%

Developer

21,864,000.00

25.76357466

Debt Finance

63,000,000.00

74.23642534

Presales

12,000,000.00

14.14027149

Total

84,864,000.00

114.1402715

PROFIT
SALE OPTION
TOTAL SALES FOR 30 UNITS

120,000,000.00

TOTAL EXPENDITURE

84,864,000.00

NET PROFIT

35,136,000.00

% Profit Margin

41.40271493

Take home ammount.

37,636,000.00

RENT OPTION
Rent per unit                                 18,000.00
No. of Units                                          30.00
Rent for 30 units monthly                               540,000.00
Annual rent                           6,480,000.00
Return on Investment. Years.                                          13.10

Conclusion.

If the project is sold at 100%, the Returns are quite high. If the project is rented out, returns will be in 13 years which is within the 15 year period hence a viable option.

The project can have 50% of units for sale to cater for the high interest rates cost of financing then the 50% of the units that remain are rented out.

This way, the high cost of finance/borrowing is mitigated by sale of units and the client remains with 15 units from which to collect rent from.

Francis Gichuhi Kamau, Architect.

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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