There is a block of flats in Donholm that is for sale and the agent is asking for Kshs 40.0 million. The rental income is indicated to be Kshs 406,000 but independent checkings reveal that the rental income is Kshs 350,000. What would be the best price for this property? The property features are as follows:

Rent No. b/r Total
3 br 1 ensuite 22000 8 176000
3br flat 18000 4 72000
2br flat 17000 4 68000
1br flat 14000 5 70000
bedsitter 10000 2 20000
Total 23 406000


My estimation is that this property should go for Kshs 32m for a return of about 12% pa on net basis. Your comments will be most welcome.

am neither a valuewer nor real estate professional. My experience,assuming the flat is structurally sound and in good state of maintance,I will value it at Khs 52.5 million,assuming a rent of Ksh 350,000 pm and a return of 8%. Any amount less than Ksh 52.5m,do not hesitate.

Happiness is not a right - except for children. You won't be happy if you think too much. The search of happiness is one cause os sorrow.

If the prospective rent is 406,000/=,then the rule of thumb is that the real value of the property is 40.6M.

However,if the rent is 350,000/=,then the property value is 35.0M.

But if the prospective rent is 406,000/= but the actual rent is 350,000/= then the property value is 40.6M.

Caution:- Before u enter into any agreement or transfer,u may need to check the small matter of the land lease and land rates. If the lease is about to expire then the value of the property is further reduces. Meanwhile all the outstanding statutary land rates arrears if any should taken into account.


NIKIPATA NALA-NIKIKOSA NALALA

@All,

Thanks for all the comments. The property is 8 years old and there might be some liabilities,however,these shall be taken care of during due diligence. I am trying to compare this property with one in South B,one year old,whose actual rent is Kshs461K. This property is being sold for Kshs46 million. The Donholm property has actual rental income of Kshs 350K and any increment must be done within the law.

The rule of the thumb in real estate is that the venture should be able to recoup in 8-12 years based on its current income. So it would a yes for me.

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