In this case it wouldn't be advisable to use the price/rent ratio because the land sitting under the house is way more valuable than the house itself.

If the plot is on a sewer line it could easily be worth over 80M. buy the land if you can, you won't regret it.

MatataMingi:

As VJ has pointed out, the basis for pricing the property is the value of the land, and not the rent paid.

Given how valuable the land is, you are better off not repairing the house but thinking of developing the land with townhouses/apartments. The units you develop will most likely be worth 2 times to more than 4 times what you paid for the land, depending on what you construct, when you start the project, the cost of financing, your available capital, among other factors.

You may want to get an informal valuation opinion from a valuer or real estate agent who is familiar with Kilimani. Recent comparable property sales should be able to give you the appropriate market price of the property.

Also, just to emphasize, the answer to your question about the basis for pricing the property is not the purchase price to rent ratio.

-Fair Car Dealer

The value of land is around 50 to 100m. The cost of a bungalow on the land is around 10m. The rental value of such land is when a minimum of 5 storeys have been constructed. This can bring in rental value of 5000m2 x kes 1000 per m2=5m per month at current rates.
This will assist you to make a good offer.

land use is controled by NCC. If the title is still under residential use, all you need is to apply for change of user to commercial and it will be automatically granted since this is in line with NCC land use for the area. You can get lucky with the 25m offer so its still worth to try...

Haleluya...150K?

Resell it to me at 30m, you make 5m pap!

It's the half acre land that's of immense value not the old house.

Hold on people, the land is probably approved for one family home, not apartments not koisks, so looking at the value of land might not really mean alot, my old folks have a house in riverside sitting on half acre land that they cannot do anything about unless they decide to blow up the current house and build a larger family house, most of the house build in 60s and 70s had a real planning to it and included the limits on what you can do to the land.

Thanks Guys for your input.

I feel I should give you some more details.

- The house is owned by a very humble, honest and nice Mzee.
- He retired many years ago and moved to his rural home upcountry.
- The rent from the house is his only cash income, although I believe he gets a lot of his food from his shamba.
- I rented the house in March, 2011, on a two year lease for 90K pm
- At that time other similar houses in the area very going for 100K
- The Mzee liked the fact that the lease was with a big company, and the rent will be paid 3 months in advance every quarter by standing order.
- A few months ago, I spoke to him to tell him that I wanted to renew the lease for another 2 years. He came back and said the new rent would be 110K pm. The other similar houses around were now priced at 120 - 130K. So I agreed with his proposal.
- However, he spoke to me recently and said the the new rent would be 150K. This he said was due to the "new" tax on rental income, and it was not possible for him to dilute his income.
- I have looked around and found that other houses coming on the market have also factored in the tax.
- My employer, who provides me with housing, is willing to pay the new rent or give me that amount as a housing allowance.

I was therefore looking at buying a house, and using the 150K pm towards the mortgage payment.

Thanks again guys

Thank you Sir.
Because of school, work etc. I need to be in Kilimani or Lavi.