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Question for a4architect
Rank: Member Joined: 9/14/2011 Posts: 853 Location: nairobi
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@4architect please advice
I have done the costings for 8 two bedroom flats and it comes to sh 16m inclusive of cost of land. Expected rent is sh 160,000 per month. Without taking into account tax then the annual return rent is sh 1,920,000 hence a return of 12% ( without taking into account annual appreciation in value of the houses)
I have also been offered to buy two small offices in westlands in a new building for sh 10m. Rent from both offices is sh 100k
Actual annual rent is thus 1,200,000 (before tax) and hence a return of 12%
So my question: Does it make sense to constuct houses for rent? It appears i would be better off if i could buy rather than construct?
I guess if am to sell the houses, i would make money but renting them seems not very profitable?
I ask because my friend's chama is negotiating to buy another block of flats for sh 40m and expected rent is sh 480k per month which again suggests that constructing for rent is not the best if one can get a good deal to buy?
what do you think? considering that constructing will also take say 2 years and commitment of time ?
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Rank: Elder Joined: 12/17/2009 Posts: 3,583 Location: Kenya
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newfarer wrote:limanika wrote:african coloner wrote:newfarer wrote:a4architect.com wrote:@newfarer, this will be approx. kes 190,000 inclusive of labour. This will be around 87 bags of cement based on a 1.2.4 concrete mix. .does this include the y12 and r8 yaani chumas That's excluding chumas, total cost will be around 400k. agreed,its better to budget with 450-500K However thanks nitajikakamua. i will need to revisit that wazua thread on 'how to survive during hard times' and do a memo in my house. The quotes nimepata for around 100m2 is in the region of 450k - 500k, I think the figure can come down a bit if you buy the exact quantity of say sand and ballast lakini the risk might be if the same gets exhausted while in the middle of the koroga.
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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heri wrote:@4architect please advice
I have done the costings for 8 two bedroom flats and it comes to sh 16m inclusive of cost of land. Expected rent is sh 160,000 per month. Without taking into account tax then the annual return rent is sh 1,920,000 hence a return of 12% ( without taking into account annual appreciation in value of the houses)
I have also been offered to buy two small offices in westlands in a new building for sh 10m. Rent from both offices is sh 100k
Actual annual rent is thus 1,200,000 (before tax) and hence a return of 12%
So my question: Does it make sense to constuct houses for rent? It appears i would be better off if i could buy rather than construct?
I guess if am to sell the houses, i would make money but renting them seems not very profitable?
I ask because my friend's chama is negotiating to buy another block of flats for sh 40m and expected rent is sh 480k per month which again suggests that constructing for rent is not the best if one can get a good deal to buy?
what do you think? considering that constructing will also take say 2 years and commitment of time ? @heri, a simple method to check project viability is to simply check the time period each project takes to repay then compare. 1. your self constructed flats=16000000/1920000=8.3 yrs. 2.westlands office=10m/1.2m=8.3 years. 3.your friend's chama flats=40m/5.76m=6.94 years. With the above, all the above properties are similar in terms of profitability. No project is greater than the other except for your friend's chama apartments which is negligibly better. In general, residential projects have less profit than office. Hotels have the highest possible profit in real estate. As Iron Sharpens Iron, So one Man Sharpens Another.
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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FRM2011 wrote:@a4architect, what would you consider a reasonable ratio/multiple between rent and cost when buying a house as an investment. Consider the following options.
A house in south B going for 15mn fetching 50k in rent.
O.rongai going for 6.8mn fetching 30k in rent.
Edenville house @ 18mn fetching 80k rent.
Nyayo Embakasi flat kes.7mn fetching 30k rent.
Green park athiriver kes. 15mn fetching 45k rent.
Is there a generally acceptable range ? Is it even prudent to buy a house as an investment with these kind of returns ? Especially if it will involve bank financing (interest, stamp duty e.t.c.) @frm, in most developed countries eg USA, they use a ratio of 0.6 to 0.8. In these countries, the calculations involve bank financing hence complex. A simpler method i use is by using time as the benchmark. This enables to compare all properties easily as below. 1. o. rongai =6.8m/360k=18 years. 2.edenville=18m/960k=18.5 yrs. 3.nyayo embakasi=7m/360k=19.44 years. 4. south b house=15m/600k=25 years. 5. Greenpark athiriver=15m/540k =27 years. I use 15 years as the benchmark time for project viability. Any project that repays after 15 years is too long a period. From the above, the houses are either over valued or are bought for the sole purpose of demolishing then constructing high rise. The recent judiciary house for the CJ costed kes 300,000,000. The average rent in runda is kes 300k per month. This time period for repayment works out s 300m/12x 300k=83 years. In other words, after judiciary buys the house and wants to rent it out at market rates, it will take 86 years to recover their costs. The cost of this house does not make any business sense at all.  Thats why Shollei's excuse of using JKUCAT as valuation advisors does not hold water since no registered kenyan valuer can want to risk their career by certifying such a valuation. As Iron Sharpens Iron, So one Man Sharpens Another.
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Rank: Elder Joined: 6/23/2009 Posts: 13,641 Location: nairobi
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how does one go about obtaining wayleave.. Paid kenyapower over one year ago for a property in kitengela and they are insisting im the one to get the wayleaves whereby i dont know the neighborin land owners and the chief is uncooperative
COOP 255,000 ABP 15.85; KQ 484,100 ABP 7.45; MTN 23,800 ABP 5.20
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Rank: Elder Joined: 12/17/2009 Posts: 3,583 Location: Kenya
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@a4architect or anyone in the know.
is there a reason why almost all bungalows have 9 stone levels before the ring beam ?
What would be the consequences of having 10 levels and also is there any harm in using 9inch stones for a bungalow, which will be roofed using mabati.
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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@nakujua, the stone levels determine the ceiling height. the minimum height is 2.4m as per the kenyan building code. the maximum height depends on your imagination. There is no harm in using 9 inch stone, infact, these make the building even more stable and stronger. As Iron Sharpens Iron, So one Man Sharpens Another.
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Rank: Elder Joined: 12/17/2009 Posts: 3,583 Location: Kenya
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a4architect.com wrote:@nakujua, the stone levels determine the ceiling height. the minimum height is 2.4m as per the kenyan building code. the maximum height depends on your imagination. There is no harm in using 9 inch stone, infact, these make the building even more stable and stronger.
Ahsante sana.
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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@nakujua, welcome. As Iron Sharpens Iron, So one Man Sharpens Another.
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Rank: Elder Joined: 3/29/2011 Posts: 2,242
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@a4a, I would like to recycle grey water in my house for gardening purposes. Do you have any contacts of someone who can do it for me? "Things that matter most must never be at the mercy of things that matter least." Goethe
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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@gathige, you can contact Regina Keino on 0719438957, she deals with bio digestors. For those who come from the mountain region, you can refer her as Regina K to save yourselves from having to answer too many questions about the last name.... As Iron Sharpens Iron, So one Man Sharpens Another.
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Rank: Veteran Joined: 12/8/2009 Posts: 975 Location: Nairobi
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a4architect.com wrote:@gathige, you can contact Regina Keino on 0719438957, she deals with bio digestors.
For those who come from the mountain region, you can refer her as Regina K to save yourselves from having to answer too many questions about the last name....  You will know that you have arrived when money and time are not mutually exclusive "events" in you life!
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Rank: Elder Joined: 3/29/2011 Posts: 2,242
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a4architect.com wrote:@gathige, you can contact Regina Keino on 0719438957, she deals with bio digestors.
For those who come from the mountain region, you can refer her as Regina K to save yourselves from having to answer too many questions about the last name.... Thanks a4a. I will get in touch with her. I won't even try the second name as my pronunciation will betray me esp when saying on the phone" nataka kuongea na Ms K* "Things that matter most must never be at the mercy of things that matter least." Goethe
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Rank: Chief Joined: 5/9/2007 Posts: 13,095
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Gathige wrote:a4architect.com wrote:@gathige, you can contact Regina Keino on 0719438957, she deals with bio digestors.
For those who come from the mountain region, you can refer her as Regina K to save yourselves from having to answer too many questions about the last name.... Thanks a4a. I will get in touch with her. I won't even try the second name as my pronunciation will betray me esp when saying on the phone" nataka kuongea na Ms K*  Bure kabisa wewe....
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Rank: Chief Joined: 5/9/2007 Posts: 13,095
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@A4Arch, how fair or otherwise are these prices for the Makao thing by HF http://www.housing.co.ke/makao-booklet/#page-1
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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@washiku, the house prices are fair. As Iron Sharpens Iron, So one Man Sharpens Another.
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Rank: Chief Joined: 5/9/2007 Posts: 13,095
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a4architect.com wrote:@washiku, the house prices are fair. Great. Ahsante.
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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@washiku, welcome. As Iron Sharpens Iron, So one Man Sharpens Another.
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Rank: Elder Joined: 12/17/2009 Posts: 3,583 Location: Kenya
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Almost all upper floors in kenya are constructed using concrete, and i think the average cost of the same is around 2600/m2,
why is timber shunned for the same, I am thinking even using the 6X2 timber for the joists at a span of say 400mm would nearly half that cost, plus reduced weight.
@4Architect, you have done a cost analysis of concrete slab, si tafadhali ufanye ya mbao.
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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@nakujua, here is the analysis on wood slabs. http://www.a4architect.c...ooden-floor-slab-kenya/
Its slightly cheaper for cypress but has many disadvantages compared to concrete. Use of timber should be discouraged since this affects ecological balance of the earth. As Iron Sharpens Iron, So one Man Sharpens Another.
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