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House on sale with a lease-back option
Rank: Elder Joined: 11/5/2010 Posts: 2,459
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Pablo wrote:Thats a horible deal.
Someone invests, 7.5M and gets 35k rent. An ROI is 5%, Aiiii
If you get a 12% morgage to buy that house payable in 15 years the repayment is almost 90k per month. @Pablo, that's Kenyan real estate for you. Consider this; 1. South B cost-16m rent 50k roi-3.7% 2. Lavington cost-20m rent 100k roi - 6% 3. Mombasa road cost-10m rent 40k roi- 4.8% 4. Ngummo cost-14m rent-45k roi 3.8%.
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Rank: Member Joined: 3/17/2008 Posts: 567 Location: Nairobi
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In terms of ROI those are horrible deals.
With 7.5M Id rather buy an 1/8th in Ngong for 2M and do 5 2br units which can rent for 12k - 15k.
Total Area = 300SqM @18,000 per SqM and have 200SqM for Parking.
ROI Just below 10%
QED!
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Rank: Veteran Joined: 8/30/2007 Posts: 1,558 Location: Nairobi
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FRM2011 wrote:Pablo wrote:Thats a horible deal.
Someone invests, 7.5M and gets 35k rent. An ROI is 5%, Aiiii
If you get a 12% morgage to buy that house payable in 15 years the repayment is almost 90k per month. @Pablo, that's Kenyan real estate for you. Consider this; 1. South B cost-16m rent 50k roi-3.7% 2. Lavington cost-20m rent 100k roi - 6% 3. Mombasa road cost-10m rent 40k roi- 4.8% 4. Ngummo cost-14m rent-45k roi 3.8%. Agreed 5% yield on rent is very good. However, you seem to forget that there is also capital growth. Property price appreciation in Kenya has been stellar since year 2000. If you did get a mortgage at 12% add miscellaneous 2% for repairs, letting fees etc giving us a total of 14% expenses. Rental yield of 5% and add a conservative 20% increase yoy of price escalation of your property which give us a total of 25% (very conservatively) and you get a net effect of +11% net. This 11% net of all costs is very conservative and from what I have seen, it's usually much higher. Granted, the effect of the mortgage, just like any other loan can take a toll.
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Rank: Veteran Joined: 8/30/2007 Posts: 1,558 Location: Nairobi
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Gordon Gekko wrote:Pablo wrote:Thats a horible deal.
Someone invests, 7.5M and gets 35k rent. An ROI is 5%, Aiiii
If you get a 12% morgage to buy that house payable in 15 years the repayment is almost 90k per month. Show me any real estate worth 7.5m that can fetch a rent of 35k. Nyayo estate embakasi
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Rank: Elder Joined: 7/22/2009 Posts: 7,872
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FRM2011 wrote:Pablo wrote:Thats a horible deal.
Someone invests, 7.5M and gets 35k rent. An ROI is 5%, Aiiii
If you get a 12% morgage to buy that house payable in 15 years the repayment is almost 90k per month. @Pablo, that's Kenyan real estate for you. Consider this; 1. South B cost-16m rent 50k roi-3.7% 2. Lavington cost-20m rent 100k roi - 6% 3. Mombasa road cost-10m rent 40k roi- 4.8% 4. Ngummo cost-14m rent-45k roi 3.8%. That's what's wrong with the Kenya real estate industry. Buyers being shafted right left and center. And this is for cash buyers. Factor in mortgage and you have negative ROI. Like for the south B house above, your ROI will be approximately -8%. Yes, NEGATIVE EIGHT PERCENT. You have to be high on wet bhang soaked in petrol to even consider some things!!! For me, real estate investment is a no brainer. NO MORTGAGE, NO BUYING!!! Raise money and build! Then you can make money. At the very least, developers sell houses at double the total cost put in. Then mortgage will at least triple that value! 6 times a slave. 30 years a slave. Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Member Joined: 4/20/2012 Posts: 888
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MaichBlack wrote:FRM2011 wrote:Pablo wrote:Thats a horible deal.
Someone invests, 7.5M and gets 35k rent. An ROI is 5%, Aiiii
If you get a 12% morgage to buy that house payable in 15 years the repayment is almost 90k per month. @Pablo, that's Kenyan real estate for you. Consider this; 1. South B cost-16m rent 50k roi-3.7% 2. Lavington cost-20m rent 100k roi - 6% 3. Mombasa road cost-10m rent 40k roi- 4.8% 4. Ngummo cost-14m rent-45k roi 3.8%. That's what's wrong with the Kenya real estate industry. Buyers being shafted right left and center. And this is for cash buyers. Fact in mortgage and you have negative ROI. Like for the south B house above, you ROI will be approximately -8%. Yes, NEGATIVE EIGHT PERCENT. You have to be high on wet bhang soaked in petrol to even consider some things!!! For me, real estate investment is a no brainer. NO MORTGAGE, NO BUYING!!! Raise money and build! Then you can make money. At the very least, developers sell house at double the total cost put in. Then mortgage will at least triple that value! 6 times a slave. 30 years a slave. Capital appreciation of the property, is it included in your calculation of ROI?
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Rank: Elder Joined: 7/22/2009 Posts: 7,872
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Why buy a house and make 5% ROI??? If you dream is to eventually own a house in that area, simply buy a plot in the same neighbourhood and put the rest of the money in a better yielding investment. For crying out loud, even a bank will give you double that ROI on fixed deposit account!!! And there are much more lucrative investments than fixed deposit any how! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 7/22/2009 Posts: 7,872
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FRM2011 wrote:sparkly wrote:Owner sounds very attached. Will he and mama watoto agree to be evicted if they default ama it will be drama. @sparkly, he is a very organised chap. He has been building another house elsewhere and I suspect the chums have ran out. ????????????????? In the same paragraph??? Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 7/22/2009 Posts: 7,872
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sparkly wrote:Owner sounds very attached. Will he and mama watoto agree to be evicted if they default ama it will be drama. Or worse, you find out the house is still his. You were played big time!!! Or he sells it again. And again. And again. And again.... This is Kenya!!! Remember??? Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Rank: Elder Joined: 11/5/2010 Posts: 2,459
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MaichBlack wrote:Why buy a house and make 5% ROI???
If you dream is to eventually own a house in that area, simply buy a plot in the same neighbourhood and put the rest of the money in a better yielding investment. For crying out loud, even a bank will give you double that ROI on fixed deposit account!!! And there are much more lucrative investments than fixed deposit any how! Weeee Maich mweusi, I thought we had a deal you stop kuharibu soko in the other thread. The house was sold by a broker who made a cool 350k in less than a week. I had advertised it here but didn't make much progress. Lesson learnt, wazua is full of arm-chair analysts while deals are being made everyday out there. If everyone was to start analysing property decisions the way you do, what do you think would happen to our holdings in HF, Equity and KCB ? Luckily for us, buying decisions are 80% emotions and 20% logic. We are still in business.
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