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Housing Finance: HFCK a diamond in the rough
Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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mkate_nusu wrote:[quote=obiero]Good news keeps flowing http://www.businessdaily...1600-12ofq3u/index.html[/quote] @obiero, courtesy of Innocent on the comment section. Nothing to add: Does buying such apartments really make economic sense? Like if 2 bedroom is going for 6.5 million and average rent for such a house along Thika Rd is between 18k to 25k, let's do the math; 6,500,000 divide by average of 23,000 monthly rent comes to 282 months which is roughly 23.551 years. Does it make sense to commit 2 bed room rent of 23 years to buy a 2 bed room house that you can't live in for all that time? For instance people in their 29 years to around 35 years are already moving to bigger houses since some of them are already starting families. So who is the target market for these 2 bed room houses??? Guys below 28 years? Will they afford? And even if they could afford, does it make sense for them knowing in a just a few years they will need to move to bigger houses??
Let's consider another scenario, where someone buys the apartment to rent out. It's 6.5 million, rent we put at 23k, the payback is 23 years assuming 100% occupancy from the date of purchase to the 23rd year. 100% occupancy firstly is not possible, there will be a couple of months the house will be un-occupied and if you add up those months they could come to maybe even 2 years. So payback period of the house is 25 years, or even if we assume that rents will rise as years move, we can change the 25 years to be around 21 years when we assume the rent increase will reduce the payback period by around 4 years. So who is this investor investing in property that will payback the investment in 21 years???? I do not see any economic sense in undertaking these kinds of projects, or rather by putting purchase prices that high, or who are these buyers being targeted??? You haven't factored in capital appreciation. More importantly you can walk into a bank and come out with 80% of the value of the apartment (5.2m) and invest it in another project Life is short. Live passionately.
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Rank: Chief Joined: 1/3/2007 Posts: 18,346 Location: Nairobi
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sparkly wrote:mkate_nusu wrote:[quote=obiero]Good news keeps flowing http://www.businessdaily...1600-12ofq3u/index.html[/quote] @obiero, courtesy of Innocent on the comment section. Nothing to add: Does buying such apartments really make economic sense? Like if 2 bedroom is going for 6.5 million and average rent for such a house along Thika Rd is between 18k to 25k, let's do the math; 6,500,000 divide by average of 23,000 monthly rent comes to 282 months which is roughly 23.551 years. Does it make sense to commit 2 bed room rent of 23 years to buy a 2 bed room house that you can't live in for all that time? For instance people in their 29 years to around 35 years are already moving to bigger houses since some of them are already starting families. So who is the target market for these 2 bed room houses??? Guys below 28 years? Will they afford? And even if they could afford, does it make sense for them knowing in a just a few years they will need to move to bigger houses??
Let's consider another scenario, where someone buys the apartment to rent out. It's 6.5 million, rent we put at 23k, the payback is 23 years assuming 100% occupancy from the date of purchase to the 23rd year. 100% occupancy firstly is not possible, there will be a couple of months the house will be un-occupied and if you add up those months they could come to maybe even 2 years. So payback period of the house is 25 years, or even if we assume that rents will rise as years move, we can change the 25 years to be around 21 years when we assume the rent increase will reduce the payback period by around 4 years. So who is this investor investing in property that will payback the investment in 21 years???? I do not see any economic sense in undertaking these kinds of projects, or rather by putting purchase prices that high, or who are these buyers being targeted??? You haven't factored in capital appreciation. More importantly you can walk into a bank and come out with 80% of the value of the apartment (5.2m) and invest it in another project Capital Appreciation when there's a glut of apartments available and others coming up? The "loan" isn't free. It costs 14% [at the minimum] when Rental Yields are only 6-8%. Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Member Joined: 9/9/2015 Posts: 233
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If u can service a loan that size and can get a mortgage that size, you can get a loan that size too. Develop a property and sale or flip a property. Ile day Kenyans will realise how much house they can stretch their shillings for, there will be a revolution "Buy when there's blood in the streets, even if the blood is your own."
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Rank: Elder Joined: 6/23/2009 Posts: 14,213 Location: nairobi
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The Great wrote:If u can service a loan that size and can get a mortgage that size, you can get a loan that size too. Develop a property and sale or flip a property. Ile day Kenyans will realise how much house they can stretch their shillings for, there will be a revolution True
KQ ABP 4.26
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Rank: Elder Joined: 12/25/2014 Posts: 2,301 Location: kenya
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VituVingiSana wrote:sparkly wrote:mkate_nusu wrote:[quote=obiero]Good news keeps flowing http://www.businessdaily...1600-12ofq3u/index.html[/quote] @obiero, courtesy of Innocent on the comment section. Nothing to add: Does buying such apartments really make economic sense? Like if 2 bedroom is going for 6.5 million and average rent for such a house along Thika Rd is between 18k to 25k, let's do the math; 6,500,000 divide by average of 23,000 monthly rent comes to 282 months which is roughly 23.551 years. Does it make sense to commit 2 bed room rent of 23 years to buy a 2 bed room house that you can't live in for all that time? For instance people in their 29 years to around 35 years are already moving to bigger houses since some of them are already starting families. So who is the target market for these 2 bed room houses??? Guys below 28 years? Will they afford? And even if they could afford, does it make sense for them knowing in a just a few years they will need to move to bigger houses??
Let's consider another scenario, where someone buys the apartment to rent out. It's 6.5 million, rent we put at 23k, the payback is 23 years assuming 100% occupancy from the date of purchase to the 23rd year. 100% occupancy firstly is not possible, there will be a couple of months the house will be un-occupied and if you add up those months they could come to maybe even 2 years. So payback period of the house is 25 years, or even if we assume that rents will rise as years move, we can change the 25 years to be around 21 years when we assume the rent increase will reduce the payback period by around 4 years. So who is this investor investing in property that will payback the investment in 21 years???? I do not see any economic sense in undertaking these kinds of projects, or rather by putting purchase prices that high, or who are these buyers being targeted??? You haven't factored in capital appreciation. More importantly you can walk into a bank and come out with 80% of the value of the apartment (5.2m) and invest it in another project Capital Appreciation when there's a glut of apartments available and others coming up? The "loan" isn't free. It costs 14% [at the minimum] when Rental Yields are only 6-8%. I agree with you mkate_nusu
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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enyands wrote:VituVingiSana wrote:sparkly wrote:mkate_nusu wrote:[quote=obiero]Good news keeps flowing http://www.businessdaily...1600-12ofq3u/index.html[/quote] @obiero, courtesy of Innocent on the comment section. Nothing to add: Does buying such apartments really make economic sense? Like if 2 bedroom is going for 6.5 million and average rent for such a house along Thika Rd is between 18k to 25k, let's do the math; 6,500,000 divide by average of 23,000 monthly rent comes to 282 months which is roughly 23.551 years. Does it make sense to commit 2 bed room rent of 23 years to buy a 2 bed room house that you can't live in for all that time? For instance people in their 29 years to around 35 years are already moving to bigger houses since some of them are already starting families. So who is the target market for these 2 bed room houses??? Guys below 28 years? Will they afford? And even if they could afford, does it make sense for them knowing in a just a few years they will need to move to bigger houses??
Let's consider another scenario, where someone buys the apartment to rent out. It's 6.5 million, rent we put at 23k, the payback is 23 years assuming 100% occupancy from the date of purchase to the 23rd year. 100% occupancy firstly is not possible, there will be a couple of months the house will be un-occupied and if you add up those months they could come to maybe even 2 years. So payback period of the house is 25 years, or even if we assume that rents will rise as years move, we can change the 25 years to be around 21 years when we assume the rent increase will reduce the payback period by around 4 years. So who is this investor investing in property that will payback the investment in 21 years???? I do not see any economic sense in undertaking these kinds of projects, or rather by putting purchase prices that high, or who are these buyers being targeted??? You haven't factored in capital appreciation. More importantly you can walk into a bank and come out with 80% of the value of the apartment (5.2m) and invest it in another project Capital Appreciation when there's a glut of apartments available and others coming up? The "loan" isn't free. It costs 14% [at the minimum] when Rental Yields are only 6-8%. I agree with you mkate_nusu By "project" I mean another cash generating venture. Life is short. Live passionately.
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Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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The Great wrote:If u can service a loan that size and can get a mortgage that size, you can get a loan that size too. Develop a property and sale or flip a property. Ile day Kenyans will realise how much house they can stretch their shillings for, there will be a revolution There are many ways to make money in real estate: 1. Flipping 2. Raw land 3. Farming and forestry business 4. Commercial rentals 5. Residential rental 6. Development and sale 7. Business premises 8. Speculation 9. Many others All of them have pros and cons. To the topic at hand, I am pointing out that if someone buys the HF apartments for rentals it is silly to just sit back and wait for rental for 20 years. He/she can flip it, borrow with the flat as collateral, or sell it in future at a higher price. Life is short. Live passionately.
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Rank: Elder Joined: 12/4/2009 Posts: 10,804 Location: NAIROBI
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Real estate will start making sense when developers realise that masionettes and villas at affordable price will move like water on a slope. Apartments the oversupply and glut is too much. Wealth is built through a relatively simple equation
Wealth=Income + Investments - Lifestyle
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Rank: Veteran Joined: 8/11/2010 Posts: 1,011 Location: nairobi
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Rank: Elder Joined: 12/7/2012 Posts: 11,935
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bartum wrote:What is flipping House flipping is when real estate investors buy homes, usually at auction, and then resell them at a profit months down the road after undertaking renovations/improvements/modifications etc . In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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