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Low End Housing: High Risk, High Return
Rank: Veteran Joined: 7/3/2007 Posts: 1,635
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obiero wrote:Chaka wrote:Just wondering..when a property is being valued,would the accruing rent be taken into account or that would be a non issue? obiero wrote:
@Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me
Non issue since it could be a non rental Nevertheless if you are valuing to borrow, then rental income becomes an important demonstration of cash flow. To my knowledge it is not included in the valuation. "The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
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Rank: Elder Joined: 6/23/2009 Posts: 14,216 Location: nairobi
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Wakanyugi wrote:obiero wrote:Chaka wrote:Just wondering..when a property is being valued,would the accruing rent be taken into account or that would be a non issue? obiero wrote:
@Jon gray the investment is in a rural setting hence ROI is unprintable. usability of the property market value as collateral for other investment(s) is key for me
Non issue since it could be a non rental Nevertheless if you are valuing to borrow, then rental income becomes an important demonstration of cash flow. To my knowledge it is not included in the valuation. Accurate. It's not included in valuation but does influence the bank decision on how much to lend. In this case though the individual has other income streams
KQ ABP 4.26
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Rank: Member Joined: 7/27/2014 Posts: 560 Location: Eastlando
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Swenani wrote:Fullykenyan wrote:Swenani wrote:Fullykenyan wrote:obiero wrote:winmak wrote:obiero wrote:kayhara wrote:What's the definition of low class? I just met a Mombasa guy with
28 Swahili houses, he tells me each cost him an average of 3.5 million to build including a borehole for each. so that's about 98 million.
each house has 10 small one bedroom going for 8,000 each including water,
so each house income per month is ksh. 80,000/-
all 28 houses is ksh. 2,240,000
assuming he built them all in one year? (he built over 5 years) it will take him only 3.5 years to recoup his investments, that's assuming the rent is constant.
well.... Low end refers to the target market not the landlord.. There are 4 different seven storied bedsitter units in Pipeline with 10 houses per floor owned by the immediate former Governor that earn him an average of KES 2,380,000 monthly from rent of KES 8,500 per flat Wow, now I didn't know he had interests in such.. Now @Obiero, I am prospecting, I want an 8th in areas of Kasarani or such like neighborhoods to build a rental flat in the next 3 years. How much do the high traffic areas go for? and would you advice me to go for this area or are there other lucrative areas? (I had been adviced on Kinoo , Gachie... but I fear those areas) @winmak last I checked, from Sunton, Clayworks, Seasons going to main centre at Kasarani you will need KES 8,500,000 for a plain 1/8 acre. Mwiki headed down to Kangundo road budget for KES 3,500,000 to KES 6,000,000 Kitengela there is no land for sale from 1st to 3rd row all the way upto Yukos. Fourth row is available at KES 5,500,000, but being a victim of an intricate land fraud in the county dating back to 2009, I will not lead anyone to invest in the area. Im still in court! These prices are equivalent to the price of land in Germany, where you have all the roads tarmacked, electricity and water on site. Something is wrong in kenya. You can't compare Kenya with a shithole country in Europe  I have realised that albeit too late . @Swenani, do you know of anyoned selling land in Masaku? No, but if you can consider my unsolicited advice and if you are buying for long term, my opinion is that you consider some of these counties; Isiolo(Isiolo town), Uasin Gishu(Eldoret town),Lamu(Lamu Town) Busia(Busia Town) and Bungoma(Bungoma and/or Malaba town). These towns will not be the same in the next 10-15 years especially if SGR and lapset projects are realized @Swenani and Obiero, what about those plots that safaricom is selling? have you tried them? or would you recommend them?
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Rank: Elder Joined: 6/23/2009 Posts: 14,216 Location: nairobi
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Fullykenyan wrote:Swenani wrote:Fullykenyan wrote:Swenani wrote:Fullykenyan wrote:obiero wrote:winmak wrote:obiero wrote:kayhara wrote:What's the definition of low class? I just met a Mombasa guy with
28 Swahili houses, he tells me each cost him an average of 3.5 million to build including a borehole for each. so that's about 98 million.
each house has 10 small one bedroom going for 8,000 each including water,
so each house income per month is ksh. 80,000/-
all 28 houses is ksh. 2,240,000
assuming he built them all in one year? (he built over 5 years) it will take him only 3.5 years to recoup his investments, that's assuming the rent is constant.
well.... Low end refers to the target market not the landlord.. There are 4 different seven storied bedsitter units in Pipeline with 10 houses per floor owned by the immediate former Governor that earn him an average of KES 2,380,000 monthly from rent of KES 8,500 per flat Wow, now I didn't know he had interests in such.. Now @Obiero, I am prospecting, I want an 8th in areas of Kasarani or such like neighborhoods to build a rental flat in the next 3 years. How much do the high traffic areas go for? and would you advice me to go for this area or are there other lucrative areas? (I had been adviced on Kinoo , Gachie... but I fear those areas) @winmak last I checked, from Sunton, Clayworks, Seasons going to main centre at Kasarani you will need KES 8,500,000 for a plain 1/8 acre. Mwiki headed down to Kangundo road budget for KES 3,500,000 to KES 6,000,000 Kitengela there is no land for sale from 1st to 3rd row all the way upto Yukos. Fourth row is available at KES 5,500,000, but being a victim of an intricate land fraud in the county dating back to 2009, I will not lead anyone to invest in the area. Im still in court! These prices are equivalent to the price of land in Germany, where you have all the roads tarmacked, electricity and water on site. Something is wrong in kenya. You can't compare Kenya with a shithole country in Europe I have realised that albeit too late . @Swenani, do you know of anyoned selling land in Masaku? No, but if you can consider my unsolicited advice and if you are buying for long term, my opinion is that you consider some of these counties; Isiolo(Isiolo town), Uasin Gishu(Eldoret town),Lamu(Lamu Town) Busia(Busia Town) and Bungoma(Bungoma and/or Malaba town). These towns will not be the same in the next 10-15 years especially if SGR and lapset projects are realized @Swenani and Obiero, what about those plots that safaricom is selling? have you tried them? or would you recommend them? I would not be overly afraid of buying into a Safaricom Sacco land offering. The brand just would not want to be embroiled in any messy affair, hence relatively solid investments
KQ ABP 4.26
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Rank: Elder Joined: 6/23/2009 Posts: 14,216 Location: nairobi
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Rank: Elder Joined: 1/8/2018 Posts: 2,212 Location: DC (Dustbowl County)
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Quote:KNBS does not currently track the rent for one-bedroom houses. The rent data means developers of single-room units, popular with low income earners, have gained the most in terms of rate of returns on their investments, especially in major towns. They are followed by investors in two-bedroom flats, then three-bedroom maisonettes while bungalows are bottom.
The majority urban poor population opt for the small units whose charges fit their meagre budgets. Of course this is a no-brainer, I was in fact very tempted to go this route because 1. Returns are higher 2. Need for parking and other costly amenities is next to zero 3. Cost of building is cheaper because you can go for the cheapest of the cheap finishings and may not even need to plaster your machine cut walls 4. Economies of scale given low fixed costs compared to returns. 5. Extra income from running businesses at the ground floor But the reasons why I rejected this route 1. Slummification of entire neighbourhoods (and cities) starts with these buildings. Look at Umoja. Note exactly a great place to raise kids and live a decent life. Some of those apartments are like modern day tombs! Kenyans deserve better. This is why I laud Uhuru's low cost housing agenda. Quality subsidised homes for all. 2. Headaches to the landlord galore. general security issues, Tenant to tenant crime may be rife, eviction problems, blocked drains due to tenants pouring all sorts of plastics and things into the drains, vandalism and constant repairs are no joke. It is as management intensive as it gets and my life is too short to spend all my hours managing all these problems. 3. Cap gains are much lower per annum for these types of structures. What you gain in cash flows you lose big time in cap gains compared to say a guy who buys a 1/4 acre in a leafy area and builds a huge maisonette on it. Bottom line, I would take decent 2br and 3 br flats, as well as 4+ br maisonettes any day over 1br blocks of flats despite the cash flows. Kenyans, seriously ask yourselves, do we want the whole country to look like this (below). If we are not careful, bila planning, that is the direction we are headed in.  Compare to Enugu (below)in Nigeria. Much more pleasing to the eyes and to the general well being of all tenants :) 
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Rank: Elder Joined: 6/23/2009 Posts: 14,216 Location: nairobi
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Photos will be shared here of besitters in New York and Beijing! Smaller living spaces are the trend going into the future. Execution of the project is what matters. Umoja failed because of lack of coordination by GoK which could easily happen to the Big Four housing agenda.. Look at Marish, Ungem, Ofafa, Baha..
KQ ABP 4.26
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Rank: Elder Joined: 1/8/2018 Posts: 2,212 Location: DC (Dustbowl County)
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obiero wrote:Photos will be shared here of besitters in New York and Beijing! Smaller living spaces are the trend going into the future. Execution of the project is what matters. Umoja failed because of lack of coordination by GoK which could easily happen to the Big Four housing agenda.. Look at Marish, Ungem, Ofafa, Baha.. Show me bedsitters ANYWHERE in Kenya that come close to matching those huge luxury studio apartments in New York! Some of those things are bigger than a 4 br hapa. Hakuna hata moja hapa Kenya. Those studio apartments (their version of bedsitters) cost hundreds of thousands if not millions of dollars! I am yet to see a decent block of "posh" bedsitters anywhere in Kenya in 99% of all cases. Please prove me wrong. Yet even the stock of those is but a tiny fraction of the entire housing market in New York. Smaller living spaces is just a media catchphrase and fad. Wake me up when it becomes mainstream and actually happens en masse. Saying everybody is running for tiny bedsitters is like saying everyone is rushing to sell their cars to buy those tiny suzukis I see being used for uber chap chap that can almost be held in the palm of one's hand I do however agree with you that execution (corruption, lack of maintenance, poor management, land grabbing *especially during the man with the rungu's error)*, ignoring zoning laws and outright incompetence) caused the collapse of otherwise well planned estates. The other problem with catering to the low income segment is that they are not able to afford to live in decent accommodation which is expensive to build, nor maintain it even if they are subsidised into it. Look at Kibera Highrise whose walls are now reddening with mud. In the USA look at Cabrini Green in Chicago - beautiful apartments that had to be torn down when they became crime and drug havens. In Paris pia look at the banlieues - modern urban ghettos with grafitti despite the buildings themselves originally being very decent. Mixed use housing (high end mixed with subsidised low income) seems to have better luck. Whether that can work in Kenya is debatable though.
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Rank: Veteran Joined: 11/13/2015 Posts: 1,654
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MugundaMan wrote:
Of course this is a no-brainer, I was in fact very tempted to go this route because
1. Returns are higher
2. Need for parking and other costly amenities is next to zero
3. Cost of building is cheaper because you can go for the cheapest of the cheap finishings and may not even need to plaster your machine cut walls
4. Economies of scale given low fixed costs compared to returns.
5. Extra income from running businesses at the ground floor
But the reasons why I rejected this route
1. Slummification of entire neighbourhoods (and cities) starts with these buildings. Look at Umoja. Note exactly a great place to raise kids and live a decent life. Some of those apartments are like modern day tombs! Kenyans deserve better. This is why I laud Uhuru's low cost housing agenda. Quality subsidised homes for all.
2. Headaches to the landlord galore. general security issues, Tenant to tenant crime may be rife, eviction problems, blocked drains due to tenants pouring all sorts of plastics and things into the drains, vandalism and constant repairs are no joke. It is as management intensive as it gets and my life is too short to spend all my hours managing all these problems.
3. Cap gains are much lower per annum for these types of structures. What you gain in cash flows you lose big time in cap gains compared to say a guy who buys a 1/4 acre in a leafy area and builds a huge maisonette on it.
Bottom line, I would take decent 2br and 3 br flats, as well as 4+ br maisonettes any day over 1br blocks of flats despite the cash flows. Kenyans, seriously ask yourselves, do we want the whole country to look like this (below). If we are not careful, bila planning, that is the direction we are headed in.
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Rank: Elder Joined: 6/23/2009 Posts: 14,216 Location: nairobi
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MugundaMan wrote:obiero wrote:Photos will be shared here of besitters in New York and Beijing! Smaller living spaces are the trend going into the future. Execution of the project is what matters. Umoja failed because of lack of coordination by GoK which could easily happen to the Big Four housing agenda.. Look at Marish, Ungem, Ofafa, Baha.. Show me bedsitters ANYWHERE in Kenya that come close to matching those huge luxury studio apartments in New York! Some of those things are bigger than a 4 br hapa. Hakuna hata moja hapa Kenya. Those studio apartments (their version of bedsitters) cost hundreds of thousands if not millions of dollars! I am yet to see a decent block of "posh" bedsitters anywhere in Kenya in 99% of all cases. Please prove me wrong. Yet even the stock of those is but a tiny fraction of the entire housing market in New York. Smaller living spaces is just a media catchphrase and fad. Wake me up when it becomes mainstream and actually happens en masse. Saying everybody is running for tiny bedsitters is like saying everyone is rushing to sell their cars to buy those tiny suzukis I see being used for uber chap chap that can almost be held in the palm of one's hand I do however agree with you that execution (corruption, lack of maintenance, poor management, land grabbing *especially during the man with the rungu's error)*, ignoring zoning laws and outright incompetence) caused the collapse of otherwise well planned estates. The other problem with catering to the low income segment is that they are not able to afford to live in decent accommodation which is expensive to build, nor maintain it even if they are subsidised into it. Look at Kibera Highrise whose walls are now reddening with mud. In the USA look at Cabrini Green in Chicago - beautiful apartments that had to be torn down when they became crime and drug havens. In Paris pia look at the banlieues - modern urban ghettos with grafitti despite the buildings themselves originally being very decent. Mixed use housing (high end mixed with subsidised low income) seems to have better luck. Whether that can work in Kenya is debatable though. Ngong Road is littered with the studio highrise apartments. Tembea Kenya! http://www.suraya.co.ke/?property=the-lynx-royal
https://www.the-star.co....-rent-in-ngong-road.html
KQ ABP 4.26
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