Month: May 2013

Viability between 2bd, 1bd and bedsitter project for rent at Thika.

This area is generally middle class so we will assume middle class finishes estimated at KES 30,000 per m2.

Area.

An average middle class 2 bedroomed is 60m2 in plinth area.
An average 1 bedroomed is 30m2 and bedsitter is 16m2.
The cost for the 2bd =60m2 x kes 30,000=kes 1.8m
Cost for 1 bedroomed =30m2 x kes 30,000=kes 900k.
Cost for bedssitter =16m2 x kes 30,000=kes 480k.

Return on investment in rent.

Rent for 2 bedroomed =kes 20,000
Rent for 1 bedroomed=kes 10,000
Rent for bedsitter =kes 5,500.

Repayment Period.

Repayment period for 2 bedroomed=kes1.8m/kes 20,000/12=7.5 years.
Repayment period for 1 bedroomed =kes 900k/kes10000/12=7.5 years.
Repayment period for bedsitter =kes 480k/kes 5.5k/12=7.2 years.

From the above, it’s clear that all these types of housing units have more or less the same repayment period. They are all equal in terms of viability.

Francis Gichuhi Kamau, Architect.
info@a4architrct.com
0721410684

REAL ESTATE INVESTMENT OPPORTUNITY IN KENYA. HOSTELS AT PANGANI.Budget. 10m

Working on an assumed budget of kes 10m, its possible to venture into hostel investment by renting out a block of flats in a neighborhood near a learning institution and converting it into student hostels.

CURRENT RENT.

The average rent for a 2 bedroomed flat in Pangani is kes 35,000.
This room has a kitchen, living room, bathroom and 2 bedrooms.
The Kitchen and living room can be converted into accommodation units. The living room can fit 3 beds sharing. The kitchen can fit 1 or 2 beds with double Decker. Each bedroom can fit 2 beds on a double Decker if the bedroom is small or 2 beds side by side if the bedroom is large.

NUMBER OF STUDENTS PER 2 BEDROOMED UNIT.

The maximum potential number of students per 2 bedroomed house will be as below.
kitchen. 2
Living room. 6
Bedroom.4
Bedroom.4
Total =16

MONTHLY CHARGE.

A charge of kes 4,000 per student brings the rental value to kes 64,000.
Similar hostels in the same neighborhood charge around the same e.g this one below for 12 people sharing on deckers near Equity Bank Ngara for kes 3,500 per month each.

http://westlands.olx.co.ke/a-new-mens-and-ladies-hostel-in-ngara-near-equity-bank-iid-479246122

This brings out a profit of kes 64,000-kes 35,000=kes 29,000 per month.
The advertising ,cleaning ,electricity and management costs will be offset by the profits from the sale of food to the students.

NUMBER OF UNITS IN A BLOCK.

On average, a 1/8th acre block will have a minimum of 20 units.
The maximum profit derived per month will be 20 units x kes 29,000=kes 580,000.

Initial startup costs.

The initial start up costs will be as below

1. Rent plus deposit . =kes 35,000 x2 x20=kes 1.4m

2.Legal fees to negotiate and secure a minimum 5 year lease. Kes 100,000.
3.Double decker Beds=16 x 20=320 beddings x kes 20,000 per bedding including bed=kes 6.4m
4.Employees to manage and clean the hostel. 3 employees at kes 20,000 each =kes 60,000

Total =kes 8.5m.

CONTINGENCY.

The balance of kes 1.5m will be set aside for any contingencies that may arise e.g more additional units, seats, wardrobes, partitioning, council license fees e.t.c.
With a budget of KES 10m, you can comfortably enjoy a monthly income of kes 580,000 per month for the next 5 years till when the landlord agrees to extend the lease.

MARKETING .

Serious marketing is needed so as to win the confidence of parents. A church based religious theme would come in handy for such a venture which should include christian moral guidance to the students eg FANUSI hostels near University of Nairobi Main campus opposite BOX women hostels or Flora Hostels in Upper Hill area of Nairobi.

Francis Gichuhi Kamau, Architect.
info@a4architect.com
0721410684

Real Estate Investment opportunities in Kenya. Hostels.

Real Estate investment opportunities in Kenya can be found in residential for sale, residential for rent, hotels, hostels, learning institutions, homes for the aged, hospitals, offices for sale, offices for rent among others.

Hostels are bedsitter like type of rooms built near Universities and colleges for student accommodation. The students share a 3.5 m by 4m room . In most cases in Kenya, the sharing per room is done by 2 people.

Most hostels tend to separate men from women . Food is served in a common dining area near the Kitchen.

The average rent per student per month is between kes 2,000 and kes 3,000 sharing 2 students of the same sex per room. As society becomes more liberalized, decisions regarding same sex sharing will most probably be reconsidered.

In most hostels serving Kenyatta University in Juja, the rooms are self contained, with a toilet and shower. A few hostels have communal showers but the rent is quite low compared to self contained hostels.

There is an administration office that is manned 24 hrs within the hostel so as to address the various issues facing the students.

Return on Investment.

In an area where a 1/8th acre costs kes 1m, this can have 48 rooms each rented at kes 6,000 per month or kes 3,000 sharing . The return on investment for this type of investment is 7.3 years which is impressive considering most investments return within 10 to 15 years.

Francis Gichuhi Kamau, Architect.

info@a4architect.com

0721410684

Constructing on Black cotton soil in Kenya.

Black cotton soil is found abundantly in most regions in Kenya.

Black cotton soil tends to soak water during the rainy season and expand and shrink during the dry season.
This expansion and shrinkage creates up and down movements on the ground floor slab, resulting to cracks.
To prevent this cracking, the black cotton soil is either excavated at a minimum depth of 1m or the building foundation raised and suspended above the ground level.

1.5m minimum depth.

Generally, if the black cotton soil is more than 1.5m in depth, its uneconomical to excavate it. This requires a suspended type of foundation whereby columns are dug till solid rock and protrude slightly above the ground level.

Road works.

Black cotton soil areas have costly road works as opposed to red soil or murram soil areas. The black cotton soil will need to be excavated and the voids left backfilled with hardcore, or murram, hence increasing the cost.

Land Price.

With the current land price increase in Kenya, the % of cost increase due to black cotton soil is negligible compared to the cost of the land. In earlier times, land buyers could choose not to buy plots with black cotton soils because there were other available better plots. Currently, the land available has become scarce and expensive so buyers have no choice but to think of solutions to construct on top of black cotton soil.

The same applies to marshlands. Land buyers have no choice but to think out for solutions to construct. This is the case with Runda area which has several areas with march land or Karen area which has several patches of black cotton soil dotting the mainly red soil land.

Francis Gichuhi Kamau, Architect.
info@a4architect.com

How Architectural design service is provided by Architect to Client.

Architectural design is governed by CAP 525 of the Laws of Kenya and the service is divided into 5 parts as per the law.See the law excerpts here.

Part A.
Inception.

Here, the architect will give you the role of various consultants in the building industry eg qs, engineer. There are no fees to pay at this point.

Part B.
Outline proposals.

Once you have your ideas in place, you can email the pictures or sketches to the Architect. He will then transform these into a workable building. Rough cost estimates will be derived. The theme, style and shape of the house is determined in this stage through back and forth exchange of drawings and sketches between Architect and Client.
Fees at this stage are at 1% of total project cost.

Part C.
Scheme Design.

At this stage, the design has taken shape and is now prepared for submission to the Local Authority for approval. Site boundaries, contours, levels and any other detail pertaining to the site is included. Sewer systems are also included.
The fees for this stage are at 1.5% of total project cost.

Part D.
Detailed Design.

At this stage, details such as the roof trusses, fascia board, window and door details, wardrobes, stair cases, stair case railings, floor tile patterns, ceiling patterns, chimney style, kitchen counter styles are included.
Fees for this stage are at 2% of total project cost.

Part E.
Tender action to completion.

This part deals with inciting building contractors to tender, advising on the tender and supervising the actual construction to finish.
Fees for this stage are at 1.5% of total cost.

Francis Gichuhi kamau, Architect.
info@a4architect.com
0721410684

FEASIBILITY STUDY FOR HIGHRISE HOUSING IN PANGANI, NAIROBI ON A 0.25 ACRE PLOT.

Land Cost.

A 0.25 acre plot in Pangani costs around KES 50m.

A maximum of 10 floor levels is possible, similar to the Chinese 10 floor building opposite thwe Pangani Mosque.

Car Parking.

This can park 28 cars per underground level. For 2 underground levels, this will park 56 cars.

Assuming a 3 bedroomed unit of 90m2, the building can house 6 units per floor and 60 units for the maximum possible 10 floor levels.

This number of units fits well with 2 underground levels of car parking. The extra cars will park along the street.

Construction cost.

A construction cost per m2 of KES 43,000 is envisioned to cater for the underground plus high rise costly construction costs.

The building construction will cost kes 230m. The total construction cost when you add up the building cost, road works, fence, sewer, professional fees,marketing, land and bank interest will total approximately kes 360m as tabulated below.

Return on Investment.

This gives a 25% Return on Investment if the houses are sold at KES 7,500,000 each, which is within market rate.

Property appreciates over time. The construction period can take a minimum of 1 year of which the property value will have increased at a rate of 20% per annum.

Below are the calculations that support the above .

Francis Gichuhi Kamau. Architect.

info@a4architect.com

0721410684

How to obtain financing for Real Estate Projects in Kenya.

There are 3 options.

Option 1. Joint Venture.

1. Joint venture.
This method as advantages in that you will not require to put any monetary input apart from the land and consultancy fees.
The disadvantage is that the JV partner will take in a huge amount of profit compared to the amount of money they put in. This depends on how adept your negotiations with the JV partner is.

For example, if the JV partner puts in kes 150m, and the profit is kes 350m, the JV partner will try to squeeze in a 49% profit sharing of KES 175m depending on how thorough your negotiating skills are.
With good negotiating skills, the JV partners can be compensated in a % commensurate with their contribution. Assuming they contribute 15% of total project cost, then the % gain in profit can be pushed/negotiated to 15% of total profit=kes 50m.

Option 2. Phasing the Project in smaller sized chunks.

The total project can be phased in chunks that are commensurate with your 15% of contribution. For example, if the 15% of your contribution is say kes 5m, this translates to kes 33m for a complete phase. Assuming the project costs kes 1 Billion, these represents 30 phases. The number of phases can be adjusted depending on the % contribution as per negotiations between the Bank and land owner.

Usually, once the first phase commences, potential buyers are able to gauge the quality of construction and gain the required confidence whereby they can begin to put in deposit of between 10 to 20% of purchase price.
Assuming a purchase price of kes 18.5m for the 190m2 houses within the 1/8th acre, this translates to kes 1.8 to 3.6m.

The actual construction cost for this unit is kes 40,000 per m2 x 190m2 =kes 7.6m.
This translates to 25 to 50% of the total cost of construction.

Therefore, if you manage to squeeze in a considerable amount of pre sales, this means the construction is funded at between 25 to 50% by the potential buyer and the balance will be borrowed by the bank.

This method has a disadvantage in terms of time. It takes a long time to attract pre sales and the number of presales will determine the number of units constructed concurrently.

This method is the best and most secure since the number of new units to be constructed will be directly proportional to the number of presales.

To achieve this, the design will need to be very unique and the marketing strategy needs to be well funded to afford billboards, promotional expos, tv, radio, newspaper and magazine ads and such advertising media on a very regular basis.

Option 3. Sectional Land sales.

In this method, the land owner will enure the land is subdivided into small portions for resale. The minimum subdivision size for issuance of title is 1/8th acre. For plots smaller than 1/8th acre, the architectural plans needs to be approved then the land owner applies for sectional land title ownership which can be resold as a gated community concept.

This method requires unique architectural designs and 3 D walkthrough and flythrough models so as to allow potential buyers visualise the finished look after houses are constructed since they will buy vacant land.
The disadvantage of this method is that the total profits will be reduced since there is no construction.
The advantage of this method is that the land owner only needs architectural services to come up with the architectural plans for subdivisions and 3D reality images and videos.

Francis Gichuhi kamau, Architect.
info@a4architect.com
0721410684