Month: June 2013

In October 2006, while President Obama was still a US Senator, an American business associate, Mr Ian Houston, suggested to me that since Chicago has the largest hoteliers in US and is represented by Senator Obama who has Kenyan roots, it could be an easy connection between the American hotel investors and Kenya.

I wrote an email to his aide at the time, Mr Mark Lupert.
http://www.thedailybeast.com/newsweek/2008/07/18/the-aide-who-went-to-war.html

This is how the deal went.

3 years later, the then Senator Obama was elected 44th President of the USA and commenced office in January 2009.

Its a pleasure for me to have had to contact and communicate with a Senator who later on 3 years later turned to become a 2 term president in USA.

Its now 7 years since. President Obama is currently in Africa to seek the same connections that i had unsuccessfully tried to create .
The investment opportunities to American hoteliers are still welcome.

We are now 7 years older with experience. We can now deal with more experience.

Building your house loan free in Kenya. The a4architect house plan.

The best way to be able to construct your house in Kenya without the huge bank loans is through pooling resources together.
Plots close to tarmac roads where it’s convenient to live and be able to go to work daily are quite expensive. They range from a minimum of kes 1m per 1/8th for plots over 1 km from main road to 3m per 1/8th for plots close to main roads.

Lack of infrastructure.

Unfortunately, since the costs are prohibitive to many working Kenyans, they are forced to buy land in far inaccessible areas such as Joska, Kantafu, Rangau, Isinnya, Juja farm and hope that one day, the Government will lay infrastructure such as schools, police stations and tarmac roads so that the areas can be inhabitable.

They then opt to rent houses closer to the road where it’s safer and amenities such as schools are easily accessible.

Financial Loss due to buying unusable land.

The land that they have bought will on average cost anywhere between kes 400,000 to 1.5million.
This amount of money is quite huge for it to be used on purchasing land that is not being used due to inaccessibility.

One could say that the land purchased will one day in future have a developed neighborhood .

In reality, the best investments are the ones that can be able to give returns immediately.

Solution.

For the same amount of money that goes to buy land that cannot be livable due to distance from main road, insecurity, lack of water and electricity and sometimes even no network coverage, a4architect.com has come up with a quick fix solution that enables one to own a home or rental unit that will immediately begin to add value in terms of comfortability and rental income.

Cost of expensive land divided by 12.

The design is such that within the 1/8th acre plot, 12 spacious, 20m2 plinth area size bedsitters fit within the compound on the same level.

This means that the cost of obtaining the expensive land near main road is divided by 12.

The 1m land will now cost 83,000, the 2m land will cost 170,000 and the 3m land will cost kes 250,000 to obtain for construction purposes.

Immediate gains.

A bedsitter in such a location can now be able to earn you good rent or house you in a safe place near the road where its more convenient for you to move to and from work.

Cost of house compared to cost of inaccessible land.

With the same cost of an average plot in an inaccessible area such as Rangau, Kiserian Pipeline, Joska, Kamulu, Isinya,Juja farm, you will be able to build a spacious bedsitter in a very good neighborhood such as Rongai town, Kitengela Milimani area, Athi River, Syokiamu etc.

This is good value for your money compared to buying land that you can’t be able to live in till after 10 or more years.

Spacious design.

The design of the bedsitter is such that if you decide to purchase 2 bedsitters next to each other, they can be easily joined to form a 1 bedroomed unit.

If you decide to buy 3 bedsitters next to each other, they easily make a 2 bedroomed unit.

The interior of the bedsitter has also been optimized to give space and increase privacy.

If the bed is placed at the farthest end and a curtain introduced, the bedsitter unit will have the same privacy level as a 1 bedroomed unit. Visitors to the bedsitter will only interact with the living room and open kitchen area without interfering with the bed space area.

See the bedsitter floor pan and furniture arrangement below.

Curtain to separate bed space area.

If a curtain is introduced across the room after the bed space, it effectively creates the unit from a bedsitter to a 1 bedroomed in terms of privacy levels.

A young family can now live in the unit comfortably as they wait for the finances to grow and the family size to increase.

Future growth.

The design is such that 4 other floors can be stacked vertically up in future.
The 12 shareholders can come up with a majority decision to construct vertically upwards within the confines of the sectional property act law.

To learn more and join this investment plan, visit a4architect.com/discuss/ or email info@a4architect.com.

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

Bye Bye High Bank interest Rates. Invest in Real Estate by pooling resources and get more value for your money.

The current bank interest rates are in the range of 17% per annum.

Assuming an investment on a 1/8th acre plot for rental bedsitters, the cost will be as below.
1. cost of construction . kes 7.3m
2. cost of land. kes 3m

70% of Cost of Construction.

Banks can finance only the cost of construction to the tune of 70%. This brings the amount financed to kes 5,110,000.

Monthly bank repayment.

After raising personal savings of kes 3m to buy land and kes 2,100,000 as 30% of construction cost, the investor is still required to pay the bank a monthly payment of kes 88,000.

Rent collection.

This project can effectively collect kes 84,000 in monthly rent.

This means for the next 10 years, the bank will take all the rent.

This can be quite an uphill task considering the bank has only put in kes 5,110,000 out of the possible KES 10,300,000 total construction cost, roughly 50%.

For an individual to purchase the 3m land and put in 2m as 30% of construction cost then wait for 10 years for any financial gain is not an easy task.

Solution.

For the exactly same project cost of kes 3m for land and kes 7.3m for construction, a4architect.com offers a solution whereby several investors are pooled together to become joint co investors into the whole project comprising of 12 bedsitters. See more details here http://a4architect.com/discuss/

Joint Co Investor.

Each joint co investor will legally own 1 share out of the possible 12 shares. In addition to this, the 1 share will be translated to a particular bedsitter unit which the co investor can live in and collect rent from.

Comparison between Bank finance and Joint co investor finance.

The land plus construction costs kes 10.3m.
For the 12 co investors, each owning 1 bedsitter unit, this translates to 10.3m/12=kes 860,000.

After contribution of kes 860,000, the co investor will immediately start earning monthly rent of kes 7,000 on construction completion.

For the bank financed at 17% per annum interest, the investor will have to come up with kes 3m for land purchase and a further kes 2.1m for 30% construction cost.

The bank will bring in 5.1m as construction loan and will take kes 89,000 as monthly payment for 10 years. In other words, the investor will get nothing till after 10 years.

The total amount the investor will have put in is kes3m plus kes 2.1m =kes 5.1m

If he invested in the a4architect.com method of pooling resources, this would have translated into kes5.1m/kes860k= 6 shares.
These shares will earn 6 x kes 7,000=kes 42, 000 monthly.

For 10 years, this will be kes 42,000 x 12 x 10=kes 5.04m.

This represents a 10% per annum growth rate .

In this case, the investor who puts in kes 5.1m and borrows from the bank will get 0 revenue for the next 10 years while the investor who puts in the same amount and pools resources form other investors gets back the money he invested by the 10th year.

As the saying goes, a bird at hand is worth more than 10 in the forest.
The a4architect.com option of pooling resources will work better .

Savings.

In the a4architect.com method of pooling resources in 12 unit shares per plot, it’s easier to spread your savings from 1 plot/area to another as your money comes in.

Example.

For example, in June 2013, you are able to raise the kes 860,000 for 1 share. 6 months later in December, you are able to raise another kes 860,000 for 1 share. This means you will t have to wait for all your shares to be in 1 project.
Every month, there will be a new opportunity to pool resources for the rental investment plan hence ease of personal finance planning.
There is no missing the bus.

Join Now.

To join into the a4architect.com Real Estate investment plan, read here http://a4architect.com/discuss/ for more info or email info@a4architect.com .

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

Most Profitable method of investing in Kenyan rental Real Estate.

As the cliché saying goes, investing in Real estate is about 3 issues.
1.Location.
2.Location
3.Location.

Example.

KES 1m land.

An investor buys land worth kes 1m per 1/8th and develops bedsitters for rent. Such land can only be found in places such as Kiserian pipeline, Joska, Juja farm etc. The land will most probably be over 1km from tarmac. The rental yield per unit will be in the range of 4,500 per month.

KES 2m land.

Another investor buys land worth kes 2m per 1/8th and develops the same bedsitters at the same construction cost. This land will most probably be between 0.5 to 1km from tarmac. The rent per unit will be in the range of kes 6,000 per unit.

KES 3m land.

The third investor buys land worth kes 3m per 1/8th acre and develops bedsitters at the same construction cost. This land is most probably between 0.5 to 0 km from tarmac. Rent per unit is kes 7000.

Return on Investment.

All the 3 investors will have the same return on investment in approximately 10 years.
See calculations here

http://a4architect.com/2013/06/22/real-estate-investment-3-land-price-options-kes-1-2-and-3-m-per-plot/

Occupancy rate.

With good well planned rents, all the 3 investors will derive near 100% rental occupancy rates.

Monthly rental income.

The 3m per 1/8th acre investor will derive the highest rental income of kes 7,000 per month. Therefore, the best returns will be within the 3m per 1/8th price.

Opportunity to invest.

For each of the options, to construct a building that can bring in rental income, the land must be purchased first. Investors must fork out the 1,2,or 3 m per 1/8th acre to begin construction.
This 1,2 or 3m can become a hindrance to rental income investment.

Solution.

To remove the need to purchase the land, a4architect.com have come up with plans that enable a 1/8th acre plot to be constructed to fit 12 units of 20m2 plinth area bedsitters.

These 12 units can then be converted into 12 shares in a Limited Liability Company. The LLC can then purchase the land and have 12 shareholders.

In this case the land worth kes 1m will now cost 1m/12=kes 83,000 per 1 share.

The land worth kes 2m can now be accessible per 1 share costing 2m/12=kes 170,000.

The land costing kes 3m can now be accessible for 1 share costing 3m/12=kes 250,000.

Any investor with kes83,000,170,000 or 250,000 can now access land to construct a bedsitter unit for rent.

Construction.

For the investor who has bought into 1 share of kes 1m worth of land, he will need approx. kes 500,000 to construct a rental unit that can bring in kes 4,500 monthly.

For the investor who has bought 1 share within land costing kes2m, he will need approx. kes 610,000 to construct and gain from kes 6,000 monthly rent form the bedsitter.

For the investor who has bought into kes 3m worth of land, he will need to add kes 610,000 to construct a unit that can bring in rental income of kes 7,000 monthly.

Check bedsitter monthly rents currently in Nairobi here
http://www.olx.co.ke/q/bedsitter/c-363

Conclusion.

To invest and in 1 share and earn kes 4,500 monthly rent, the cost of land plus all construction is kes 580,000.

To invest and earn kes 6,300 monthly rent, the cost of land plus construction is kes 780,000.

To invest in 1 share and earn kes 7,000 monthly rent, the cost of land plus construction will be kes 860,000.

On top of monthly rental gain, the investment will appreciate at a rate of 20% per year. In 5 years, the investment will have doubled if you opted to sell out.

To start investing, visit http://a4architect.com/discuss/ to learn more or contact info@a4architect.com.

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

LAND KES 1 M PER PLOT.	contribution per share.KES	587,422.67
Monthly earnings per share .KES	4800
Cost Item	Kshs	%
Land	1,000,000.00	14.18626452
Preliminary	120,000.00	1.702351742
Construction	5,040,000.00	71.49877317
External Works	100,800.00	1.429975463
Contingency	75,600.00	1.072481598
Professional fees	403,200.00	5.719901854
Project Management fees	50,400.00	0.714987732
Marketing	250,000.00	3.54656613
Financial Charges	9,072.00	0.128697792
Total	7,049,072.00	100
Financing Plan	Kshs	%
Developer	7,049,072.00	100
	0.00	0
Debt Finance	0.00	0
Presales	0.00	0
Total	7,049,072.00	100
PROFIT
3 OPTIONS AS BELOW.
1. SALE OPTION
TOTAL SALES FOR 4 UNITS	8,800,000.00
TOTAL EXPENDITURE	7,049,072.00
NET PROFIT	1,750,928.00
% Profit Margin	24.83912776
Take home ammount.	2,750,928.00
2. RENT OPTION.
Rent per Month	57600	57600
Rent per year	691,200.00
Return on Investment in years	10.20
Return on investment minus land	8.75	6,049,072.00
3. FULLY FURNISHED OPTION
Fully furnished.
Per bedroom daily	1000
Per unit daily	3000
Per 4 units daily	12000
Per 4 units yearly	4,380,000.00
Per 4 units 50% occupancy	2,190,000.00
4 units 50% occupancy. Monthly	182,500.00
Return on Investment in years	3.22
Number of rooms	12
Number of ownership shares	12
Total value per share	587,422.67
Total monthly earnings per share . Rent	4800
Total monthly earnings per share. Fully furnished.	15,208.33
LAND KES 2M PER PLOT	contribution per share.KES	777,566.67
Monthly earnings per share .KES	6300
Cost Item	Kshs	%
Land	2,000,000.00	21.43438933
Preliminary	120,000.00	1.28606336
Construction	6,000,000.00	64.303168
External Works	120,000.00	1.28606336
Contingency	90,000.00	0.96454752
Professional fees	480,000.00	5.14425344
Project Management fees	60,000.00	0.64303168
Marketing	450,000.00	4.8227376
Financial Charges	10,800.00	0.115745702
Total	9,330,800.00	100
Financing Plan	Kshs	%
Developer	9,330,800.00	100
	0.00	0
Debt Finance	0.00	0
Presales	0.00	0
Total	9,330,800.00	100
PROFIT
3 OPTIONS AS BELOW.
1. SALE OPTION
TOTAL SALES FOR 4 UNITS	12,400,000.00
TOTAL EXPENDITURE	9,330,800.00
NET PROFIT	3,069,200.00
% Profit Margin	32.89321387
Take home ammount.	5,069,200.00
2. RENT OPTION.
Rent per Month	75600
Rent per year	907,200.00
Return on Investment in years	10.29
Return on investment minus land	8.08	7,330,800.00
3. FULLY FURNISHED OPTION
Fully furnished.
Per bedroom daily	1000
Per unit daily	3000
Per 4 units daily	12000
Per 4 units yearly	4,380,000.00
Per 4 units 50% occupancy	2,190,000.00
4 units 50% occupancy. Monthly	182,500.00
Return on Investment in years	4.26
Number of rooms	12
Number of ownership shares	12
Total value per share	777,566.67
Total monthly earnings per share . Rent	6300
Total monthly earnings per share. Fully furnished.	15,208.33
Fully Furnished option.
	unit	cost
Bed	3	36000
Beddings	3	15000
curtains	3	9000
TV	3	75000
Table and chair	3	45000
Contingencies/cutlery	3	30000
TOTAL per 3 share unit		210,000.00
Cost per unit share		70,000.00
This cost should be added to the initial share price when members choose to change form normal monthly rent to Fully Furnished option.
LAND KES 3 M PER PLOT.	contribution per share.KES	860,900.00
Monthly earnings per share .KES	7000
Cost Item	Kshs	%
Land	3,000,000.00	29.0393774
Preliminary	120,000.00	1.161575096
Construction	6,000,000.00	58.07875479
External Works	120,000.00	1.161575096
Contingency	90,000.00	0.871181322
Professional fees	480,000.00	4.646300383
Project Management fees	60,000.00	0.580787548
Marketing	450,000.00	4.355906609
Financial Charges	10,800.00	0.104541759
Total	10,330,800.00	100
Financing Plan	Kshs	%
Developer	10,330,800.00	100
	0.00	0
Debt Finance	0.00	0
Presales	0.00	0
Total	10,330,800.00	100
PROFIT
3 OPTIONS AS BELOW.
1. SALE OPTION
TOTAL SALES FOR 4 UNITS	12,400,000.00
TOTAL EXPENDITURE	10,330,800.00
NET PROFIT	2,069,200.00
% Profit Margin	20.02942657
Take home ammount.	5,069,200.00
2. RENT OPTION.
Rent per Month	84000	84000
Rent per year	1,008,000.00
Return on Investment in years	10.25
Return on investment minus land	7.27	7,330,800.00
3. FULLY FURNISHED OPTION
Fully furnished.
Per bedroom daily	1000
Per unit daily	3000
Per 4 units daily	12000
Per 4 units yearly	4,380,000.00
Per 4 units 50% occupancy	2,190,000.00
4 units 50% occupancy. Monthly	182,500.00
Return on Investment in years	4.72
Number of rooms	12
Number of ownership shares	12
Total value per share	860,900.00
Total monthly earnings per share . Rent	7000
Total monthly earnings per share. Fully furnished.	15,208.33

Investing in Real Estate in Kenya. Pay KES 780,000 and earn KES 6,300 monthly rent.

Enjoy property appreciation of 20% annually.

A 1/8th acre plot is purchased and 12 rooms constructed which can be converted into 4 no. 2 bedroomed units. Each room represents a share in the Limited Liability Company.

Payment Procedures.

1.After an expression of interest, the applicant will place the money in an escrow account held by one of the leading Construction finance banks in Kenya.

2. Once all the 12 shares/rooms have been confirmed by applicants, a Limited Liability company is formed with the 12 members as 12 shareholders, each with 1 share.

3. The LLC opens a bank account and the money is transferred into the account.

4. The Articles of Association will describe how the LLC will carry out its business on decision making. A majority vote will make the decisions of the LLC.

5. Suitable land that will cost KES 2m inclusive of legal fees, stamp duty and agent fees is sourced from around Nairobi in areas such as Syokimau, Kitengela, Athi River, Rongai, Kiambu, Ruiru, Juja, Ruai, Kikuyu, Ngong etc.

This is the average price of land that is not more than 1km from the main tarmac road. Such land ensures good rental income returns. For someone to invest in Real Estate within such land, they will be required to first obtain the land which becomes a financial obstacle when done individually.

By pooling resources as 12 shareholders, rental income from such land becomes a reality without first having to fork out the kes 2m land value.

More development opportunity within the same land is still available vertically, on the 1st, 2nd, 3rd, 4th and 5th floors. These will become future investment plans by the LLC shareholders.

Obtaining land will take 2 weeks to 1 month.

6. After the LLC obtains the land, drawings are submitted to the local authority for approval. This usually takes 2weeks to 1 month.

7.After approval, construction for the 12 rooms commences. Construction will take 3 to 4 months to complete.

8. After completion, tenants are rented out the rooms, either in 4 No.2 bedroomed units or as 12 no.self contained bedsitters. The 12 No. bedsitters can also be converted into fully furnished rooms for higher rental returns after a further kes 70,000 per room cost of furnishing.
Plot locations next to major roads will be ideal for fully furnished motel concept that gives higher returns on investment.

The 12 LLC shareholders will make this decision through majority rule as prescribed in the Articles of Association.

9. The 12 shareholders will decide on appointing the management company to collect the rent and repair and maintain the building.

10. The 12 shareholders can now collect their monthly rent through their appointed management company. Each shareholder can decide to sell their share and gain from the high property appreciation prices in Kenya.

Other decisions regarding day to day functions of the LLC will continue as specified in the Articles of Association. Communication will be through email and www.a4architect.com website forum.

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

Comparison between stone walling and Glass walling in the architecture of buildings in Kenya.

Glass walling is becoming the new architectural style in housing all over the world.
It gives the interior rooms ambiance and increases the comfort-ability level.

It also reduces need for use of expensive electricity to light the interiors during daytime.
It also ensures moths and other pathogens that thrive in darkly lit rooms are eradicated.

Glass cost.

For a glass wall, 6mm to 10mm thick glass will be ideal.
5mm sq m kes.900.
6mm sq.m 1250
8mm per sq. m 1950
10mm frameless 2500 per m2.
aluminum frame. natural . 8mm.
7m long. 3100 Kes 150 per meter.
Labour. Kes 1500 per m2.

Assuming 5mm glass on aluminum frame is used, this will cost kes 900=5mm glass + 4x 150m-alluminium frame + kes 300-labour=kes 1800 per m2.

Prices courtesy of http://danglass.co.ke/htm/home.htm

Stone Walling.

A square meter of stone wall has 12 stones.
Each stone costs kes 65 in the current Nairobi market.
The total cost of stone is kes 800.

Stones require cement mortar for joining together.
1 m2 of stone wall takes in kes 300 in cement mortar.
1 m2 of stone wall takes in kes 200 for plaster.
1m2 of stone walling takes another kes 100 for exterior keying.
1 m2 of stone walling takes in a further kes 300 for interior painting.

This totals to kes 1700 per m2.

Comparison.

Glass wall on aluminum frame is kes 1,800 per m2.
Stone wall is kes 1700 per m2.
Stone wall has some advantages and disadvantages.

advantages of stone wall.

1. lower maintenance.
2. gives a higher psychological perceived sense of security

Disadvantages of stone wall.

1. Higher chance of poor workmanship compared to glass and aluminum which are finished in the factory.
2. Makes a building to be perceived of lower quality when compared to glass.
The world is slowly moving to glass on aluminum as a preferred method of walling. This trend will also be followed here in Kenya. As the years go by, more and more architects and developers will do the arithmetic above and realize they can be able to obtain higher sales and rent just by switching to glass wall as opposed to stone walling.

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

Real Estate Investment in kenya.

Number of Shares.

The project is divided based on the maximum number of 2 bedroomed units that can fit and be approved by the local authority.
The 6m building setback from the access road has been observed.
This leaves the project with a possibility of 4 no. 2 bedroomed units per each floor.
The 2 bedroomed units have been designed such that the livng room can convert into a self contained bedroom to make a total of 3 bedrooms.

The unit has been designed such that each of the 3 self contained rooms, i.e 2 bedrooms plus the living room can be separately sold out under sectional title ownership.

Each such room represents a share.

The 4 units of 2 bedroomed will this have 3 rooms x 4 units=12 shares.
A floor level will this have 12 shares.

 

Resale of Share.

A seller can then resell their share at an agreed price with the buyer.
The land inclusive of the 12 rooms will be owned by a Limited Liability company that has 12 shares.
Some buyers may prefer to buy more than 1 share . There is no minimum number and the maximum number is 12 per 1 shareholder i.e. only 1 owner for the whole project.
A buyer may opt to live in their unit or rent it out.

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

Real Estate Investment in kenya.
Buy a share at kes 780,000 to obtain 4.2 years for return on investment in Fully furnished apartment or 10 years in monthly rental or 20% per year capital gain after selling.

Number of Shares.

The project is divided based on the maximum number of 2 bedroomed units that can fit and be approved by the local authority.
The 6m building setback from the access road has been observed.
This leaves the project with a possibility of 4 no. 2 bedroomed units per each floor.
The 2 bedroomed units have been designed such that the livng room can convert into a self contained bedroom to make a total of 3 bedrooms.

The unit has been designed such that each of the 3 self contained rooms, i.e 2 bedrooms plus the living room can be separately sold out under sectional title ownership.

Each such room represents a share.

The 4 units of 2 bedroomed will this have 3 rooms x 4 units=12 shares.
A floor level will this have 12 shares.

Value of share.

These shares will trade at kes 780,000 at entry level. This amount guarantees a complete self contained room within a middle class neighborhood.

Resale of Share.

A seller can then resell their share at an agreed price with the buyer.
The land inclusive of the 12 rooms will be owned by a Limited Liability company that has 12 shares.
Some buyers may prefer to buy more than 1 share . There is no minimum number and the maximum number is 12 per 1 shareholder i.e. only 1 owner for the whole project.
A buyer may opt to live in their unit or rent it out.

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