Month: June 2013

Real Estate Investment Opportunity in Kenya.
Invest KES 590,000, 780,000 or 860,000. See more info on the financial breakdown here.

Get return on your investment in 4.2 years for Fully furnished apartment option on addition of a further KES 70,000 per room for furnishings.
Get Return on Investment in 10 years for Monthly rent option.
Gain from 20% property appreciation annually. You can sell after a few years to gain from the 20% annual increase in value.

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
1. SALE OPTION
TOTAL SALES FOR 12 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	#VALUE!
2. RENT OPTION.
Rent per Month	76000
Rent per year	912,000.00
Return on Investment in years	10.23
Return on investment minus land	8.04	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	6333.333333
Total monthly earnings per share. Fully furnished.	15,208.33
Future Plans.
Average annual land appreciation rate	20%
This represents a profitable chance to cash in on capital gains from sale of shares with high annual investment appreciation.
Fully furnished option.
Repayment period. Years	4.26
New floor can be added on top of existing building every 4 years.
New shares can be invited to invest in upper floors each year.
Rent option.
Repayment period. Years	10.23
New floor can be added on top of existing building every 10 years.
New shareholders can be invited to buy into investment of upper floors per year.
Project will be advertised to invite shareholders for a period of 3 months on www.a4architect.com
After 12 shares are all bought, at a cost of KES 780,000, Construction commences.
Construction period takes 3 months.
After completion, project is advertised online throughout duration and life .
Advertisement plays key role in success of real estate projects.
This advertisement attracts tenants for monthly and fully furnished rental options and for sale of shares options.
Advertisement enables shareholders to easily offload shares and new shareholders to buy into project.
Areas to invest in.
Areas where the land cost is within the kes 2m budget, inclusive of stamp duty, agency and legal fees.
Such areas include Syokimau, Kiambu, Juja, Kitengela, Rongai, Kikuyu, Ruaka.
Suitable land will be sourced and once found, agreed upon by members.
A reputable conveyancing lawyer will be appointed to enable to purchase by the members who will be owners of a registered company registerd for this investment purpose.
Once the land is acquired, www.a4architect.com will design the building and submit the drawings to the relevant local authority for approval.
After approvals are granted, www.a4architect.ocm will engage a contractor who will be responsible for actual construction till completion.
The finishes and budget allocated is in the region of lower middle class that is in tandem with land value.
For areas where land value is high, finishes and budget will be ammended to high class. This will affect the initial shareholder price accordingly.
After project completion, marketing will be done to attact tenancy.
Shareholders will decide whether to have fully furnished or usual rent option or a mix of both.
Each shareholder will own a sectional title for each room.
The architectural design will have 3 equal sized rooms per house which will be owned by 3 shareholders .
A shareholder can own more than 1 unit of share. There is no limit to the number of unit share a member can acquire.
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.

 

Check here for more info on the sectional ownership of the 12 shares.

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

REAL ESTATE INVESTMENT IN KENYA.

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
1. SALE OPTION
TOTAL SALES FOR 12 UNITS	12,400,000.00
TOTAL EXPENDITURE	9,330,800.00
NET PROFIT	3,069,200.00
% Profit Margin	32.89321387
Take home amount.	5,069,200.00	#VALUE!
2. RENT OPTION.
Rent per Month	76000
Rent per year	912,000.00
Return on Investment in years	10.23
Return on investment minus land	8.04	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	6333.333333
Total monthly earnings per share. Fully furnished.	15,208.33
Future Plans.
Average annual land appreciation rate	20%
This represents a profitable chance to cash in on capital gains from sale of shares with high annual investment appreciation.
Fully furnished option.
Repayment period. Years	4.26
New floor can be added on top of existing building every 4 years.
New shares can be invited to invest in upper floors each year.
Rent option.
Repayment period. Years	10.23
New floor can be added on top of existing building every 10 years.
New shareholders can be invited to buy into investment of upper floors per year.
Project will be advertised to invite shareholders for a period of 3 months on www.a4architect.com
After 12 shares are all bought, at a cost of KES 780,000, Construction commences.
Construction period takes 3 months.
After completion, project is advertised online throughout duration and life .
Advertisement plays key role in success of real estate projects.
This advertisement attracts tenants for monthly and fully furnished rental options and for sale of shares options.
Advertisement enables shareholders to easily offload shares and new shareholders to buy into project.
Areas to invest in.
Areas where the land cost is within the kes 2m budget, inclusive of stamp duty, agency and legal fees.
Such areas include Syokimau, Kiambu, Juja, Kitengela, Rongai, Kikuyu, Ruaka.
Suitable land will be sourced and once found, agreed upon by members.
A reputable conveyancing lawyer will be appointed to enable to purchase by the members who will be owners of a registered company registered for this investment purpose.
Once the land is acquired, www.a4architect.com will design the building and submit the drawings to the relevant local authority for approval.
After approvals are granted, www.a4architect.ocm will engage a contractor who will be responsible for actual construction till completion.
The finishes and budget allocated is in the region of lower middle class that is in tandem with land value.
For areas where land value is high, finishes and budget will be amended to high class. This will affect the initial shareholder price accordingly.
After project completion, marketing will be done to attract tenancy.
Shareholders will decide whether to have fully furnished or usual rent option or a mix of both.
Each shareholder will own a sectional title for each room.
The architectural design will have 3 equal sized rooms per house which will be owned by 3 shareholders .
A shareholder can own more than 1 unit of share. There is no limit to the number of unit share a member can acquire.

A shareholder can buy into as many different projects as possible.

Shareholders can agree to sell part of their unit shares to finance more development such as adding other floor levels on top of existing building.

Francis Gichuhi Kamau, Architect.

0721410684

info@a4architect.com

REAL ESTATE INVESTMENT IN KENYA. KES 780,000 investment . Pay Back period. 4.2 Years on Fully Furnished Option and 10 years on monthly rent option.
20% per annum capital gain.

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
1. SALE OPTION
TOTAL SALES FOR 12 UNITS	12,400,000.00
TOTAL EXPENDITURE	9,330,800.00
NET PROFIT	3,069,200.00
% Profit Margin	32.89321387
Take home amount.	5,069,200.00	#VALUE!
2. RENT OPTION.
Rent per Month	76000
Rent per year	912,000.00
Return on Investment in years	10.23
Return on investment minus land	8.04	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	6333.333333
Total monthly earnings per share. Fully furnished.	15,208.33
Future Plans.
Average annual land appreciation rate	20%
This represents a profitable chance to cash in on capital gains from sale of shares with high annual investment appreciation.
Fully furnished option.
Repayment period. Years	4.26
New floor can be added on top of existing building every 4 years.
New shares can be invited to invest in upper floors each year.
Rent option.
Repayment period. Years	10.23
New floor can be added on top of existing building every 10 years.
New shareholders can be invited to buy into investment of upper floors per year.
Project will be advertised to invite shareholders for a period of 3 months on www.a4architect.com
After 12 shares are all bought, at a cost of KES 780,000, Construction commences.
Construction period takes 3 months.
After completion, project is advertised online throughout duration and life .
Advertisement plays key role in success of real estate projects.
This advertisement attracts tenants for monthly and fully furnished rental options and for sale of shares options.
Advertisement enables shareholders to easily offload shares and new shareholders to buy into project.
Areas to invest in.
Areas where the land cost is within the kes 2m budget, inclusive of stamp duty, agency and legal fees.
Such areas include Syokimau, Kiambu, Juja, Kitengela, Rongai, Kikuyu, Ruaka.
Suitable land will be sourced and once found, agreed upon by members.
A reputable conveyancing lawyer will be appointed to enable to purchase by the members who will be owners of a registered company registered for this investment purpose.
Once the land is acquired, www.a4architect.com will design the building and submit the drawings to the relevant local authority for approval.
After approvals are granted, www.a4architect.ocm will engage a contractor who will be responsible for actual construction till completion.
The finishes and budget allocated is in the region of lower middle class that is in tandem with land value.
For areas where land value is high, finishes and budget will be amended to high class. This will affect the initial shareholder price accordingly.
After project completion, marketing will be done to attract tenancy.
Shareholders will decide whether to have fully furnished or usual rent option or a mix of both.
Each shareholder will own a sectional title for each room.
The architectural design will have 3 equal sized rooms per house which will be owned by 3 shareholders .
A shareholder can own more than 1 unit of share. There is no limit to the number of unit share a member can acquire.

A shareholder can buy into as many different projects as possible.

Shareholders can agree to sell part of their unit shares to finance more development such as adding other floor levels on top of existing building.

Francis Gichuhi Kamau, Architect.

0721410684

info@a4architect.com

Residential Land price appreciation in Kenya around Nairobi.2000 to 2013.

High cost land.

Example. Karen, Runda.

High cost areas such as Karen and Runda had land price per acre at kes 3m in 2000.
5 years later in2005, the same acre sold for between kes 7m to kes 10m.

This represents 30% price appreciation per year.

Same land costed between 12 to 15m per acre 5 years later in 2010.
This represents 20% price appreciation per annum.

Currently, in 2013, the same land costs approximately kes 30m.

This represents 33% price appreciation per year.

A median estimate of 25% price appreciation for high cost land around Nairobi can be safely guestimated.

Middle cost land.

Example. Syokimau, Kitengela, Kiambu, Juja, Ruiru.

Middle cost land in Syokimau, Kiambu, Juja, Kitengela cost kes 300,000 per 1/8th acre or 2.4m per acre in 2000.
In 2005, land in the same areas costed kes 700,000 per 1/8th or 5.6m per acre.

This represents 30% annual price appreciation.

The same land costed kes 1.5m per 1/8th or kes 12m per acre in 2010.

This represents 23% annual price appreciation.

Currently, the same 1/8th acre is costing 2.5m per eighth or kes 20m per acre.

This represents 25% annual increment.

Low cost land.

Examples. Isinya, Joska Kangundo road, Juja farm, Naivasha.

In 2000, 1 acre land in these areas cost kes 50,000.

In 2005, the same acre costed kes 100,000.
This represents 20% annual price increment.

In 2010, the same acre costed kes 250,000.
This represents a 30% annual price increase.

Currently, in 2013, the same acre costs kes 400,000.
This represents a 20% annual land price increase.

Global Land price appreciation rates.

In South Africa, property appreciated at a rate of 20% only during the property boom of between 2000 and 2006.
In Texas, USA, the average annual rate of price increase for the last 20 years before 2010 was 8.9%.
http://michaelbluejay.com/house/appreciation.html

The average South African appreciation rate for property is 11%.
http://housepricesouthafrica.com/2011/01/27/what-will-average-property-prices-look-like-in-2050/

In Ontario, Canada, for the last 10 years, property appreciation was in the tune of 2.9% per annum.
http://www.neighborhoodscout.com/ca/ontario/rates/

In Las Vegas, USA, property appreciation for the last 10 years has been an average of -3% negative per annum.
http://www.neighborhoodscout.com/nv/las-vegas/rates/

This year, 2013, land prices in USA are estimated to appreciate to the tune of 15% per annum.
http://online.wsj.com/article/SB10001424127887323820304578412632432865220.html

Kenya Inflation rate.

In 2011, inflation rate in Kenya was 14%.
In 2012, the inflation rate was down to 10%.
http://www.indexmundi.com/kenya/inflation_rate_%28consumer_prices%29.html

Conclusion.

Government of Kenya ministry of lands and ministry of finance will need to work out solutions that reduce the high annual land price increase in Kenya. This will make land price affordable hence allowing many Kenyans acquire this important factor of production so as to in turn increase production hence lower inflation.
These current high land price appreciation is beneficial to the individual real estate investors, architects, engineers etc but form a fiscal economics angle, detrimental to the national economics.

Francis Gichuhi Kamau, Architect.
0721410684

Return on Investment for Rent vs Sale in Kenya.

Real Estate investors can opt to invest in rental or sale properties.
Each of these has its own advantages and disadvantages.

Rental property.

Advantages.

Assured regular monthly income for a long time.
Lower cost of construction compared to projects for sale.
Ability to let kin inherit property.

Disadavantages.

Its harder for banks to finance projects for rent compared to projects for sale. Developer will need huge % of personal savings to construct.
Returns on Investment take many years . The market average is between 10 to 15 years.
Need for regular building maintenance and dealing with problematic tenants.

Sale property.

Advantages.

Shorter Return on Investment. The market average is between 20 to 30% ROI within 2 to 3 years.
Easy to obtain capital from banks and Joint Venture partners.
Less headaches from Nonexistent building maintenance issues and tenants.

Disadvantages.

Higher cost of construction so as to entice end buyers.

Joint Venture equity provider.
A JV equity provider can easily get a Return on Investment of between 100 to 300% within 2 to 3 years in the case of investment in property for sale.

Francis Gichuhi Kamau, Architect.
0721410684

Difference in Cement cost between Local Fundi mix ratio vs. specified ratio.

In Kenya, majority of the local construction developers who have no full architectural and structural engineering services rely on the local fundis and foremen to guide them on the mix ratios for cement, sand and ballast.

The local fundi mix ratio is usually 2 bags of cement for 4 wheelbarrows of sand to 8 wheelbarrows of ballast.

This represents a ratio of 1 to 4 to 8.

The specified mix ratio of for exposed Reinforced concrete is 1 to 2 to 4.

This represents 2 bags of cement to 1 wheelbarrow of sand to 4 wheelbarrows of ballast.

2 bags of cement make up 1 wheel barrow.

Example. 170m2 residential house.

Calculations when the house construction has used cement ratios of 2 bags cement to 4 wheelbarrows of sand to 8 wheelbarrows of ballast will be as below.

FOUNDATION
BLINDING
CEMENT BAGS	14.98
SAND	3,630.77
BALLAST	5,990.77
STRIP FOOTING
CEMENT	88.85
SAND	21,538.46
BALLAST	35,538.46
FOUNDATION WALLING		2000 stones
CEMENT	29.17
SAND	12,376.00
RING BEAM
CEMENT	25.38
SAND	6,153.85
BALLAST	10,153.85
SUPERSTRUCTURE WALLING		3800 stones
CEMENT	41.71
SAND	17,696.00
BALLAST	10,267.57
ROOF		2000ft
FLOOR SCREED
CEMENT	23.76
SAND	5,760.00
WALL PLASTER
CEMENT	41.25
SAND	17,500.00
WALL KEYING
CEMENT	6.50
SAND	2,756.25
TOTAL
		COST	KES
CEMENT	271.60	190,119.00	190,119.00
SAND	87,411.33	87.41	87,411.33
BALLAST	61,950.65	61.95	99,121.03
TOTAL			376,651.36

 

271 Bags of cement costing KES 190,000 will be used in total.

 

Calculations for the same house using specified ratios of 1 to 2 to 4 will be as below

FOUNDATION
BLINDING
CEMENT BAGS	27.81
SAND	3,371.43
BALLAST	5,562.86
STRIP FOOTING
CEMENT	165.00
SAND	20,000.00
BALLAST	33,000.00
FOUNDATION WALLING		2000 stones
CEMENT	38.90
SAND	11,786.67
RING BEAM
CEMENT	47.14
SAND	5,714.29
BALLAST	9,428.57
SUPERSTRUCTURE WALLING		3800 stones
CEMENT	41.71
SAND	17,696.00
BALLAST	10,267.57
ROOF		2000ft
FLOOR SCREED
CEMENT	23.76
SAND	5,760.00
WALL PLASTER
CEMENT	41.25
SAND	17,500.00
WALL KEYING
CEMENT	6.50
SAND	2,756.25
TOTAL
		COST	KES
CEMENT	392.07	274,450.41	274,450.41
SAND	84,584.63	84.58	84,584.63
BALLAST	58,259.00	58.26	93,214.40
TOTAL			452,249.44

 

392 bags of cement will be uses, costing KES 274,000.

this represents a 30% increase in cost of cement.

This represents a 16% increase in overall cost of concrete.

For most local constructions whereby developers engage fundis without architectural and engineering consultations, this is the amount of % savings they usually aim to get.

This method of achieving savings can be compared to an own goal since once structural defects check in, they are unrepairable and can result in the loss of the complete building, usually costing millions of shillings.

Developers should engage their architects and engineers in other methods that can result in the same % savings without compromising structural integrity.

Francis Gichui Kamau, Architect.

0721410684