Southern Sunshine Hotel room investment. Comparison to Stock market.

The Southern Sunshine Hotel , developed along the Southern Bypass near Thogoto town, is being sold to investors per room. 33 rooms are available for sale.

Investors will then be paid the rent income generated .
The initial assumptions are as below.

The Hotel will have an occupancy rate of 70%. Newer hotels in nairobi eg Sunstar Hotel off Thika superhighway is already recording 70 to 80% occupancy rate.

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The Southern Sunshine hotel is located right next to the busiest bypass in Kenya so it will not be a tall order for the hotel to get close to 100% occupancy rate.

Assuming someone buys the hotel room for kes 1.8million, this translates to 20% return on investment.
Assuming kes 1,500 per night for 30 days x 70%=kes 31,500 per month. This is kes 378,000 per year. This translates to 21% return on investment which will be increasing every year as occupancy rises.

Rent at the nearby Wida Highway motel for a similar room is kes 5,600 per night.
http://www.hotelwida.com/rates.html

This means this kes 1,500 estimated rent has the potential to rise to kes 5,600 over the years.
There is also a 20% annual increase in property value capital gain.

Stock Exchange option.

Assuming someone invests in the stock exchange, the annual Return on Investment is also 20%.

http://www.investinginafrica.net/african-stock-markets/african-stock-market-performance/

The difference is that in the stock exchange, the capital gains are not high.
The Return on Investment calculated for the stock market includes capital gains accrued from sale . ROI for real estate only includes monthly rent gains hence akin to eating your cake and still having it.

http://www.teensguidetomoney.com/investing/stocks:-buying-selling–researching-/calculating-your-return-on-your-investment-roi/

In the stock exchange, there is also a danger of negative return on investment/losses.

In the hotel option, there are no risks or losses since the location guarantees rental income. Its virtually unheard off for property next to a busy international highway not to have good tenancy income.

To purchase a room, email info@a4architect.com.

Francis Gichuhi Kamau, Architect.