Before design works conformity, check with the local Authority Planning department to find out how many levels are allowable for construction. For example, areas such as Syokimau are only allowed for 1 single family unit in a 50 x 100 plot. Areas such as Utawala Embakai are allowed for multi family development in 3 levels.
The units can be for rent or for sale. Most banks in Kenya give up to 85% financing on units for sale and around 70% financing for rental units. The time period to recover the money invested in sale units is shorter, usually 1 year while the time taken to recover the monies in rental units is longer-usually 5 to 10 years.
DESIGN OF THE UNITS
On the 2 bedroom rentals, these are usually smaller [70 sq.m] so as to make them more affordable for rent. If the rental units are larger, this will cost much more since to recover the costs, the rents go higher.
When the rents go higher, the house lacks tenants. Investors who construct units without prior consultation with their architects are more likely to make mistakes such as having rental units of very large floor area for the given location.
For example, rental units in middle income areas such as Kitengela and Ngong should be in the range of 60 to 70 m2. This makes the construction cost smaller and hence a rent of KES 15,000 can cater for the initial construction cost. Investors who put up larger units for rent, say 100 m2 and above will be forced to increase the rents to recover their costs of construction. The houses will stay vacant for many months and when they get tenants, the tenants will not stay for more than 2 months before they move to a house that charges a lower rent that is the average for the given area. The land – lord will be forced to lower his / her rent while still giving the tenants more house-space than the surrounding neighboring plots. This means it will take them over 30 years to recover their costs which is not viable.
Likewise, if an investor builds small rental units [50 to 70m2] in high income areas such as Lavington, he / she will not recover their true value since the tenants in such areas require much space and can afford to pay for the extra luxury of having larger rooms.
COST OF CONSTRUCTION
Rental units are not built as intricate as sale units. The finishes are moderate so as to reduce costs. Sale units are built to perfection and the materials are more expensive. This is because people are more specific and choosy when it comes to buying houses than renting. If a sale house is built with lower quality materials, average design and average workmanship, the investor risks being stuck with a house that can not be sold or he will be subject to selling it below market value.
A sale house should have a very unique design and very keen workmanship so as to fetch good returns to the investor.
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