Real Estate in Nairobi is overpriced in most locations.
I was reading up on Capitalisation rate which can be used to determine the actual value of a property.
Capitalisation rate = annual net operating income/cost (value)
For example, if I can rent a 3bedroom apartment in Kileleshwa for ksh 45,000 a month, and I bought it for ksh 10,000,000. My capitalisation rate is 45,000x12/10,000,000
yielding 0.054.
So to justify an asking price of 14,000,000 for a 3 bedroom apartment in Kileleshwa, you should be able to get annual income of 14,000,000x0.054 = ksh 756,000 per annum i.e 63,000 per month.
The only good deals in nairobi right now are the Karen's and Runda's of this world.
But the question is, given the demand, will the prices come down anytime soon?
On Wed, Mar 2, 2011 at 8:24 AM, Gichingiri Kuria
<gmail@gichingiri.com> wrote:
There are some NHC flats in Langata that we're on sale last year. 3 bedroom going for about 4.3m.
Some guys are paying monthly installments of sh. 53,000. You can't charge rent over sh. 30,000 because of the location. It appears to be the same story in many areas.
Where is the sense in such an 'investment'? Even if you were to live in it, why not rent at 30k and use the extra 23k for an investment with better returns.
2011/3/2 Nd'wex Common
<flexycat@gmail.com>
Yesterday did some very basic research with regard to housing and found that armed with 2M you can do either of the following
option 1:
Buy land appox 1/4 -> 800K
Building appox 900K [depends on the design, and bushman of an engineer you find]
Proximity: Nairobi -> outskirts
option2:
Mortgage an apartment worth 4M [your 2M being the down payment] rent it out @30-40K for the duration of the loan repayment period [you living in your current abode assuming its 15-20K pm] this should take min. of 5years to have it repaid but no more than 7yrs interest included.{Where do you get 2M just like that??}
In reality option2 will most likely materialize if you are either married without kids or having a multitude of revenue streams if not a good income, however its the best.
I stand to be corrected.
--
Gichingiri Kuria
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