Building Rental Houses in Kenya and Their Costs
A high percentage of Kenyans, especially, those who live in cities and towns, live in rental houses. Therefore, investing in rental houses can be fruitful, provided you identify your target market and seek to satisfy their needs.
With enough research, you can be sure to spend your money on rentals that will generate you a substantial income. If you proceed to build the houses without information on how to impress your customers and without a plan on how to face the challenges that may come up, there is a chance you’ll experience disappointment in the future.
Explained below are factors to consider before building rental houses in Kenya:
Your financial status
Before making any financial-related decision, determine whether you’re capable enough to spend without affecting the quality of your life. Otherwise, you’ll end up spending more than your income or savings allow, which may mean becoming dependent on others for basic needs.
Before investing in building rental houses, ensure you have a plan on how to fund this investment without compromising your future. Seeing that you may have to invest extensively, you may have to seek financial assistance from a lender, but ensure you have a plan on how to service your loan if the returns on investment do not turn out to be as high as you hoped.
The location of your rentals will highly determine the amount of money you’ll spend. For instance, you may spend Ksh 30,000,000 to buy a 1 acre piece of land to build your rentals in Karen.
You may spend approximately Ksh 7,000,000 to buy the same size of land in Githurai, meaning that the cost of building your houses will differ, regardless of whether the land’s measurements are similar.
Also, there is a chance that labour costs will differ for both places seeing that Karen is known to host wealthy people while Githurai hosts many middle-income earners.
Your prospects will highly determine the amount of money you’ll spend on the rentals, seeing that they’ll rent a house that matches their financial capability. If you’re targeting low-income earners, building high-end apartments for them isn’t a good idea, as they will not afford the rent associated with such houses.
Instead, you should ensure there are single rooms, double rooms, and 1 bedroomed houses that are fairly furnished. This option will cost you approximately Ksh 25,000 per square meter so you won’t spend too much money seeing that low-income earners go for houses that aren’t big in size.
If you’re targeting high-income earners you can include high-end finishing, and construct bigger houses, where you’ll spend at least ksh 35,000 per square meter. As stated earlier, educate yourself on what your potential customers are looking for and ensure your houses meet these needs.
Type of house
Before construction begins, you should have a vision of what the end result should look like. This means you should decide whether you want to build single rooms, double rooms, 3 bedroomed houses or luxury villas. This decision will mostly be driven by your financial capability because each of these houses comes with different price tags.
For instance, if you have Ksh 3,000,000 at hand and hope to construct many rental houses in Kenya, you might want to go with the single room option, as it will cost you about Ksh 500,000 to construct a 25 square meter house. With this amount of money, you can build 5 single houses and use the rest on constructing a shared bathroom and toilet for your tenants.
If your aim is to construct one house, you can spend the Ksh 3 million on a 3 bedroomed town house and host one family. Make the decision on the type of house you want after comparing the pros and cons of each option.
Demand of rental houses
If the demand of rental houses is high, this means that you can spend a lot of money and still generate profits because people will be looking to fill all the available vacancies.
However, this does not mean that you should build high-end apartments in an area where people have low incomes as doing so will result in future losses. If the demand is low, be watchful about the amount of money you direct to this investment.
Before directing your money to the construction of rental houses, obtain information on the country’s economic status. This way, you’ll decide whether it’s wise to invest during a certain period or wait till the economy is stable.
For instance, if the cost of living is high, you’ll spend too much money on building the houses and have a challenge recovering your money because there will not be a lot of money in circulation. This economic characteristic also means that if you choose to take a loan to fund your investment, you’ll pay more interest in the future regardless of whether the cost of living will go down or not.
All the above features relate to each other so you shouldn’t focus on one and forget about the rest. For instance, your financial capability will determine the location you choose to build your houses, which will then determine the type and size of the rentals you’ll construct. In the end, ensure that you put your customers in mind throughout your investment journey. This way, you can trust that there is a chance you’ll earn a lot of money.