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Here is the cheapest route to real estate business

Tuesday May 03 2016
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One of the apartments constructed by National Housing and Construction Company. Prospective entrepreneurs in real estate are always put off by the impossibly huge capital needed to venture into the industry. FILE

By OTIATO GUGUYU

Prospective entrepreneurs in real estate are always put off by the impossibly huge capital needed to venture into the industry.

Even buying just land is bound to set you back millions of shillings especially in Nairobi where the prices have gone through the roof. When you add the prohibitive construction costs, you are talking of an industry that’s largely the exclusive domain of the moneyed.

However a new model is set to change this and with less than Sh10 million you can be in real estate business. All you need to do is buy a unit of an apartment and allow the developer to run it commercially.

Kenyans are used to a situation where you buy a unit of an apartment for a home. However, in the new model, you buy it as a form of investment. Anyone who can afford can own a unit — one to three bedroom unit — and surrender it to an operator who will run it for the investors.

Soho furnished apartments are the trailblazers in this novel ground.

As an investor, you earn from your unit when it is rented out. As the developer will be operating under an internationally recognised brand, your investment will have a head-start in the increasingly competitive industry.

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“You will be able to obtain your lease and title to the property but you will be tied to an international operator,” said Mr Nathan Luesby, a consultant for the project.

Gruelling process

The apartments target non-government organisation, embassy and multinational workers visiting Kenya for short periods of between three and 12 months.

The advantage is that investors are buying into a recognised brand and hence do not have to go through the gruelling process of marketing and position the business in the market.

Mr Luesby estimates that the apartments could deliver returns of up to 14 per cent.

“This is an overlooked niche with a very high demand by clients who do not want long-term rentals or expensive hotels where they are billed per day,” Mr Luesby told Money.

He estimates that the apartments could be able to attract up to 80 per cent occupancy.

The apartments will go for an average of Sh9.5 million for a studio to Sh35 million for a three-bedroom duplex.

Mr Luesby said they are in talks with several international operators to run the investments who might add brand premium once they come on board.

“We are hoping to get a deal in the next four to six weeks, and who knows maybe they will even charge more than our current prices, so it’s better to get one now,” he said.

Real-estate agent Realto Group Ltd managing director Rajbal Sahib said expatriates like serviced and fully furnished apartments to enable them settle in and start working upon arrival.

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