Are you looking to make money from rentals by providing affordable housing to the masses? Housing demand continues to increase especially in our urban areas. One of the best returning real estate businesses is the construction of bedsitter units/studios either on personal land or leased land. Most of the parcels of land commonly sold or leased are 1/8th of an acre (50ft by 100ft), 15m by 30m and therefore we will use this common land size as our benchmark.
When choosing a plot of land to set up this business, location is key because the rent you fetch will highly affect the rate of return on the investment you have made. Here is a simple breakdown for the thinking process that goes into construction of bedsitters for rent on a 50ft by 100 ft piece of land.
Factors to consider
1. Number of bedsitters that go into a 50 by 100 plot – 16.5 SQM (14ft by 13 ft units) – 16 – 18 Units depending on the layout and compactness.
2. Cost of construction per unit can be estimated at (2024) – Ksh. 400,000 per unit.
3. Total cost of the project is: 400K*16 Units – 6.4Million Kenyan Shillings
4. Rent collected per unit: 10,000
5. Occupancy rate: Assume 14/16 are occupied
6. Total rent collected per month: 14*10,000 = 140,000
7. Assume Ksh. 20,000 goes towards maintenance and other services. The amount collected per month is Ksh. 120,000
7. Per year, this amount is 120,000*12 = 1.44M
8. The number of years it takes to pay back is the following: 6.4M/1.44M – 4.5 Years.
Note that one of the other advantages of this business is the healthy cashflow it gives to your bank and can therefore unlock more capital and therefore grow itself. What do you think of this business? Note that the same template can be used for single unit rentals and mabati rentals.
At Jenganami, we offer site visits, specialised consultancy, design, build and end to end project project management to help you navigate this real estate investment sector. With years of experience, we are happy to show you some of our work. Reach out to us at our email or contact us at 0742 813 160 and we will be happy to guide you through rental housing construction.
Build Wisely!
