Do rental houses have a ‘shelf life?’ Most investors have this assumption that rental investment is an infinite investment. First, I did an analysis and concluded that rentals in Kenya have a Return on Investment (ROI) of between 10 and 15 years. So what is the maximum duration of its utility? 50 years, 75 years, 100 years?
Are rentals built in the year 1923 still compatible with the current market? I doubt.
Sijui
if a building is structurally sound, you can do major renovations to modernize it
However, a well-built building should give you income untill you drop dead (30-50+ utility lifetime)
Most well-built structures will outlast you.
You can actually redo the floors ( laminate, tile)and walls ( gypsum), to give a modern appeal. Roofing is supposed to be done every 15 -20 years although no one does it. Paint is supposed to be done every 5 years ( it becomes dull).
I prefer nyumba za kitambo coz they tend to be spacious. Nyumba ya two bedroom for example iko mpaka na hallway, na choo na bafu ziko separate. Huko unapata family inaishi fifteen years visuuuuri bila shida. Jaribu hizi tucker tucker zilijengwa wakati wa real estate boom ya Kibaki era. You can easily jump from one room to any other room in the house. No privacy whatsoever. Ukiwa na wageni pale living room wanaona kila mtu anaingia kwa choo, which happens to share the same tiny space with the bathroom.
Around 2015 nikitafuta nyumba, niliwahi onyeshwa a bedsitter masquerading as a one bedroom. The “bedroom” was so tiny that ukieka bed ya 4x6 ni hivo. Sahii with so many vacant houses, najua huyo jamaa hupandwa na pressure coz no one in his right mind would rent such a thing with so many options around. Hawa landlord wanalia ni wale wali-rush ku “take advantage” of the real estate boom and “optimize” the space. Those who made long term projections will weather the storm.
Renovations are a must if you want to compete in the market place unless your apartment is next to amenities such as a reputable school.
Most people who build rentals are seeking passive income for old age… That means that houses that will still be marketable in 50 years either as is or through some renovations. Beyond that it’s someone else’s headache, original landlord will be long gone.
The only issues I see with rentals are leasehold title renewals and maybe KRA
Upgrade your degree. Why would you type ROI when you intend to mean PBP?
Rentals ni upuss ,just check out centum
Wacha hizo. what do you propose as alternatives?
Government bonds, corporate bonds ,stocks market,money market , forex trading , commodity markets etc
Rentals hutaka mtu amekafunga anataka kuprotect wealth yake.
You don’t get rich from rentals. First you get rich, and then protect that wealth with rentals.
Rentals have low ROI. But they are also lower risk compared to other investments and unlike bonds, they protect the investor from inflation.
Example: Ufungue club kama Whiskey River (high risk high reward business). By good luck and effort biz yako i-hit ukule vizuri for four years ukipandisha rentals zako. By the end of the forth year, new clubs zimekam na wateja walishahama. You close the business and continue earning hundreds of thousands in rent as you strategize on your next move for two years. By then you have saved enough money from rent and other hustles to risk it big again and your downside is protected juu utakuwa unajua in the worst case bado rent yako itaingia hata biz ikifail.
In my view, a big rental portfolio is insurance against poverty if you are rich. It won’t make you richer but it protects your downside. Utakuwa ukijua even in the worst case scenario you have income X from rent.
Any venture that requires a customer/client/tenant etc has inherent risks, including changing tastes and preferences, economic headwinds, tax obligations etc. Also when it comes to rentals, maintenance costs can over time diminish your returns, such that it would have been better to save via bonds or low risk fixed income securities. The time required to manage could also be an issue if you have other commitments, while hiring agents could have it’s downside, including reducing your margins. All these factors mean that if you don’t have any other sources of wealth, rentals is not dependable imo
How long are you going to be doing this? Will they beat inflation year on year indefinitely? Cos with rentals one can collect passive income until he dies and rents can always be raised.
And if we begin scrutinising each of these one by one they just look shaky… Eg bonds, say 3 year at 10% …sasa in those 3 years before they mature mtu akule nini. Na when it matures ukule all your interest ibaki principal someone who build rentals is still ahead, he has monthly income and his asset has appreciated with time
How do they protect one from inflation when bonds will give you 13% and rentals cannot give even 8%?
Eti bonds before they mature mtu akule nini? Bonds hulipa interest every 6 months.
Mtu ako na rentals worth 20 million atakuwa anapata pesa kidogo sana ukimcompare na mtu ameweka hela same amount kwa treasury bonds.
Rentals are a store of wealth, not a means to wealth.
Mahindi ikiwa store kuna kidogo itakuliwa na wadudu, lakini ata ivo, itakufikisha next season.
Rentals itakusaidia kuprotect ile kidogo ulikusanya ukiwa kijana, for the sake of the next generation.
Unajiuliza maswali na unajijibu? I don’t remember asking that question.
A good property investment will give you 12% lakini ukigongwa when buying the property shauri yako you get a lower rental yield. Soma about the 1% rule in real estate.
Real estate is hedged against inflation and bonds aren’t. If you don’t understand why, rudia school fees yako.
About rentals being a store of wealth, isn’t that exactly what I just said?? You are just regurgitating my point ama hukusoma comment yangu before responding.
Did you even read that comment you responded to juu kama ungesoma hungerudia chenye nimeandika.
nilikuwa nareply @Gitonga hapo juu, sio wewe
Again, people who build rentals are building up passive income for old age, whether the RoI is 8% or 13% is immaterial. The issue here is passive monthly income.
That aside, you put 20 million in treasury bonds today and you’re taking interest every 6 months and chewing all of it… The guy who builds rentals with his 20 million will be worth more than you in net asset value after 5 years plus he has a monthly income that he controls and can adjust upwards anytime based on the economy … How is this not understandable?
It is not immaterial. If you don’t consider RoI then why build rentals? Si uweke pesa chini ya mattress uwe unakula kidogo kidogo hadi ukufe?