First, let us assume that you have 10 million shillings and are living in a rented house in Kasarani. Your rent is 35K. Then, you see a nice 50by100 plot being sold for 3.5m and you grab it and build two units with the remaining 6.5m. You therefore live in one and rent the other one for 35K per month.
I, on the other hand, have 10m and living in a similar house paying same rent as above. Instead of buying a plot in Kasarani, I go to Juja Farm interior and buy 20 plots at 500K. I sit back and continue paying rent.
Sasa tufanye hesabu.
After 5 years, you will have collected rent equal to 35K125=2.1M. Your plot will also have appreciated three-fold (lets hope) t0 say 10m plus the buildings (will have depreciated slightly) valued 6.5m. So, your total "value"will be 10m+6.5m+2.1m=18.6m. NB: Whereas the cost of construction may have gone up over the 5 years, wear and tear will also have had its effect. If I remember well, a bag of cement in 2012 costed 500. Today, ni 650, a 30% increase. Your house will have depreciated by more than that.
I, on the other hand has spent 2.1m on rent, but my plots have appreciated three-fold (same assumption as above), so am worth 30m-2.1m=27.9m.
So, if we all decided to liquidate after 5 years, I will be worth far much more than you. Developing plots is therefore not ideal for someone who isn’t ready for retirement.
You make it sound like it’s as easy as selling spinach on a Saturday afternoon. I usually deal with matters land and trust me there are many factors that come into play especially when it’s the owner selling directly.
It is not easy, but still it is not hard. You just use those experienced in selling. Like PRC, Gakuyo, Urithi, etc. They will get their cut, but well, its easiers than doing it yourself.
Was there on friday, na niliweza kufika mpaka kwa plot. Near mwireri primary School if you know the place.
Your point? Selling and buying genuine land is not that hard or an exclusive skill as you want it to appear. I know guys who are selling at Murera, kamakis etc and they barely finished high school.
This is an example of how people do not maximise opportunity. Hence, opportunity cost. A 50x100 plot can fit 16 units. 8 bed sitters & 8 one bedroom units. This would cost 40m to construct.
Therefore, if I had 10m in cash, I would buy the plot for 3.5m. 6.5m will get me about 30m in debt. Enough for me to do my 16 units. Fully constructed & let out within 8 months. A bed-sitter would let out at 10k and a 1 bed at 13.5k. That’s 188k a month. Annually, that’s 2.25m. How you repay your debt out of this would depend on the interest rate you secured.
There are other factors here, tax, rental increase… blah blah blah… but point is, after paying your loan, approximately 5-9yrs, your property value will be more than Kes 60m. Now you’ll have an asset that is appreciating, and cash flow. Things that open up more opportunity.
188K/month will need 13 years to repay the loan. So, haujapata chochote (cash) for the 13 years. On the other hand, your property has grown from 40m to 60m, a 50% increment over 13 years!