UJENZIBORA

Design and Build Contractor.

Author: David Nahinga

Affordable Housing / Architecture / Bills of Quantity / BUILDING SOLUTIONS / Business of Construction / Cost Information / Decision Making / Doing Business / Ujenzibora

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How To Think And Build like a Real Estate Investor (With a Simplified Worked Example)

Introduction

Money is made or lost in real estate before a house is built. The decisions that determine the outcome are made at the beginning. These include the Vision to Build(Why?), the Design (What?), the Costs summarized in a Bills of Quantity(How?), the Location (Where?) and the target Market (Who?). Here is how to build while thinking as an investor:

 

Build to Rent

 By Self: Rent to Own

If your annual rent is higher than the cost of owning land plus building a small office, then build and use the savings to offset the cost of development. It is possible to find good land in Peri-Urban Areas near main Cities.

This will allow you to start your journey of owning a small office and eventually a bigger office complex as you complete your Rent-to-Own Milestones. In this scenario, you build a house and move in so that you can stop paying rent but pay down the loan used to build the house or office. Caution: Do not be too quick to move out of major Cities since some Opportunities are more concentrated in Cities than Rural Areas.

 By Others: Rent for Profit

Becoming a landlord is a worthy goal when thinking about building. There is always pressure created by increasing household sizes and there will always be persons willing to rent if the location and price is right.

The main factor to consider while thinking about rental properties is affordability, Location, Services and The Payback Period. In Other Words, will your tenants be happy? and will you be able to recoup your initial investment by collecting rental income? One should also consider the prevailing rental income of the location and whether there are Opportunities for growth. For example, Universities and Hospitals can be great source of constant clientele.

 

Build to Sale

When Building to Sell, the most important factors are Location, Affordability and Profitability. One needs to consider all the costs of the project including Value of land, Financing Costs, Consultancy Fees, Cost of Statutory Services (Electricity, Water and Sewerage) and then determine the Selling Price. The metric to study will be the return on Investment (ROI)

Worked Example with a Financial Template

Financial Template:

In the above example, we are looking at a Potential Development of an Apartment Block Comprising of 8 Residential Units with shared services (Parking, Play Area, Common Staircase et Cetera).

 

As the numbers show, we have only two factors to consider, the input costs and the revenues. A difference of which will either generate a Profit, Loss or Rental Income with the indicated Payback Period.

 

All the Variables in the template are adjustable such that one can do further analysis on different neighborhood, House Types, Project Type e.g. An Industrial building or Park et cetera.

The most important thing to remember is that money is made or lost before a house is built.

NOTES ON FINANCIAL TEMPLATE:

  1. The proposal is to build 2 Blocks in two phases or at a go if funds are available and allow some green area, parking, landscaping and a running track all-round the land.
  2. Item A: Cost of land is pegged at KES. 1 Million for each unit. A bloc will thus raise KES. 10,000,000 and Two Blocks of Apartments would raise KES. 20,000,000.00 towards the cost of land. The sum raised can be used to purchase subsequent land parcels for future developments. This figure can change depending with the final report from a Registered Land Valuer.
  3. Item B: Commitment Fees is sums paid for formal engagement of consultants and the Project Team. This is used towards making detailed feasibility studies of the proposed venture. This will also enable production of preliminary Concepts, Cost Estimates and a Master Plan. The Client can pay a minimum of KES. 200,000 and a maximum of KES. 500,000 to jumpstart this process.
  4. Item C: The Cost of Finance. Using the Concepts, Cost Estimates and Master Plan prepared under Item B, the Developer can secure a Loan Facility from lending institutions. The Cost of acquiring and processing such a facility is covered under Cost of Finance. This includes insurance for the facility, interest rates and processing fees. The lender will determine the Terms and Cost of Finance in negotiation with the Developer. Investors who put money into the project can also determine this as a return on their investment when the project is sold out.
  5. Item D: Professional Fees. This covers the fees for the Architect, Structural Engineer, Mechanical and Electrical Engineer, Quantity Surveyor, Landscaper and any other Specialist Consultants engaged by the Project Team to ensure the integrity and successful implementation of the project to completion. It is paid in pre-agreed stages until project completion and covers both Design, Inspections and Supervision.
  6. Item E: Preliminary Costs. These are costs which are incurred either as a statutory requirement or as a matter of necessity to make the  e.g. Hoarding, Signboard, Project registration, Insurance for the Works, Sanitation for the Works, Water and Electricity for the Works, Security et Cetera. They may not form part of the final works but they are a necessity for the successful implementation if the project. They will be particularized and priced.
  7. Item F: Construction and Training Levy are mandatory sums payable to the Government on any ongoing or proposed project and may change from time to time depending on legislation.
  8. Item G: Renewable Energy Component. Studies indicate that Green Buildings and those which are designed and built with environmental consciousness attract more rental income and can be sold at a premium thereby increase their uptake in the market. This cost shall be covered by the Renewable Energy Component which includes Solar Water Heating and Lighting
  9. Item H: ICT Component is to make the building compatible with ICT Technology including charging ports, CCTV Surveillance, Security Installations, Conduiting and wiring for gadgetry.
  10. Item I: NEMA + Levies 1%. According to the Environmental Management and Coordination Act(1999), we will require to obtain a license from NEMA after an expert has undertaken an Environmental Impact Assessment of the Project.
  11. Item J: External Works Cost (Drainage+ Septic tank+ Water Storage). The Foul Drainage, Septic Tank and A Soak Pit will cost each dweller approximately KES. 300,000.00 as there is no Public Sewer near the project site. Each house will thus contribute this sum towards foul drainage and water storage tanks or Tower.
  12. Item K: Project Manager. There is need to coordinate the Project Components, Expectations and Delivery during the lifetime of the project from start to finish including period where the units will be under sale. This is usually done by the Construction Project Manager
  13. Item L: Marketing Cost. This cost is important to ensure there is speedy uptake of the housing units and to gauge the correct pricing point. It also includes cost of covering target market survey, advertising, billboards, social media campaigns, Print and Voice Advertising and any other Marketing Activities geared towards the success in the uptake of the project.
  14. Item M: Cost Per Unit: With Item A to K covered, the cost of building one residential unit will be 7,724,673.16 This cost is reasonable. More items can be introduced or removed depending on the overall target audience
  15. Item N: Projected Sale Price: The Developer is at liberty to sell the project at any cost. However, should the units be sold for KES. 15,000,000.00, it is projected that the Developer will realize a Net Revenue of KES. 150,000,000 for the 10 units. The Market Analysis generated from Market Research will provide the Best and Worst Case scenarios and the correct selling price.
  16. Item O: Cost Per Square Metre. This is the all-inclusive cost per square metre used to estimate the cost of building a similar unit in the neighborhood/ same land e.g. as Phase 2 or 3.
  17. Item P: Net Profit is what is realized after the Total Cost of the project as been subtracted from the Total Revenue.
  18. Item Q: Percentage Return on Investment (ROI) activities comparing what has been invested and what has been realized as profits. In this case, it is 94.18%. Selling the units at a higher price would raise the ROI and increasing the input costs would lower it subsequently.
  19. Item R: Rental Income. If the 10 Units as designed, are released to the market as rental properties, they will be able to fetch KES. 500,000 per month. This item will also vary depending on the Market Research and Feasibility Study.
  20. Item S: Total Annual Rental Income is the total sum realized from rent from the housing units built.
  21. Item T: Finally the Payback Period means the time it will take for the Developer to get back 100% of his initial investment if the Property is let out at the Proposed Rents. This is 10.73 Years using our analysis. The higher the rent, the shorter the payback period and vice versa

 

COST SAVINGS

  1. The floor area of the house is a major constraint in trying to lower the cost of the house. Our Key Assumption is that we shall design 3 Bedroom Houses in the range of 90 to 100 Square Metres

Maximizing Rental Income by Design

  Example 1

Because the primary driver of an investment decision is to obtain a Return on Investment(ROI) or Make Profit at the shortest time possible, below is an example of a Proposed Residential Housing Unit that Maximizes Rental Income.

 

In the example, we are working with an 8No. Bedroom Maisonette where the following scenarios can play out to maximize Returns.

 

  1. Owner can rent out each of the 8 Units bedrooms as an AirBnB or Hostel for near a busy institution.
  2. Owner can rent out the first floor as a commercial Kitchen and Lending Library to two different vendors or Build and Operate them as Such
  3. Owner can rent out the upper attic floor as a Gym for the Residents and people in the neighborhood.

 

This is a House designed with the idea that it is an income generating machine. It is meant to get the owner to their financial goals within the shortest time possible.

 

Whereas this is one scenario, there is no limit as to what Solutions can be Designed to meet various Financial Goals.

 

8 Bedroom maisonette Designed to Maximize Rental Income

 

(Nobody has the luxury of time, and those who wish to solve the pressing problems of others are prudent to want to obtain their initial sum invested as soon as possible)

More Examples to Follow**

Architecture / Decision Making / Design / Inspiration / Man Cave / Ujenzibora / Woman Cave

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Designing for Humans- Why Men, Women and Children need Caves in a Modern House

Summary

Most design spaces confine people to the same type of space. This could be a result of cost saving or outright ignorance of the need for a proper balance of activities and spaces for men, women and children.Make sure that individual men and women also have room to flourish, in their own right, distinct and separate from their opposites.

Every house needs rooms for individuals to be alone but we neglect this and build Guest Houses for Guests who never come. This is strange. In terms of space, what is required to solve the problem? Simply, a room of one’s own. A place to go and close the door; a retreat. Visual and acoustic privacy. And to make certain that the rooms are truly private, they must be located at the extremities of the house.

Women Spaces
Naturally, life is a flux of the masculine and feminine and this is united in the children. However, if we are to design for growth and healthy identities, there is need to design for individual humans. A failure to design with this in mind has led to women feeling that the only space they have is the Kitchen. This is an technical injustice since society quickly picks up the design flaw with sexist remarks like, “A woman’s place is the Kitchen.”

To this debate, we would like to add a new proposal that other than a Bedroom or Kitchen, women need a special place called a Woman Cave. This thinking will go a long way in repairing the social tension between men and women.

43 She Shed & Woman Cave Ideas: The Ladies Answer to The Man Cave

A woman belongs everywhere, and every place inside the house is hers yet it is only very rarely that the woman of the house has a small room which is specifically and exclusively her own. In the book, A Room of One’s Own,” Virginia Wolf asserts, “A woman must have money and a room of her own if she is to write fiction.”

The things which can be done in the Woman Cave other than Vanity and Writing Fiction include Prayers, Wine Drinking, Thinking, Experiments, Cursing, Book Reading, Idling, Enjoying a Fireplace, Wearing Make Up and any other thing that offers rejuvenation of the Woman of the House.

The building of this exclusive space means we can no longer say that women belong to the Kitchen. The Kitchen is The Kitchen.

Man Spaces
In equal measure, men require a Man Cave other than the Car Park, Garage or Bedroom. This will diffuse the tension that comes with lack of a quiet place to Think and Reflect.

Many a man associates his house with the mad scene of young children and the enormous demands put on him there. If he has no room of his own, he has to stay at his office, away from home, to get peace and quiet. This is a negative behavioral response to a technical design problem.

Men need Workshops, Garages for Bikes and Cars just like women need Woman Caves and Powder Rooms.

A Simple Space.

 

Bookshelf by Ujenzibora Workshop

“The kind of place which is most closely suited to one person’s needs is a place of the utmost simplicity, in which only the bare bones of necessity are there: a place, built like a ploughshare, where every corner, every table, every shelf, each flower pot, each chair, each log, is placed according to the simplest necessity, and supports the person’s life directly, plainly, with the harmony of nothing that is not needed, and everything that is.” – Christopher Alexander

Teenager’s Cottage
To build a firm and strong identity of their own, children need their own private space. A place to keep their possessions, to play, to think and to discover their talents. It helps in the development of one’s identity

Ancillary Cottages for Old Age

Old age is a moment of dilemma to everyone. I see my clients wonder whether they can climb that staircase when the years finally come. And this is a valid concern. The solution is very simple: In your youth or mid-life, provide for it. You can build a little special outbuilding cottage which can contain within it a summary of your life, passion and ambition.

Most people are surprised that the few things that they care about can fit in a single cottage.

The Minima Cottage

An ancillary Cottage is best since psychologically, while enjoying old age, you will be receiving visitors to check you out but technically, you will still enjoy your independence. The cottage serves as a receptacle for receiving visitors who will introduce you to the new happenings in the New World. (When old, the world will be changing rapidly. Grand children will be a happy lot to re-introduce you to the new bold world.)

Independence is equally vital for your peace. A decent tiny houses compatible with a small income and reduced activity of old age that is make affordably, is sunny, near people and easy to maintain social contact is enough.

It is in old age that Children leave, neighbors move out, wives and husbands die and soon, the salad years fade away. It is important to prepare oneself for that inevitable time. You can gift the next generation your main house and stay close-by in your cottage.

What this means in practical terms is that you can build a Main House and rent it out for profit. A Main house that is rented out can afford to provide and sustain all the extreme luxuries and comfort of an ancillary cottage. This symbiotic relation is a work of long term thinking about the nature of life

Conclusion: Repair the World
Our overriding objective in building must always be,

“When you build a thing, you cannot merely build that thing in isolation, but must also repair the world around it, and within it, so that the larger world at that one place becomes more coherent, and more whole.” – Christopher Alexander

I totally agree with this line of thinking and believe that we can drop the pretense of building Guest Bedrooms and instead build Teenager’s Houses, Man and Woman Caves. Random Guests can easily be taken care of by nearby AirBnB Accommodation.

When the times are better, the home owners can build Ancillary Cottages as Outdoor Buildings. They can be used as Guest Houses or get repurposed at the right time. This is what it means to repair our world. It begins by looking at the reality of life, the masculine and feminine side of things and designing for it.

Kitchen, Lounge, Dining Room and Back Yards are spaces which don’t belong to any particular gender. By recreating spaces to reflect this reality, we are one step closer to repairing homes and making them more coherent to the users.

Related : 43 She Shed & Woman Cave Ideas: The Ladies Answer to The Man Cave

Architecture / Decision Making / Design / Design Brief / Green Building Elements / Inspiration / Lighting / Planning / Sustainable Design Kenya

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9 Ways Light and Windows Affect User Experience in Buildings.

This blog is about Ways in which Light and Window design can inform your thinking if you plan to rent, remodel an existing house or build a new house. We trust this insight will help you create a better living experience that is humane and alive.

 

  1. Indoor Sunlight: It is good to check out the orientation of the building with respect to the sun. A sunny room is a happy room! If the rooms are facing south, a house will be bright, well lit and cheerful. If the wrong rooms are facing south, the house shall be dark and gloomy. To achieve a better experience, let the outdoors face southwards

Orientation with respect to the Sun Path

  1. Rooms with bay windows tend to be more beautiful because they allow more light and help the room come alive by providing an alternative sitting space for family members while maintaining their presence and psychological connection with the rest of the family members. It is like an additional interactive space that compliments a family or living room. You may also consider having a slit window if you must have a solid wall.

Bay Window & Slit Window : The Minima House

  1. Go for rooms that have an elaborate window space. This could be a window seat, a wider window board, special ledge next to the window of an alcove that is on a wall recess covered with special glasses.

  1. Biologically, human beings are phototropic. You are more comfortable in light than in darkness and you tend to gravitate towards that side. However, one can play with the light to bring varying experience e.g. as one transitions from outdoor spaces to indoor spaces. Rooms feel less claustrophobic and lively with larger windows.

 

  1. High Level Windows: Where you have wall heights exceeding 3 Metres high e.g. for rooms with double volume, consider breaking the monotony with high level windows. Staircases are potential places for this since they vertically connect floors.

High Level Windows: Gatundu House and Zuri House

  1. Ease of Cleaning: Most kitchen windows that would be next to the cooker unit would be difficult to clean because of reach and oil film. See Annals of Bad Design: Stove Window

  1. A room which has no window place, in which the windows are just “holes”, is hopeless. A window should not only let in air but also visually allow occupants/users to connect with the outside world. The “energy” should flow

 

  1. Internal Windows: Sometimes you might have walls between rooms. Adding windows helps the rooms become more alive by creating more views of people and illuminating dark corners. Fully glazed fixed windows will do.

Internal Window: Gatundu House

  1. It is hard to talk to a silhouette. If you make the windows too large, at about a distance of 4 to 5metres, the person on the opposite side will not see facial expressions. Unfortunately, this mistake will only be noticed after the fact

Business / Construction Permits / Doing Business / Environmental Law / Resources

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The Process of Obtaining the Construction Permit and Estimate Durations

What?

The building permit or CP (Construction Permit) is a document provided by a Local Authority to authorize the construction of a new building, or in a situation to amend or renovate an existing approved building.

Who?

The City Council of Nairobi (CCN) has embarked on an ambitious project of automating Construction Permits. This has several Key Benefits to the Industry

How?

In order to open and run a successful construction business or Undertake a Building Project, it is important for one to understand the process that goes into obtaining business permits. Obtaining a Construction Permit is one of the Key Indicators of the Business Environment in a Country.

Those economies with an easier and less laborious process are deemed to be More Competitive. Singapore, Hong Kong(China), Singapore and New Zealand all have more favorable environments than Kenya. Though Kenya is a regional Best Pwerformer in the ease of obtaining Construction Permits, there is still room for improvement in two aspects:

1. Reduce on time taken from 159 days to Global Best Performer (27.5 Days- Korea Republic)

2. Reduce on number of Procedures from 16 to Global Best Performer ( 7 Days – Denmark)

3. Reduce the Cost as a percentage of Project from 5% to Global Best Performer (0.1% – 5 Economies)

Globally, Kenya stands at 124 in the ranking of 190 economies on the ease of dealing with construction permits.

Generally, the Process is as explained on Page 12 of Doing Business in Kenya Report.

Construction_Permit_-_Doing_Business_in_KE

The Procedures for Obtaining a Contruction Permit Are:

  • Obtain a Survey Plan from Survey of Kenya – 1 day
  • Optain a project report from an environmental expert and submit to National Environment Management Authority (NEMA) – 5 days
  • Obtain approval of the environmental impact study from NEMA
  • Submit and obtain approval of the Architectural Plans – Up to 45 days.  The structural engineer submits all the structural and architectural drawings
    to be approved using an online platform httpss://ccn-ecp.or.ke/. The required documents to be submitted are the following:
    i. The proposed development;
    ii. A survey plan from Survey of Kenya;
    iii. Ownership documents
    iv. Up-to-date rates payment receipts.
    v. Structural plans

The fees are as follows:
(i) Building plan approval fee: 1% of the estimated cost of construction
(ii) Construction sign board fee: KES 25,000
(iii) Application fee: KES 5,000
(iv) Inspection of building le: KES 5,000
(v) Occupation certi cate: KES 5,000

  • Submit and obtain approval of the structural plans. – 10 days
  • Obtain stamps on architectural and structural plans from the Nairobi City County – Development Control Section.- 1 day
  • Apply and received the Project Registration Certi cate from the National Construction Authority (NCA) – 7 days or Less

The following documents must be provided for the registration application
1. Authenticated architectural plans (original)
2. Authenticated structural plans (original)
3. Nema approval (Simple copy)
4. Bill of quantities (Simple copy)
5. contract/agreement (Simple copy) It should be duly signed by both the
contractor and the client
6. Contractor’s registration certi cate (Simple copy)
7. Quantity surveyor’s practicing certi cate (Simple copy)
8. Architect’s practicing certi cate (Simple copy)
9. Engineer’s practicing certi cate (Simple copy)

  • Notify the Nairobi City Council of commencement of work and request and receive set out inspection – 1 day

Areas for Improvement:

1. Reduce non-official costs to the process including Diligence of Officers dealing with the process, transparency and elimination of all forms of compromise on the process

2. Increase or consolidate processes that can take place simultaneously

3. The official costs for obtaining the Construction Permits should be kept at a minimum. Setting a goal to reduce this cost will force the Local Authorities to be more innovative and remove costly redundancies in the process.

4. Automation and embracing Click-through-Procedures which can be executed online

Further Reading:

1. Doing Business in a more Transparent World, World Bank, IFC : 2018 PDF ( https://www.doingbusiness.org )

2. Construction Permits, City Council of Nairobi (https://www.ccn-ecp.or.ke/)

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