Student hostels investment in Kenya: make 24% per annum (more than government securities)
And I’m dead serious..
Curious?
Maybe you don’t even believe it…
Well, read on..
Student hostels investment in Kenya: Make 24% in one year
Last Saturday I went out to meet my friend John Maina..we used to work together many years back when I was the principal of a private TVET in Nyeri county and we had formed a close bond.
So after losing contact with him for over 5 years, John reached out to me in 2023 and invited me to visit him at his home at Kagochi, near Karatina University
I asked him why we couldn’t meet in Karatina town..
“Well, I want you to come and see what I have been up to”…John answered
Of course, I asked him to give me a hint because curiosity was starting to get the better of me..
And he told me it was about a good investment opportunity in the area..
And that is how I found myself in his home area on that Saturday…
Guess what?
I was pleasantly surprised to find that John had constructed 30 student hostel units (singles) in the last 5 years.
More importantly, all were always fully occupied..
Naturally, I wanted to learn exactly how had done it..
So as we sat down- after he had finished showing me around- for a cup of tea, I was really excited to hear from him.
And this is what I learned..
Student hostels investment in Kenya: Make 24% in one year
First, Karatina University has a student population of over 10000 students..
Fortunately for John and other investors around (many homes here have constructed some kind of hostels- from cheap mabati ones going at Kshs.4000 to storey buildings housing bedsitters, that go at Kshs.7500), the varsity does not have the capacity to build hostels to accommodate everyone.
Yeah, they have a few blocks of hostels inside the university but many students have to live in private students hostels because only a few hundred students can be accommodated by the varsity-owned hostels.
And the student numbers are projected to continue growing.
In fact, the leadership of the University recently invited those who live around to a meeting and according to John, the Vice Chancellor pleaded with the community to invest in hostels as they expect to receive more and students each year going forward.
The Vice Chancellor pleaded with the community to invest in hostels as they expect to receive more and students each year going forward
The maths now
Now to the maths part because in investing, we must look at the numbers…
John has three types of structures(hostels)
#1- Stone /Block Hostels
He built these – 5 of them- at Kshs.200000 per unit. He borrowed from the bank. Pretty expensive…
#2- Affordable Housing Build Hostel Blocks
He built these – 10 of them- at Kshs.50000 per unit. Used affordable technology to construct them- No Darugo stones anywhere, hence very cheap.
These are the ones I found most interesting because if you invest Kshs.250000 (for 5 units), you will earn Kshs.240000 in one year (Rent is Kshs.4000 per month for 4000×5= 20000. Kshs.20000×12=Kshs.240000).
Surface to say that they too look good and it is not easy to differentiate them from the ‘Stone’ ones in terms of appearance and overall build quality.
#3- Mabati ones
He didn’t give me the actual figures (I think we had a lot of catching up to do) but the cost is definitely cheaper than the affordable technology built hostels.
You recoup your money super fast
If you net 240,000 the first year, you only have to take Kshs.10000 from the first month of your second year to recover all your invested building amount!
Note that students pay half the rent during their holidays – as they want to retain the house because of the biting shortage- and even if you factor in that, you are looking at quite some impressive rate of return on your investment (ROI).
Show me another investment that pays back that fast….we have very, very few.
Why I like the Idea
You are not over-investing….If you have been following me, I’m one of those people who hate overcommitting money.
Why should you invest Kshs.10 Million and take years to get back your initial investment when you can do cheap housing and make your money back quick?
We have good plots there
If you’d like to go for this investment idea as a way of diversifying your portfolio or make passive income, we have a couple of plots selling at Kshs.1.5 Million, not very far from the University.
And even if you add the Kshs.1.5M to the Kshs.500000 (for 10 units), you see you just need Kshs.2 Million to become a landlord…
Again you will make your whole amount back within 4-5 years (2 Million/Kshs.40000 per month= 50 months)..a return of 24% p.a (480000/2000000×100=24%)
This is remarkable because government securities– which have become popular with many investors in the last couple of years- rarely pay above 20%.
Not forgetting that you will have your land and building(s) with you for years to come…they’ll probably continue earning money for you for as long as the university exists and has an accommodation crisis (Recall that they have no plans to build own hostels anytime soon).
Talk to us on 0797 532 345 if you would like to go to the ground and see it happening on the ground!