Here’s the good, the bad and the ugly of investing in rental houses
By Harold Ayodo | March 25th 2021
We are a chama that I have saved in over the past 10 years before buying a quarter acre of land in Mlolongo area. We resolved in our last meeting to construct rental houses towards generating income and avoid being seen as holding the plot for speculation. What are some of the good and bad sides of rental houses?
Rental houses are a sure way of generating steady income mainly depending on location and design of the units.
For the burgeoning middle class who prefer renting than buying homes on mortgage, the location is highly influential to maintain their status in society. Some will not mind paying rent through their noses to live in upscale or secluded neighbourhoods.
There are also a growing number of Nairobians who opt to rent houses in the outskirts of the capital city where houses are more spacious and rent is affordable.
The infrastructural developments like opening up of by passes and new roads with the passenger train to boot makes it easier to commute to and from work without the headache of standstill traffic jams.
However, many landlords counted losses over unpaid rent following the economic effects of the corona virus pandemic. Some rental unit owners were forced to reduce rent to maintain their income stream while others stared at empty houses after tenants moved out over increasing defaults.
Many landlords gain from the increasing value of property following the ongoing infrastructural developments which some house owners take advantage of to increase rent.
There are many instances whereby rent goes up even without undertaking improvements on the property – this mainly depends on the area where the rental property is located. There are also areas where rent remains stagnant for years.
There is also the advantage of the ‘sweat’ equity which adds value to the property when the landlord upgrades it. For instance, repainting the units, upgrading the finishing, landscaping, internet connectivity and engaging a reputable security firm complete with a response alarm system.
Such progressive developments not only add value to the property but a ‘license’ to increase the rent. These enticements are what encourage some progressive landlords to upgrade their houses whenever a tenant moves out in preparation for the next one.
However, there are times when rentals are not a bed of roses as some tenants are never willing to pay rent on time – even when they have the money. Some may pay regularly but others resort to a hide and seek game whenever rent is due. This usually makes landlords spend more time and resources seeking the payment before ending up in court to get eviction orders.
There are also tenants who are professionals in causing more harm in form of property wear that cannot be fixed by the deposit paid before moving in. There are also property owners who built houses that have stayed without tenants for months which lead to auctions especially when the construction was financed to be repaid in installments.
- Harold Ayodo is an Advocate of the High Court of Kenya
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