Investors in big town houses and maisonettes are earning the highest rental yields (cash returns), among residential properties, with owners of studios and bedsitter apartments getting the lowest returns, a new report shows.
A real estate 2023/2024 report conducted and published by the Kenya National Bureau of Statistics (KNBS), shows that a two bedroom townhouse attracted the highest yield of 8.3 percent per annum and a three bedroom maisonette had a return of eight percent.
Studio apartments and bedsitters were the least attractive investments for realtors, earning them a low yield of 2.2 percent per annum.
“The survey findings indicate that a studio apartment or bedsitter had the lowest rental yield of 2.2 percent, while a two-bedroom town house had the highest rental yield of 8.3 percent, followed by a three-bedroom maisonette at 8 per cent,” said KNBS.
“The rental yield for a four and more bedrooms apartment was 4.4 percent and 2.8 percent for a one-bedroom apartment. However, the gross yields mask differences due to location and characteristics of properties.”
The yields earned on real estate assets are trailing returns on fixed income assets such as Treasury bills and bonds, as well as some blue chip stocks with high dividend yields. Real estate investors, however, have an opportunity to augment their total returns from capital gains.
Investors with the same type of houses can earn different cash returns depending on the location, quality of the units and tenant base.
The properties with high rental yields means that tenants are paying more to their landlords, as a fraction of what it cost to acquire or build the houses.
A two bedroom goes for an average of Sh17.35 million while generating a monthly rent of Sh120,000 or Sh1.44 million per annum, according to the survey.
A three bedroom townhouse and apartment priced at Sh23.2 million and Sh13.4 million have the same yield of 6.7 percent, with the units having monthly rental income of Sh130,000 and Sh75,000 respectively.
A three bedroom maisonette sells at Sh20.9 million with a monthly rental income of Sh140,000, giving it an annual rental yield of eight percent.
The selling price for a studio apartment or bedsitter is Sh4.6 million with a monthly rent of Sh8,500. The annual rent is Sh102,000 resulting in the low yield of 2.2 percent.
Student hostels or single rooms cost an average of Sh1.25 million while earning monthly rent of Sh6,500, earning a yield of 6.2 percent.