Posted by: Martin | February 17, 2010

Current Situation

The current situation is that the sum total of the micro enterprise/business I’m running comprises two properties. The first one, is a two-floor house in a well-off part of the Cocody municipality of the commercial capital of the Ivory Coast, Abidjan.  It provides  an annual gross return of 12%.

The idea behind this investment was:

Good value – Property prices were depressed due to political tensions, riots and actually war back in 2002, but could be expected to revert back to a higher level, so I deemed it a good time to buy.
Potential home – I wanted a place nice enough to live in someday, however, it was intended for rental income from the start.
Minimise risk – It is not without fear that I bought that house – when saying that I was thinking about buying a house in West Africa some people thought that I had fallen for a Nigerian email scam. It would probably have been cheaper to buy land and have a house built on it, or buy an older house, but all those things could have gone wildly wrong. So I opted to buy from a large well-reputed developer that builds and sells  many houses of the type I bought.
Get experience – Learn as much as possible about real estate business in the Ivory Coast – learning by doing is hard to beat.
Corner location – Buying a corner house allowing for a good location for add-on shops.
Return – While minimising risk, still getting a much better return than I would have gotten from a property investment at home in Europe. And I think doing business in Africa is strikingly more exciting than back home.

And in hindsight it has worked out pretty well. Going to my bank at home in Europe and transferring the purchase amount to the Ivorian developer’s bank account in the Paris branch of a Lebanese bank was a pretty scary moment, but thankfully I got ownership of the house without any problems.  Guess the main hiccups and mistakes have been:

-That the contract with the main tenant was signed before constructing the shops. I had to wait with the shops for a while and then made a deal with the tenant not to raise the rent at one year end in return for building the shops.
-That a builder stole the floor tiles (they were worth an annual salary for him). A few friends tracked him down and we sorted it out by him giving the tiles back and us not going to the police with it.
-The main tenant missing a few rental payments, but catching up.

This house is at the moment a pretty simple business, the rental income has since the start essentially been equivalent to net profit, not counting the time I have put into it, which has felt more like an enjoyable hobby than work. The balance sheet has no debt and is 100% equity of the size of the value of the house and the shops.   The only paperwork has been to sign the contacts with the developer and the notary at purchase, and the letting agreements with the tenants. The tenant for the main house, and the tenant for one of the shops were found via the ads at www.abidjan.net – a portal for all things Ivory Coast. The other shop tenant saw the shop under construction and expressed interest on the spot.

The second property is a piece of land in a not so well-off (but no slum) part of the Yopougon municipality of Abidjan.  The land was originally  was given to my  partner as an inheritance. This is a bit of a free option to try out and see how difficult it is to work in a not so well-off area and to manage construction. At the moment we’ve got a wall built (that’s very necessary) a gate, and water and electricity pipes / connections for 480 Euro. We have decided to build six studio apartments on the property.

I’m expecting each studio to rent for 20,000 CFA Francs (30.5 EUR) per month, which on paper at least should give a fantastic return. We’ll see how it goes.

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