Posted by: Martin | March 6, 2010

Construction underway

The piece of land in Yopougon (in Abidjan, Ivory Coast) is now a construction site. I got a price I deemed reasonable from the builder and  pulled the trigger.  As usual the bulk of the cost comes from the construction material, not the labour.  Anything that’s imported gets a surcharge coming mostly from bribes and customs paid to get through the port of Abidjan. I’m not sure where the construction material comes from actually – some of it at least has to be locally produced in the Ivory Coast . Ok, that’s yet another thing to find out.

That’s one good thing with the real estate business and one reason why I chose it – that you don’t have to worry about the complex bureaucracy of getting things into the country through the airport or the port, meaning that basically a corrupt customs agent has the power of putting you out of business.

This can be seen in the prices of consumer electronics such cellphones, laptops,and tvs which cost about 20% more in Abidjan than in western Europe.

A small piece of Yopougon

Anyhow, when the construction is finished in a month or so, I expect each of the six units to rent for an amount that would result in a gross return of over 35% assuming all six units will be let, and not including the cost of the land. Nevertheless it is quite a fantastic return.

The downsides that I can see are that in the case of a devaluation of the CFA Franc this property will offer no protection, as I don’t think the tenants ability to pay will go up in CFA terms. Also, due to the piece of land not being in a well-off area I expect more problems with tenants falling behind in rents. There’s already been problems with people putting trash in the empty piece of land, but that should go away once people start moving in.

On the other hand, I think this property is better protected from civil strife and socioeconic crisis, which casues europeans to leave the country, middle class ivorians to revert back to poverty and to some extent the super rich elite to get even further ahead. During the last major crisis in 2002/2003 Abidjan saw an influx of people fleeing wars in the rest of the country increasing the demand for cheap rented accomodation.   I would much prefer to benefit from an increasing middle class, than from increased poverty, but investments in cheap accomodation are clearly good for the Ivory Coast:

for the tenants that get a better deal than they would have found if it wasn’t built
for the builders who get work,
and for the employee I will hire to manage it.

One thing I wonder is whether people that rent for 30 EUR a month can be reached via ads on the internet. They should be able to afford internet access at internet cafes, but there could be other hurdles such as literacy and lack of computer experience. Well, I’ll try to put an ad and see, but I’ll also look for tenants with more traditional word of mouth methods.

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Responses

  1. […] that the Yopougon building is nearing completion, there’s already been a few potential tenants seeing it and expressing […]


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