On budget, not on time
The building in Yopougon is now finally completed on budget but with a month’s delay. It consists of six studio apartments and I had hoped to rent them for 20,000 CFA Franc (30.5 EUR) per month each. It turns out that the demand is quite large. We have a list of 10 prospective tenants that have expressed interest and a few of them have even called multiple times insisting on renting one of the apartments. The demand, however, seems to be very price sensitive, and 20,000 CFA Franc per month is probably the upper range of the rent. The actual rent could well go down to 15,000 CFA Franc (22.9 EUR) per month which is a bit of a disappointment but no disaster.
The thing is, to offer apartments for which people pay 20,000, it would probably have been good to spend a bit more on the construction, but I was advised that it would be a better idea to not have it stand out too much from the rest of the neighborhood where rents for similar apartments are closer to 15,000. This neighborhood is average for Yopougon or even slightly below average, and location matters greatly.
Next up is the screening and negotiating process with prospective tenants and taking of the deposit which will be five months’ rent. I might put up an online ad for it, mostly to check if anybody answers, but I suspect online ads aren’t very useful in this part of the market.
A note on the area
Yopougon is – I think – the largest of Abidjan’s municipalities both in terms of square kilometers and population. Though Yopougon has nice parts and outright slums are only a minor part of Yopougon, it is not a well-off area and one could even say it has a somewhat bad reputation. I have seen ads of people looking for an apartment in Abidjan including “not in Yop”. As mentioned in the No Grunge post “quartier populaire” areas such as Yopougon are a bit like many small villages next to each other and it is difficult to do business there without a local connection.
Still, it is in this type of areas that a majority of West Africans will live in the future, if they don’t already form a majority (accurate statistics are hard to come by) . What happens in these type areas is roughly what happens to Africa in terms of human development indicators, poverty reduction, economic growth etc.
China’s tremendous growth involves people moving from the rural parts of China to Yopougon-style areas of China’s cities where they take the step into the middle class, and hopefully Africa is on the same (but seemingly slower) path.
When cellphones were first introduced in Africa, the big operators initially expected that they would only reach the super-rich elite and the small middle class, just like other expensive and advanced technological products such as the laptop. However, with prepaid call credits, cellphones became widely used in the Yopougons of Africa, thus becoming a success story and reaching a much larger market than expected. The purchasing power of poor, but not destitute, turned out to be greater than expected.
So I’m looking forward to getting to know my tenants in Yopougon. Unsurprisingly I’d like to see if they’ll pay the rents so the investment will work out, but I also think the tenants will be a reasonable proxy for how people live and how things are going in Yopougon. I’d guess they will have cellphones, and radio or tv, but beyond that I’m not so sure. Stuff I’d like to figure out (while respecting the tenants privacy):
- How many occupants will there be in each apartment? What’s their age?
- Where does their income come from?
- What’s the income level per person? How many euros a day?
- How big part is the rent approximatively of their total income?
- Have they moved to Abidjan from other parts of the Ivory Coast or were they born there?
- What are their dreams, goals and aspirations?
- What are their most expensive possessions? On what do they spend their money?
- Do they have relatives abroad?
- Have things gotten better for them along with Ivory Coast’s reported GDP growth over the last 6-7 years?
- Are they literate?
If it works out well, I could multiply this investment by five or ten, and beside a good passive income, it would bring some interesting data of the goings on in Yopougon.