**Below is a 6 year old project which we planted in 2009 the trees are averagely 30 meters tall and a trunk biomass of averagely 24-40 cm in diameter. The project is in Kiambu county Gatundu south few kilometers from Ruiru. Click here to view more pictures of the project. The trees are only 6 years old.**

BY JOHN OMOLO

__WHY TIMBER INVESTMENT IS PROFITABLE THAN REAL ESTATE INVESTMENT__BY JOHN OMOLO

**TREE PLANTING INVESTMENT IN KENYA VS REAL ESTATE INVESTMENTS IN KENYA**

While we address the issue of house scarcity in the country and how investors are investing largely in real estate due to profits associated with this investment, i want to bring into lime light another investment profitable than Real Estate,, Timber Investment,, YES Planting of trees for commercial purposes. Did you know you can make millions of shillings with a fraction of the costs incurred in developing a real estate?? and have double the profits?? Now you know. Lets go through the whole calculations process and find out, if you have a challenge for us contact us and we will make your invite worth every second of it. I will try to be fair and reasonable to every investment explore almost every angle of this investments and at the end of this article we compare.

Before we continue go through this story and find out the practical aspect of the investment he is in and how much you can earn in short time. Timber investment is next best, profitable venture if you indulge right now. Read from Kenya forest article on shortage of timber in the country, the costs and where the construction companies are turning to import timber from since Kenya doesn't have that timber and this will open many people to timber investment.

**Note all the figures here are in Kenya Shillings and the article is only based with real experiences faced in Kenya and any other country where this two investments are almost similar to kenya**

**REAL ESTATE INVESTMENT**I happened to have a conversation with an owner who had a plot in a metropolitan middle class suburb of Nairobi

He bought the plot of quarter an acre at Ksh 8 million

Cumulative construction costs for the whole project was Ksh 52,000,000

Below is an explanation of how the 52,000,000 figure is arrived at.

*(The cost of construction in middle suburbs is Ksh 25,000 per Sqm*

1/4 an acre is double 50 by 100 plots, 1, 50 by 100 plot can fit 4, 2Bedroomed units per floor. The maximum number of storeys allowed by the government is 5 storeys, This will bring the total number of units to 4 by 5 = 20 units.

He built the rest half of 50 by 100 plot with 10 units a total floor area of 70sqm by 10 units = 700 sqm.

Cost to build this 10 units will be half of the total construction of 50 by 100 plot which is 35,000,000/2 = 17,500,000

The rent is Ksh 20,000 per month, the total rental income per month will be 20,000 by 30 = Ksh 600,000.

The average size of these units (50 by 100 plot) is 70 square meters. The total floor area will be 70 sqm by 20 units= 1400 Sqm

The total cost of construction for this will be Ksh 25,000 per Sqm by 1400 Sqm = Ksh 35,000,000.)

1/4 an acre is double 50 by 100 plots, 1, 50 by 100 plot can fit 4, 2Bedroomed units per floor. The maximum number of storeys allowed by the government is 5 storeys, This will bring the total number of units to 4 by 5 = 20 units.

He built the rest half of 50 by 100 plot with 10 units a total floor area of 70sqm by 10 units = 700 sqm.

Cost to build this 10 units will be half of the total construction of 50 by 100 plot which is 35,000,000/2 = 17,500,000

The rent is Ksh 20,000 per month, the total rental income per month will be 20,000 by 30 = Ksh 600,000.

The average size of these units (50 by 100 plot) is 70 square meters. The total floor area will be 70 sqm by 20 units= 1400 Sqm

The total cost of construction for this will be Ksh 25,000 per Sqm by 1400 Sqm = Ksh 35,000,000.)

He built 5 storey apartments 2 bedrooms 30 units which he rents at ksh 20,000 per month per unit.

In a month he receives Ksh 600,000

In an year he pockets Ksh 7,200,000

In 20 years he will pocket 144,000,000

Lets assume the expenses to be incurred in the period of 20 years inclusive of land rates, taxes renovations will amount to Ksh200,000

*(Note this is just an assumed figure, this figure will be so much more than the amount included here in)*

**SCENARIO ONE**__Lets tabulate this information for better understanding.__

**Cost of Land Construction Costs Income Per month Income Per Year Income for 20 years**

8,000,000 52,000,000 600,000 7,200,000 144,000,000 - 200,000 =

__143,800,000__

Less construction and Land expenses 143,800,000 -60,000,000 = 83,800,000

The total income for this investment for the next 20 years if all the factors remain constant is

**(-+5,000,000)**

__Ksh 83,800,000__

**SCENARIO TWO**In this scenario i want us to keep on increasing rent as it would be the case for the next 20 years then we solve it out and realize the profits for this investment.

10 years in future the rent is increased by 100% to make it 40,000 per month

*( i.e 50% in the 5th yr and another 50% in the 10th yr)*

Another 10 years in future he does the renovation increases rent by 100%

*(i.e 50% in the 15 yrs and another 50% in the 20th yr)*

So by 20th year lets say the rent will be increased by 200%

10th year = 144,000,000

20th year = 288,000,000

Total income for 20 years is 432,000,000

labor and land construction expenses 60,000,000

Renovations 200,000

__Lets tabulate the information for better understanding__

**Cost of Land Construction Costs 10th yr Cumulative Total 20th yr Cumulative Total Total Income**

8,000,000 52,000,000 144,000,000 288,000,000 432,000,000

Expenses 60,000,000 Total income - Expenses 432,000,000-60,200,000 = 371,800,000

__200,000__

__60,200,000__

Total income for this investment if all factors remain constant is

**371,800,000 M**

*(-+2,000,000 )*in 20 years.

**TIMBER INVESTMENT**I will use an example that i used in 'where the rich are investing' the only seen difference in timber investment is time, it takes time for this investment to mature but the return on investment is worth waiting and attractive. This investment is far better of than some long term investments and even real estate itself. If you are a wealthy person and you have exhaustively invested in real estate this is the next investment to think about without a second thought. Why you should invest in timber investment is among many other reasons no so much labor is required, besides that in the 10 and above years the timber experts have estimated that the timber prices will rise 4 times now.

My popular saying on timber investment is,

**"The best time to venture in to this investment was 10 years ago, the next time to do so is now"**

Lets say you have a 100 acres of land ready to invest in Eucalyptus trees

Cost of land per acre in a remote place 200,000 per acre. = 20,000,000

Tree seedlings per acre 1300

*(this usually depend on the type of trees, rain reliability etc)*

Cost of 1 tree seedling Ksh12

*(sorted, tested, planted and tried seedlings)*

Transport to site free

Controlling weeds for 3 years 200,000

Digging holes Ksh 6 per hole

Replacing dead trees free

*(done up to a period of 6 months after initial planting)*

Planting Ksh 3 per tree

Fencing Ksh 200,000

Pruning Ksh 4 per tree, two times, the other pruning times we will offer you free of charge free.

Other expenses Ksh 150,000

*(This are unforeseen expenses during the entire 10 years duration)*

Lets tabulate this information for better understanding.

**INVESTMENT RETURNS AFTER 10 YEARS**Lets tabulate this information for better understanding.

**No of trees Cost of land Total cost of trees Labor & expenses Costs**130,000 20,000,000 1,560,000 Digging planting holes 1,080,000

Transport Free

Planting 540,000

Replacing dead plants Free

Pruning 1,440,000

Fencing 200,000

Controlling weeds 200,000

Other expenses 150,000

TREE SALES, Ksh 6000 by 123,500 TREES 741,000,000

LESS EXPENSES & LAND COST 25,170,000

PROFIT 715,830,000

INCOME PER YEAR 71,583,000

TOTAL EARNINGS PER MONTH 5,965,250

Total income of this investment if all the factors remain constant is

__715,830,000 M__*(-+ 5,000,000)*for 10 years

**INVESTMENT RETURNS AFTER 5 - 6 YEARS**

**No of trees Cost of Land Total cost of trees Labor & expenses Costs**130,000 20,000,000 1,560,000 Digging planting holes 1,080,000

Transport Free

Planting 540,000

Replacing dead plants Free

Pruning 1,440,000

Fencing 200,000

Controlling weeds 200,000

Other expenses 150,000

TREE SALES, Ksh 4000 by 123,500 TREES 494,000,000

LESS EXPENSES 25,170,000

*(Lets say the expenses and and labor remains the same)*

PROFIT 468,830,000

INCOME PER YEAR 93,766,000

TOTAL EARNINGS PER MONTH 7,813,833

Total income of this investment if all the factors remain constant is

**Ksh 468,830,000 M***(-+5,000,000)*for 5 years

**TREE FARMING IN KENYA- REAL ESTATE VS TIMBER INVESTMENTS**As i mentioned earlier the only seen like disadvantage in timber investment is time factor. This investment can be substitute to long term investments that matures in over 10 years or in 5-6 years, as well as a diverse investment portfolio

Now back to the two investment above, you will see i have equated the real estate life time to be 20 years and the timber 10 years.

Now, to the logistics the real estate investor purchased the plot for 8M the construction costs 52M this leads to 60M.

For the timber investment this investor goes to the remote parts of the country where the rainfall is in supply almost all the year round he purchases an acre of land for 200,000 which translates to 20,000,000 the labor and expenses equates to 5,770,000 amounting to 25,770,000 the investment capital is 2.3 times half of the real estate investor. The returns in timber investment are quiet enormous than real estate. No matter how this will be calculated. Be it high end real estate or middle like in the above example.

TREE FARMING INVESTMENT IN KENYA- MARKET OF YOUR TREES

You might be wondering where you will sell all this trees and realize all this money i am talking about, very good, you are thinking like an investor. An investor doesn't think of all the process involved in order for them to realize their initial capital and profits, what they think about is 1 Profits and returns, 2 Profits and Returns 3 profits and Returns.

What they do is invest and wait.

Goldenscape Tree Africa is developing an industry

**(Goldenscape Industries which will be completed by March- April 2017)**which will be processing timber into finished products for export and to be used locally. In order for you to have the zeal of investing, GTA will showcasing you the whole process from seedlings propagation , trees in the land and our processing plant so that at least you will have an idea and when we tell you we have the market for the trees this wont be cooked stories to lure you in investing a "blind" investment.

**TREE PLANTING IN KENYA - CALCULATION OF INCOME FOR HIGH END REAL ESTATE INVESTMENT, (RUNDA, MUTHAIGA, LAVINGTON, KITSURU E.T.C)**Lets say this apartments are in high end areas, where rental is 60,000 pm in the first 2 years the landlord charges 60,000 pm the 3rd to 7th year he increases the rent with 10,000, the 8th to 10th year and above he further increases the rent with 15,000

*(assuming the property market will be booming then like it is now)*

Lets calculate the income for the landlord in the 10 years assuming we wont change the construction costs per SQM which in this high end areas is usually Ksh 35,000-40,000 per sqm but in this case let it remain that way.

1st -2nd year 60,000 by 30 units by 12 x 2 = 43,200,000

3rd -7th year 70,000 by 30 units by 12 x 5 =126,000,000

8th-10th year 85,000 by 30 units by 12 x 3 = 91,800,000

TOTAL

**261,000,000 IN 10 YEARS**In the above figure we have not subtracted the land and construction costs plus any other expense.

**CALCULATION OF RENT FOR AN APARTMENT INCOME OF 3 MILLION PER MONTH FOR 6 YEARS**In this scenario will have a look at an apartment with an income of 3 million per month constant for 6 years the calculations are as shown below assuming the rent is free of expenses.

1st Year.............................3,000,000 x 12 Months = 36,000,000

6 Years..............................36,000,000 x 6 Years = 216,000,000

__CONCLUSION__:No matter how you calculate this and compare with timber investment as shown above there will be no way Real Estate investment will ever be profitable than timber investment putting into consideration the labor and all the expenses this includes letting option, selling option etc. The only advantage that real estate investment have over timber investment is time to maturity. But if an investor can be patient for few years then he will have an income almost two times the real estate.

**WE REQUEST YOU TO CHALLENGE US, info@goldenscapetreeafrica.org is the email to reach us on.**

**SIZE OF YOUR LAND**It doesn't matter the size of the land you have from 1 acre you can earn Ksh 78,708 per month, 944,446 per year and Ksh 4,722,230 in 5-8 years,

To know how much you piece of land can earn you in 5 years broken down earnings per year and further per month when you plant trees

**CLICK HERE.**

I have included in each and every total of each investment minus or plus( -+ )sign just in case of unforeseen circumstances. The trees in question here is eucalyptus its fast to grow and rarely affected by diseases in Kenya.