Becoming a Landlord in Nairobi Without Owning Land: Leasing to Build Rentals 

Rental income is regarded by many Kenyans as the ultimate source of passive income. However, land prices and the rising cost of construction often make it difficult for the majority of investors.

In this series, we look at alternative ways to become a landlord in Nairobi without owning land. For this particular article, we highlight the lease-to-build model, where you can lease land from a landowner for a long-term period, construct rental houses, and start earning income, essentially turning someone else’s land into your source of rental income. 

Here’s a detailed look at how this works, using a practical case study in Kinoo, Nairobi County.

Read Also: 9 Ways for Owning a Home In Kenya

How the Lease Model Works

In the lease-to-build approach, you sign a long-term lease agreement for as long as 30 years with a landowner. It is important to get a lawyer to have a solid agreement that protects your lease to ensure the land cannot be sold without your consent. The lease agreement should also be long enough to ensure you recoup your heavy investment. 

During this period, you own any structures you build on the land, while paying an agreed annual or monthly lease. At the end of the lease, ownership of the structures may revert to the landowner, depending on your agreement, or you may have the option to renew the lease.

The key advantage? You can start a rental business without the massive upfront cost of buying land, while still generating a predictable rental income.

Case Study: Bedsitters in Kinoo

Let’s take a practical example. Suppose you lease 1/8 of an acre in Kinoo for 20 years, paying a monthly lease of Ksh30,000 (Ksh360,000 per year). On this land, you decide to construct 10 bedsitter units designed for affordable rental, targeting working professionals, students, or small families.

Read Also: Homeownership Option 1: Buying a Ready House

Development Costs

• Construction: Each bedsitter costs Ksh500,000, totalling Ksh5 million for 10 units.
• Approvals & Contingencies: Factor in Ksh400,000 for building permits, professional fees, and unexpected expenses.

Total development cost: Ksh5.4 million

Rental Income Potential

Once the units are ready, each bedsitter can rent for Ksh10,000 per month, generating Ksh100,000 monthly or Ksh1.2 million annually.

From this, subtract: the annual lease fee: Ksh360,000 and maintenance & vacancy buffer: Ksh120,000

This leaves a net annual income of Ksh720,000, giving you a payback period of about seven years. After breaking even, the remaining years of the lease are largely profits.

For example, a 20-year lease: Approximately Ksh9 million after the break-even point, while a 30-year lease: Profit can reach Ksh16 million, even without discounting for rental increments. This approach demonstrates how a relatively modest investment can turn into a sustainable rental income stream, even without owning land outright.

Also Read: eRITS: KRA Rolls Out New Tax System For Landlords; How It Works

Key Considerations Before You Start

While the lease model offers a practical way to become a landlord, there are a few things to keep in mind:

1. Lease Duration & Terms
   Longer leases (15–20 years) provide enough time to recover your investment. Negotiate renewal terms or exit strategies in advance.
   
   
2. Location & Demand
   Success depends heavily on location. Focus on areas with high rental demand and growing infrastructure.
   
   
3. Construction Quality
   Moderate finishes balance cost and appeal. Over-investing in luxury finishes can delay payback.
   
   
4. Legal Clarity
   Ensure the lease agreement clearly states who owns structures at the end of the lease, responsibilities for repairs, and dispute resolution mechanisms.
   
   
5. Maintenance & Contingency Planning
   Allocate funds for repairs, vacancies, and unforeseen costs. Budgeting for a 10–15% buffer is recommended.
   

Wrapping Up 

Becoming a landlord in Nairobi doesn’t have to start with buying expensive land. The lease-to-build model provides an alternative path for investors who want to generate rental income while minimizing upfront capital.

With a total development cost of Ksh5.4 million, 10 bedsitter units in Kinoo can deliver over Ksh720,000 net income per year. After seven years, the project becomes a largely profitable venture, showing that even without land ownership, real estate investment can work for you.