Looking into Real Estate Investment in Kenya
Real Estate in Kenya is presumed to be a great deal as an investment plan. It has more benefits over stocks, bonds or mutual funds. It is a long-term investment and engenders reflexive income as value of the property appreciates with time. It can also be used as a strategy to build one’s wealth in the future. To invest in real estate in Kenya, you will need a considerable amount of money and be ready to invest.
Investing in real estate is an exclusive business and that’s include purchasing of land, an apartment and a house. Not failing to recall the service charge which you will utterly be accountable for as well as the wealth gaps if you are in between tenants for a while. During superannuation, real estate is a self-sustaining asset unlike stocks that are self-liquidating asset.
Reasons to invest in real estate
- It has foreseeable cash flow
A well-planned real estate in Kenya should make available a 6% or greater cash flow. This should be after all the mortgage payments and operating expenses has been done.
- It appreciates in worth.
Despite having a dwindling economy as from 2007, The National Association of Realtors reported a 6% appreciation in worth level per year.
- Leverage is applicable.
It is probable to use the borrowed capital to upsurge the budding return of an investment. In real estate in Kenya, mortgage is used to decrease the amount of investor capital essential to purchase a property hence leverage.
- It provides equity stockpile.
Most individuals in real estate in Kenya, purchase property with a down payment with the balance through debt-financing. The principal amount is paid gradually and then more hastily towards the end of the amortization period.
- Real Estate is depreciable
Depreciation is a non-cash expense that disparages the worth of the investment property over-time. But surprisingly, the value of a property appreciates. The depreciation deduction allows an investor to generate a larger positive cashflow while reporting a lower income for tax purposes.
- Real estate is improvable
Real estate is a palpable asset made of timber, blocks, concrete and glass. This substance possess an exceptional and striking features which means they are improvable. Whether the repairs are structural or cosmetic you can DIY or hire someone.
Things to know about investing in real estate in Kenya
- Pay in cash
Investing in real estate requires one to do in cash. One should be able to invest in real estate other than cash, make sure you are capable of paying the mortgage payments plus the interest charged. If you cannot cater for the mortgage payments, it will end up being a financial burden to you rather than a means for enrichment. If you patient enough its advisable to rent out the property to have an income flow till you complete on the mortgage.
- Start small
If you are unsure of your future capabilities, start small by purchasing a cheaper but well-maintained home with several rooms and a servant’s quarter. Rent out some of the rooms and the servant’s quarter to have a free flow of income. Create rules to avoid disturbances since you sharing the house keeping in mind its only for a short period. This only applies to individuals with no family.
As you adapt to becoming a landlord and learn how to manage a property in Kenya, you may consider purchasing a larger property with more income in the future. As you grow, it becomes more easier to purchase and manage more properties in Kenya hence earning a greater income, ignoring the tenant gap.
If you plan well when investing in real estate in Kenya, it’s possible to cover the entire mortgage and live comfortably.
- Plan out your expenses
When considering real estate as an investment purpose, you will need to consider various factors such as the landlord tax, maintenance costs/service charge as well as possible repairs. Consult with the rental companies in Kenya, and have them handle rent collection as well as doing repairs.
When pricing the rental houses, make sure you include all the costs involved such as service charge. This minimizes a tag-of-war between you and the tenants. Its important to insure the property for natural disasters as well as setting a side a certain amount of cash to cover any major repair. Set a sinking fund purposely for the property.
- Do a research on the property
Before purchasing a property and you plan to resell it, do adequate research on the property. If its land, go to Ardhi House in Nairobi-Kenya to have a copy of the title deed. Look around for any social amenity present such as schools, hospitals, are the roads passable and what close to the property. Factors such as availability of water, the neighborhood and any factor that may affect the property need to be put into consideration.
Once adequate research has been done, consider the investment whether it is worth the risk or a waste of money. Investment should be a future-oriented aspect but not led through emotions.