Real estate investment in Kenya has a bunch of benefits. It's the only investment with appreciating power. That's why tycoons focus on property investment across big towns in Kenya with great returns.
However, to succeed in real estate investment as a beginner, you need to have enough money, a reliable mortgage lender, and a professional real estate agent. An agent will help you get houses in areas with huge returns due to the demand.
Once you invest in real estate, you can gain financial freedom due to a steady cash flow.
Now, what do you stand to benefit from when you invest in a real estate business in Kenya? Let's have a look.
Benefits of Property Investment
Real estate appreciates in value
This benefit is the greatest of all since there are no other appreciating investments apart from real estate.
You all know that property investment is a long-term investment plan that could help you retire early if you do it right.
The land will never depreciate, no matter what happens. However, it takes longer to feel the fruits of property investment.
A property worth Ksh. 1 million today can be worth 5 million in 30 years to come. Thus, you need lots of patience to invest in real estate.
Hedge against inflation
It's like inflation will always keep going high if nothing is done. However, high inflation might mean an advantage to property owners. This is because their property will increase in value and yield higher returns.
Apart from that, realtors suffer an equally high cost of living regardless of the return on investment they get from their property. But they can cope better with inflation than employed people with constant salaries.
Steady Income
If you have a commercial property in a busy area, you will experience a steady income flow throughout the year. Rental income also serves as passive income you can rely on to retire by 40.
However, factors like location and the occupancy rate contribute much to how you will get income.
In Kenya, areas with high occupancy rates are near universities, colleges, and urban centres. These areas could give you a steady rental income with high yields.
It's long-term financial security
After the inversion of the Covid-19 pandemic in Kenya, thousands of individuals closed their businesses, and others lost their jobs.
However, property owners were stable since nothing big happened to their rental property. Instead, they faced the small problem of losing some of their renters.
Property investment needs lots of money, but it will save you in the future when other businesses and investments are drowning.
Tax benefits
Another benefit of real estate investment is that the government won't charge you tax on the whole e rental income. Instead, they will charge tax after all expense deductions, including property insurance and mortgage repayment. That's better compared to PAYE taxes.
Your tenants pay the Mortgage Loan
If your rental property has a high occupancy rate, your tenants will take care of all expenses, including mortgage repayments and insurance.
You even benefit from the cash flow you gain after the 50% rule and mortgage repayment.
Property equity
Property equity is the property's value after deducting the remaining mortgage repayment. For instance, if your total mortgage repayment is Ksh 100 million, and you've already paid Ksh. 60 million, your property equity is Ksh. 60 million.
You can use the property equity to get a loan to expand your real estate business or invest in other ventures.
Real Estate Vs. Other Investments
Real Estate vs Cryptocurrency/ stock market
Real estate investment is way much better than cryptocurrency in terms of risk. Crypto investment is increasing day by day due to little startup costs, but that doesn't make it less risky.
Real estate has a great future, but no one knows about the future of cryptocurrency. After all, it can die at any time.
Real estate is a physical asset, but crypto is a virtual asset, and hackers can hack it and leave you with nothing.
Real estate vs Money mutual funds
A mutual fund is a company that invites investors to pool money together and invest in different markets, such as stocks, bonds, or short-term debts. When the funds make profits, investors get their share. However, predictions go wrong, and investors lose their money.
Mutual funds can have high returns on investment of around 12% annually, but they are very volatile as the market changes every time. Real estate can give you up to 10% ROI, but it's better than mutual funds.
Mutual funds only beat real estate with their easy liquidity. You can redeem your mutual funds into cash with a few clicks, but it will take time to liquidate real estate property.
Real estate vs Fixed deposits
If you want to invest your money in a fixed deposit account, you choose the period you want the bank to hold your money. Within that period, you cannot withdraw the funds, and if you request, you can lose interest. As a result, you will benefit the bank for nothing in return.
In addition, fixed deposits have very low-interest rates. For example, return rates in most Kenyan banks range from 2% p.a, which is very low compared to real estate returns of 7-10%, depending on location.
The good thing with real estate, it will appreciate, though at a lower rate, and you can sell it whenever you want without breaking any contract rules.
The Bottom Line
From the comparisons above, real estate stands as the best long-term investment plan. The risks are lower than most online investments, which are booming nowadays. The only drawback of real estate is you will need lots of cash to invest in property, but it's a better choice than betting on your money with stocks.
Frequently Asked Questions
What's the main disadvantage of investing in property?
You need a lot of money to buy and hold real estate. Alternatively, you'll need an excellent credit score to get a mortgage loan to help you finance the purchase.
What's the main benefit of investing in real estate?
Security
Guarantee of appreciation
