Property254 by Tulia Real Estate

Author: Peris Gachago

  • 7 Essential Tips for Buying Your First Rental Property in Kenya

    7 Essential Tips for Buying Your First Rental Property in Kenya

    Are you overwhelmed when considering buying your first rental property in Kenya? Well, you’re not alone. Many people experience anxiety when they are about to make a big purchase that will bring more money.

    However, don’t let anxiety carry you into making the wrong investment choices that will haunt you in the future.

    That’s why you need this guide to help you make the right choices while buying your first commercial property. Keep reading to know how you’ll become a landlord soon.

    Steps to Buy First Rental Property in Kenya 

    1. Build your credit history 

    Loans are good, but if you take them for a good purpose. However, you cannot get big loans with a poor credit score. 

    It’s still funny how the youth are ruining their credit scores by taking expensive payday loans from mobile apps in Kenya, which they later fail to repay. However, the good thing is that anyone can build a good credit score, regardless of their credit history. But you may have to correct your credit early to retire at 40 with real estate.

    To buy a rental property, you need lots of cash, and saving such a tremendous amount of money might be challenging. So, you’ll need to take a long-term loan to boost your savings and buy commercial property.

    Beginner’s Guide to Real Estate Investment in Kenya
    1. Do thorough research 

    Before getting into real estate, you should first research the potential income you will get once you become a landlord. 

    While researching, consider the following:

    • Find a location that is likely to bring in more yields. For instance, a rental property in Nairobi and its metropolitan area will yield more than property in deeper rural areas.
    • Will the rental property need renovation? If yes, how much will it cost, based on the current market price of construction materials? This factor will help you analyse the amount of cash you need to set up your property to bring in money.
    • Ensure you learn about the market trends. Of course, you need to know what other investors are doing in the area you wish to buy your first rental property in Kenya. You can also survey the rate of rent in the area, which will determine how much you’ll earn monthly as a landlord.
    • You should also know the price of the rental property you are buying. This knowledge will help you know what amount of loan you’ll take if you’re not buying with your savings. In addition, knowing the value of your investment eases the calculation of Return on Investment (ROI).
    1. List all the documents you need

    You should have all the necessary necessities to purchase the property and prepare it as early as possible. 

    Beginner’s Guide to Real Estate Investment in Kenya

    Make sure to have the following with you:

    • Your National ID/ Passport 
    • Seller agreement forms
    • Title transfer document
    • KRA Pin certificate
    • Power of attorney

    Don’t forget to get lawyers/ advocates to handle the purchase’s legal part.

    1. Find a good lender 

    It will be good if you shun loan brokers from your way if you need to get better deals. However, a good credit score of more than 700 will lead to a better loan deal. 

    Since you have the amount you’ll use to buy the property, don’t take a huge amount of money that exceeds your needs. 

    Having savings to help you make the purchase is preferable, so you don’t depend entirely on loans. 

    1. Buy your first rental property in Kenya 

    After everything is in place, you must take the bold step to becoming a real estate investor. Ensure you have your witnesses; the seller has their witnesses and lawyers. 

    You should make the process as legal as possible. Ensure you also enquire about title deeds and do a search to know their validity.

    In addition, it’s advisable to use electronic money transfers instead of paying in cash. This trick will help keep durable records that won’t get altered by anybody whatsoever.

    1. Have plans to transform your new rental property 

    After you’ve become the legal owner of the property, you can refurbish it into what you want to draw new clients. Consider furnishing your rental property to be more appealing to the customers.

    1. Focus on high-value clients 

    Remember, you’ll now be after profits and ROI and, of course, not forgetting customer satisfaction. 

    You can derive excellent means to advertise your property to potential clients. Remember that the more your houses are vacant, you may not realize your dream income.

    Always make an effort to make your property as decent as possible. Remember that it’s the appearance that will attract high-value clients. 

    The Bottom Line 

    Buying your first rental property in Kenya is simple if you follow this guide. Why don’t you start planning on buying your first rental property?

    Frequently Asked Questions 

    1. How do I fund my first rental property in Kenya?

    You can fund your first property with your savings or a loan. Your savings can serve as a downpayment of the property. If you own a home, you can use it as collateral against the loan you take. However, ensure you can repay the loan if you don’t want to lose your home to the lender.

    1. What is an excellent rental yield in Kenya?

    Your rental income depends much on the location of your property. Big cities and towns have a higher rental yield than small rural towns. In addition, a residential property can yield between 5% and 7%, while a commercial property between 9% and 12%, depending on location.

    1. Is being a landlord profitable?

    If you make the right decisions after becoming a landlord, you can earn lots of profits. You also need to make your houses very attractive to potential clients.

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  • 10 Key Steps to Close a Real Estate Deal

    10 Key Steps to Close a Real Estate Deal

    You researched and got your preferred real estate property. Now, how do you close a real estate deal? This part of buying real estate is the most important since you will be a property owner after closing the deal successfully.

    It may seem easy to close a real estate deal, but don’t rush first. You still need to learn a lot before signing that sales agreement form. 

    This guide will teach you how to own property successfully without facing future obstacles.

    Let’s get to the important steps you should take, without skipping any, to close a real estate deal without trouble.

    Steps to Close a Real Estate Deal

    Step 1: Have Your Funds Ready

    After researching the type of real estate you should invest in, it’s time to talk to your lender. At this point, you should know the amount of money you need to purchase your property. Therefore, you will only apply for a loan that is enough for the purchase and other related costs.

    They could help boost your property purchase if you’ve had some savings. In addition, getting a huge loan will highly depend on your credit score and income level. A good credit score and a high-income level could help you get a reasonable loan.

    Step 2: Get an Escrow Account

    An escrow account is the best way to transact without losing your funds. Using Escrow protects your money from possible theft. You can get your funds back if you sense any signs of malicious activity during the property transfer. 

    How to Do an Online Title Deed Search In Kenya

    After activating your escrow, you can deposit your funds there as you await the signing of the property transfer documents. Once everything goes well, you can release the funds to the seller. 

    Escrow services also protect the seller’s property since there is an assurance of payment. So, it’s a win-win situation when you both agree to use Escrow services. 

    This step is crucial since you will confirm the current property owners. Once you conduct a title search, you will also know the property ownership history, revealing all details.

    This step will save you from potential conmanship since you will get to know the authenticity of the property you are about to buy.

    In addition, this step will familiarize you with the documents you need to own property successfully.

    Step 4: Hire a Real Estate Attorney

    If you are a first-time real estate buyer, you don’t know the legal part of property transfer. That’s why you need to hire an attorney who can represent you in court once anything happens in the future.

    An attorney will also ensure that the property ownership documents you sign are authentic. Therefore, you might not have to worry once you have a good attorney.

    Beginner’s Guide to Real Estate Investment in Kenya

    An attorney will handle all legal proceedings related to property transfer. That’s why you need to hire who has previous experience in property ownership and transfers.

    You might also require some eyewitnesses when signing the property transfer documents. That will help in ensuring that you can handle any case related to your property that can arise in the future.

    Step 5: Inspect the Property 

    Before signing the property transfer documents, you need to go through the property once more. Ensure that you like everything about the property you are purchasing.

    Check for possible roof leaks, if all shingles are in place, paintings, floor, doors, and windows. 

    If there is any need for repairs, let the owner do it before you buy the property. 

    You should only pay for property that is ready for use. However, if the seller is not able to fix it, that takes us to the next step.

    For the inspection process to go forward, you need to include an inspection contingency clause that protects you from accepting damaged property. If the seller isn’t willing to fix it, you can walk out of the contract without paying penalties.

    Step 6: Ask For Negotiations 

    If you’ve some issues with the property quality, you can talk with the seller to reduce the price since you’ll do some repairs before using the property. 

    But that doesn’t mean you shouldn’t ask for negotiations if the property is in good condition. You can ask the seller to remove some costs involved in the transfer. Remember that sellers can take advantage if you are starting in real estate investment.

    Step 7: Remove All Contingencies 

    Contingencies protect you if anything is wrong with the contract. You won’t pay any form of penalty if you leave the contract when the seller fails to meet some or all requirements in the contingency.

    In addition, if you have a mortgage loan contingency, you cannot pay the penalty if you leave the contract in case you don’t get funds on time.

    So, if everything is smooth during the contract signing, you can remove all contingencies involved.

    Step 8: Do Final Touches 

    Do not assume everything is good, and continue with the signing. That may cost you in the future. 

    Ensure you crosscheck the property again to see whether the owner did repairs and if there was anything to fix. Again, check whether there are any new damages caused before signing.

    Step 9: Sign The Sale Agreement Documents 

    This is the final step before you become the legal owner of the property. Ensure your attorney and witnesses are present during the signing. 

    Step 10: Store Your Ownership Documents Securely 

    After you’ve become the new property owner, keep all documents in a safe place. 

    This will help you in the future if there are any disputes with your property. Furthermore, you will still need the documents to resell the property later.

    Don’t navigate the market alone! Visit our website to connect with a network of pre-vetted real estate agents. Search by location and expertise to find your perfect partner on Property254. Start your journey today!

    The Bottom Line 

    Now, you have the right procedure to follow when closing a real estate deal. Why don’t you go ahead and become the next property owner?

    Frequently Asked Questions 

    1. Why is closing a real estate deal so important?

    Closing a real estate deal is critical in real estate investment since it’s the final step to making profits( for the seller) and owning the property(for the buyer).

    1. How long does a real estate deal take to close?

    If everything goes as planned, it will take approximately 50 days to close a real estate deal.

  • What is Joint Tenancy? Is It Worth the Investment?

    What is Joint Tenancy? Is It Worth the Investment?

    The cost of living is at its peak, not only in Kenya but also in other countries worldwide. As a result, getting money for survival has been challenging, leave alone investing in real estate. 

    However, that should not discourage you because life has to move on anyway, with new survival tactics.

    You can get a friend or a relative and engage in joint tenancy, where you’ll contribute towards property ownership.

    By the end of this post, you should:

    • Understand joint tenancy meaning 
    • How joint tenancy works
    • Know the benefits of joint tenancy 
    • Why you may have to avoid joint tenancy

    So,

    What is Joint Tenancy?

    Don’t confuse joint tenancy with being a tenant. Being a tenant means you don’t own the property and can only rent it. A tenant can move from one property to another without restrictions.

    On the other hand, joint tenancy is a property ownership criterion involving two or more people contributing equally to buying property.

    When you are ready to form a joint tenancy, you can hire a real estate attorney who will take you through all legal aspects.

    You can co-own a home with a spouse, friend, or relative with whom you have equal responsibilities in the house.

    10 Key Steps to Close a Real Estate Deal

    In addition, you can also co-own a commercial property where you will equally share the profits and any other maintenance costs involved.

    How Joint Tenancy Works 

    Each member will contribute 50% of the final property cost if you are two members. In addition, all your names will appear on the property ownership documents. 

    What if you both don’t have funds? Can you take a mortgage together? Well, to get a mortgage loan to invest in real estate, you both need a higher credit score, say above 650.

    However, if the income of the joint tenants is high when combined, there is a good chance of the lender approving their loan.

    In addition, if all members have excellent credit scores, they will get a better loan deal with lower interest rates. So it will be a good idea for each member to improve their credit score before applying.

    If both of you can qualify for a mortgage loan, you can apply for a mortgage together when you have a high score and a higher income level.

    Every member will contribute an equal amount of all costs involved during the joint mortgage loan application. In addition, the lender divides the instalments among the members so that each one pays equally.

    Easy Steps to start Your Career as a Property Manager in Kenya

    What if one member dies or fails to repay his share of the mortgage due to job loss or something similar?

    Well, if a co-tenant dies, their share of ownership goes to the other co-tenant. If more than one co-tenant remains, they will have to restructure their ownership to have equal shares. If unwilling to share equally, they may have to reform it to tenancy in common. Tenancy in common allows members to have different claims of property ownership.

    The same criterion applies if one tenant wants to sell their property share.

    If one co-tenant dies, the remaining co-tenants take full responsibility for the mortgage and the property. The deceased beneficiaries have nothing to do with the joint tenancy property. They can only benefit from the dead person’s other properties.

    This aspect of property transfers is known as Joint tenancy with rights of survivorship.

    The Benefits of Joint Tenancy 

    1. You only need to have a percentage of the total cost of the property. 

    We all know how buying real estate can be expensive, an amount you’ll need decades to clear your mortgage.

    However, when you agree on a joint tenancy, you may not even take a loan if you have a huge amount of savings.

    You will share the downpayment that the real estate buyer requests. 

    1. If you take a mortgage, you don’t pay it solely. 

    When you take a mortgage to invest in joint tenancy, all co-tenants will have an equal share of installments to repay the mortgage.

    Furthermore, it will take a shorter period to repay the mortgage since you are sharing.

    1. When one co-tenant dies, his share belongs to the remaining co-tenants. 

    This scenario is only advantageous to the remaining co-tenant since the deceased beneficiaries have nothing to rejoice at. However, if the remaining co-tenants are compassionate, they can reward the deceased family with a one-time compensation, but it’s not compulsory.

    1. The mortgage loan is paid, even when one member dies. 

    The deceased family members won’t be left with a mortgage loan to repay if their loved one dies. Instead, the remaining co-tenants will take care of it without involving the family.

    Disadvantages of Joint Tenancy 

    1. When you die your family is left with nothing. 

    With the rights of survivorship, other co-tenants have the right to own all your shares since there is no need for probation. 

    1. Added responsibility. 

    If one co-tenant dies, the remaining members have the responsibility to repay the mortgage loan. 

    The same applies when one member loses their job. In addition, the remaining co-tenants will also have to foot all property maintenance costs.

    1. Relationship may end. 

    You all know what happens when a good relationship turns sour. It will be so tough to co-own property with someone you don’t talk with. The only possible solution will be selling the property, which won’t happen so fast. 

    Conclusion 

    Joint tenancy is a good investment plan, especially if you are working with a close friend or relative. The good thing is that you won’t need lots of money to be a real estate investor.

    Frequently Asked Questions 

    1. When do I need joint tenancy?

    You will need this investment when you have less money, but you have someone whom you can share and co-own the property with.

    1. What happens when one member wants to leave a joint tenancy?

    The member has to give written notice to the other members. Then they should agree on terms and conditions involved.

    1. Can a couple have a joint tenancy?

    Yes. If they agree, they can engage in joint tenancy ownership. In case of divorce, they will equally divide the property, with help of an attorney of course.https://www.youtube.com/embed/BxvT-qT-7R0?start=68

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  • 10 Steps to Achieving the Dream of Home Ownership

    10 Steps to Achieving the Dream of Home Ownership

    Being a homeowner can save you from unnecessary disappointments when you pay your house rent late. It’s a good feeling to own a home, primarily due to the flexibility involved.

    When the Coronavirus pandemic hit our country and the world, homeowners had more advantages over renters. Why? Because after losing jobs, it must have been a challenging experience to pay rent on time. Although homeowners struggled with mortgage repayment, they were far better than non-homeowners.

    The pandemic has been an eye-opener, and more people are focusing on owning a home where they have the freedom to stay and do other things like agriculture.

    Now, before investing in owning property, you need to understand the benefits involved.

    10 Motivating Benefits of Owning a Home 

    1. Freedom 

    Everyone likes the freedom of space and the ability to do what they want without disturbance. For instance, if you’ve got your compound, you’ll plant flowers or vegetables to save on grocery costs. In addition, you can also rear chicken and other domestic animals that contribute a lot to your diet. 

    I bet you won’t have that freedom in a rented apartment. 

    7 Proven Tips to Save for Your House in Kenya
    1. Homeownership saves you from future inflation 

    When you take a fixed-rate mortgage loan to buy a home now, the payment won’t increase if interests increase in the future. With the current economic trend, especially with the influence of external factors such as pandemics and war, the cost of living may never return to where it used to be. That said, homes increase in price, and so is the mortgage loan you take plus the interests.

    So, a fixed-rate loan can help you avoid future inflation.

    1. You save on taxes 

    Saving money through taxes is one good thing that happens when you become a homeowner. You can deduct property taxes involved in installments.

    You can include private mortgage insurance in your expenses, which will reduce the annual tax you could have paid.

    1. Appreciation 

    Home is a long-term asset that appreciates value as time goes by. Houses lay on the land, which will never depreciate. 

    All you need is to keep the house in good condition by maintaining it all through. 

    You can buy a home at 15 million and, after like ten years, sell it at 25 million. That’s a cool 10 million profit. 

    7 Essential Tips for Buying Your First Rental Property in Kenya
    1. Social stability 

    It feels good to stay in an area you know you can stay there forever. That can only happen when you have a home. Of course, you cannot stay in a rented apartment forever because, at some point in life, you’ll need to settle.

    Owning a home assures you of future security. If you lose your job, you still have a place to stay. You can strategize on what to do next without much stress from the landlord. 

    In addition, owning a home serves as a good retirement plan where you settle away from all the noise and so your things privately. Your home compound can be a business unit if you invest in agricultural activities like dairy farming.

    1. Build equity 

    When paying a mortgage, it’s like you are forcefully saving money. That home you are paying its mortgage later becomes your net worth.

    So, you are building your home equity while paying monthly mortgage installments. 

    1. You build a strong credit history 

    A good credit history can help you get millions of money to invest in other businesses. Once you pay your mortgage installments on time, you even build your credit score.

    After some time, you can also refinance your mortgage and get a fresh one to buy commercial property. 

    7 Essential Tips for Buying Your First Rental Property in Kenya

    Remember that you’ll always need an excellent credit score to make it in quality investment plans.

    1. You have your privacy 

    You don’t have to deal with noisy and rude tenants when you are in your home. You have your space to do what you think is suitable for you and your family.

    In addition, there won’t be anyone to track your progress once you have your home. You can comfortably leave and come back home without bothering anyone.

    1. You are a step ahead 

    Indeed, you can’t compare a homeowner without a car to a car owner without a home. A car is a depreciating asset, unlike a home, which always appreciates.

    Owning a home is one step ahead in becoming what you want in life. Sorting out your home keeps your family satisfied.

    In addition, you can focus on other investment plans after you have a roof over your head, which sounds good.

    1. No rent increments 

    Landlords can be frustrating at some points. They can wake up one day and decide to add a 10% increment to the monthly rent.

    When it comes to that, it’s either you take it or leave it. After all, it’s their property, and you got no shares.

    Once you own a home, forget about those weird rent increments. Your only focus is mortgage repayment, which never changes if it’s a fixed-rate loan.

    What Next?

    Well, you’ve seen all the benefits you could gain when you plan to own a home. At least, you are now ready to make an informed decision when buying a home. 

    Frequently Asked Questions 

    1. What are the social benefits of owning a home?

    One of the most significant benefits to society is a reduced crime rate since you’ll also contribute to ensure that the area is secure. You can also participate in other activities like making your neighborhood’s roads among the best. Of course, you don’t want to get stuck in the mud when it rains, so you’ll participate in activities to make your area the best.

    1. How do I benefit financially if I become a homeowner?

    You can save money through reduced taxes when you include mortgage insurance costs. You’ll also save rent that you could have paid since you will use the funds to pay for a house which later becomes your net worth. In addition, you’ll profit from selling your home when you plan to sell it.

    1. Which is better, homeownership or renting?

    I would go for homeownership if I had the financial ability. However, if you don’t have enough income to pay your mortgage, go for renting till you are ready to own a home.

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  • The Ultimate Guide to Investing in Multiple Rental Properties

    The Ultimate Guide to Investing in Multiple Rental Properties

    Buying multiple rental properties is one sign that you aren’t new in property investment. However, you’ll still need guidance in accumulating such huge properties. 

    I’m sure you’ve tasted rental income and found the sweetness of it. That’s why you need to upgrade. Right?

    However, before adding more rental property, ensure that the current one is stable enough to repay the mortgage in case your job fails.

    This guide will show you how to make those big investments with much ease. You’ll also learn the precautions before making a mistake while investing in multiple rental properties.

    The ideas you’ll learn here have worked for more prominent real estate investors who own properties worth billions of money.

    Keep reading.

    How do you invest in Multiple Rental Properties?

    Step 1: Determine your goals 

    You might want to retire early with real estate. That’s why you could be planning on multiple rental property investments. With a goal in mind, you will manage to stay in line to achieve your dreams.

    1. Consider different types of real estate. 

    You can consider investing in mixed-use rentals if you have a residential rental property. A mixed-use rental refers to property that can serve as retail stores at the front and residential rooms at the back. 

    You can also try investing in apartments or single-family residential, leisure buildings, warehouses, and offices for rent. 

    Top Factors to Consider before Investing in Commercial Real Estate in Kenya

    This criterion will ensure you get different types of tenants that will boost your rental income.

    1. Research on best locations for your rental property 

    Diversify your rental properties such that you don’t congest them in one area. Remember, you could suffer losses if something like fire breaks into your property. 

    Different locations have different rental yields in Kenya. For instance, rental yield in Ruiru, Limuru, Kamulu, Athiriver, Mlolongo and other Nairobi metropolitan areas is higher compared to rural towns.

    Step 2: How to finance multiple rental property investments 

    Indeed, you need funds to multiply your rental properties. So where do you get the funds, even with an ongoing mortgage repayment?

    • An investment line of credit 

    To get funds through this method, the property you are using as collateral should have equity of above 40%. The mortgage lender refinances your previous loan. Once that happens, they will clear the old loan and give you the balance. However, the new funds will be a new loan with different interests, installments, and repayment terms.

    • Cash Out Refinance 

    This method allows you to use the existing property’s equity against the loan to use the funds as a new estate down payment.

    • Blanket mortgage 

    This mortgage covers multiple real estates so you don’t have to apply for a mortgage loan for each property.

    However, this financing method requires you to have prior experience with real estate. 

    Owner financing 

    • Conventional financing 

    This type of financing can only occur when you don’t have an active loan repayment. The borrowing is entirely based on your credit score, income level and at least a 20% loan down payment.

    When getting any of the above loans, you will need the following. 

    • Personal and rental business tax returns for the last two years 
    • Bank statements, both personal and business 
    • Experience in previous real estate investment 

    Step 3: Register each property as a different Limited Liability Company (LLC).

    Having each property stand as a single LLC protects you from losing your property in case of an accident in one of your rental properties.

    For instance, a tenant can sue you due to damages in case of an accident resulting from faulty maintenance of your property. If they win, they could follow other properties under the same name, including personal property. 

    Therefore, it’s advisable to confuse the law by registering each rental property as a different LLC.

    Registering your property as a different LLC saves you from keeping personal expenses from rental business expenses.

    Top Factors to Consider before Investing in Commercial Real Estate in Kenya

    It will also be an excellent way to keep clear records of each property. Therefore, property management will be simple.

    Different LLCs mean that each company will have different expenses, hence reducing the tax liability. In addition, profits and losses will be divided among each property’s shareholders, again, reducing the tax liability.

    Factors to Consider Before Investing in Multiple Rental Property 

    • Ensure you set your goals clearly to avoid changing your mind halfway in investment. 
    • Your income level should be higher. If you need to finance your other properties, you need lots of money, which you may get from a blanket mortgage.
    • You need to hire a professional property attorney who has handled multiple property transfers 
    • Are you ready to hire a property manager? You are now turning into a big real estate investor and need people with great minds around you. That’s why you should get a professional property manager to ensure you don’t lose money in your investment.

    Bottom Line 

    If you want to invest in multiple rental properties, you need to take calculated risks to avoid losing money in the end. 

    Real estate investment is actually not for the faint-hearted, so ensure you are psychologically prepared to take huge risks.

    Frequently Asked Questions 

    1. How do I buy multiple properties with one mortgage?

    The only sure way to buy multiple rental properties with one mortgage is by taking a blanket mortgage. With this loan, you can finance the buying of multiple properties with one big mortgage. However, you must have a solid experience in the real estate industry.

    1. How do I use my property to buy more properties?

    Through the accrued property equity, you can refinance your mortgage or get a property equity line of credit.

    1. Is there a limit to the number of properties I can own?

    No. There is no limit to the number of properties you can own. All you need to do is ensure that every property stands as a single LLC.

    Not sure if buying or selling is right for you? 

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  • What is a Proof of Funds Letter (POF)?

    What is a Proof of Funds Letter (POF)?

    A proof of funds letter is a letter from the buyer’s bank to the property seller, showing that the buyer has enough liquid cash to pay a downpayment and other expenses related to closing the deal.

    A property seller will feel more secure if you prove you have enough funds to buy their property. 

    A proof of funds letter can help you close a real estate deal and outshine other property bidders without a POF letter.

    By the end of this post, you’ll learn:

    • Benefits of POF letter 
    • Difference between mortgage preapproval and POF letter 
    • How to get a POF letter
    • A POF letter template

    Benefits of a Proof of Funds Letter?

    1. You stand a chance to own the property. Once a seller trusts you from day one, they’ll definitely like to sign property transfer documents together. Let’s say you bid for a property with Ksh. 1M plus a POF letter and someone else bids with only Ksh. 1.2M. The seller might consider you since you have proof you can afford to pay.
    2. If you are using cash to buy a property, you don’t need to provide a mortgage pre-approval letter to the seller.
    3. If you are using a mortgage to buy property, you’ll need a POF to prove to the seller that you have enough funds to foot a down payment of at least 20% of the selling price. In addition, you’ll also need to provide a mortgage pre-approval letter.
    10 Key Steps to Close a Real Estate Deal

    Mortgage Pre-approval vs. Proof of Funds Letter: What’s the Difference?

    A mortgage pre-approval serves as proof that the lender is willing to give you the loan you applied for after a specific period. In most cases, you must make a cash down payment on the property while waiting for the mortgage funds.

    On the other hand, you will need a POF letter when you want to buy the property with cash. The bank states the liquid cash that is available in your account. 

    Ultimate Guide to Land Allotment Letters In Kenya

    Note that mutual funds, stocks, and bonds don’t count as liquid cash available.

    How to Get a POF Letter 

    You should visit your bank with your national ID to get a POF letter. If you have other accounts, transfer the money to one account before requesting a POF letter.

    Having the money in one account saves you the time moving from one banking institution to another requesting POFs.

    After the funds are in one account, request a POF letter from the bank manager. It won’t take more than 24 hours before you have the letter with you.

    A Proof of Funds Letter Template 

    Here is a template of what to expect inside that envelop: 

    Date 

    Bank Name 

    Address 

    Contact 

    Dear (Property Seller),

    RE: Proof of Funds for (Buyer Name)

    We hereby certify that (Buyer Name) has been our esteemed customer for the last (no. of years).  

    (Buyer Name) has total liquid cash of (Ksh….) in their account in our institution.

    Kindly find the attached documents of their bank statements for each account. 

    If you need more information concerning (Buyer Name), feel free to contact us via (email/phone number). 

    Regards,

    Signature 

    Branch Managers Name 

    Conclusion 

    Always aim to provide a POF letter whenever you are not the only one bidding for a property. Sellers will not waste time going for bidders with no POF letters. Instead, they’ll just come to you directly.

    Frequently Asked Questions 

    1. Can I submit several POF letters if I have multiple bank accounts?

    This idea will be tiresome since you will spend more time waiting for those letters. Furthermore, moving all the money to one account from one banking institution will be convenient.

    1. When do you need a POF letter?

    You’ll need a POF letter when buying a property for cash. The seller will trust you more once you prove your legitimacy through your available funds.

    Unlock the secrets of the Kenyan real estate market. join our upcoming webinar and gain valuable insights from industry experts.

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  • The Best Types of the Real estate to Invest In Kenya

    The Best Types of the Real estate to Invest In Kenya

    Are you thinking of investing in real estate? Well, it’s important to note that different real estate types have different Returns on Investment (ROI). In addition, different locations accommodate different types of real estate. For instance, you cannot invest in residential property in industrial areas. 

    If you invest in an ideal property type in the right location, you could earn lots of profit, enabling you to invest in multiple rental properties in Kenya. Real estate is a good retirement plan, which is more secure than stocks. However, you should have an excellent plan to succeed in real estate investment in Kenya.

    This post will break down the best types of real estate you can try out in Kenya and succeed.

    What is Real Estate Investment?

    Briefly, real estate investment involves buying and selling raw, commercial, and residential land. There is also another type of real estate that you don’t necessarily need to own property to be a real estate investor.

    Anything natural or manmade on land is considered to be real estate. For instance, crops, forests, boreholes, or minerals are all real estate. However, the commonly known and traded real estate is commercial and residential property.

    4 Best Types of Real Estate

    1. Commercial Real Estate

    Commercial real estate is one of the best real estate investments in Kenya that can make you the next tycoon. This real estate model comprises industrial warehouses, offices, retail stores, and hospitality buildings like hotels and hospitals.

    With everyone thinking of having a side hustle in Kenya, there is a guarantee that commercial buildings in the right locations will always have tenants. That’s why commercial property brings more rental yield than any other type of real estate. 

    The growth of commercial real estate depends on the location you choose. For instance, if you set up retail stores near colleges and universities, you will have tenants faster since there is a ready market, the students.

    Industrial warehouses will grow well in big towns like Nairobi, Mombasa, Kisumu, and Eldoret. In addition, offices and hospitality buildings will do well in those big towns.

    1. Residential Real Estate

    Residential real estate is the second-best type of property investment in Kenya. This type of property consists of single-family houses and apartments. You can rent or sell your residential property. 

    If you plan to build apartments for sale, you’ll need a lot of money since you’ll need a bigger piece of land. These big investments suit people with experience in real estate investment. 

    However, if you are a beginner in real estate investment, you can start with simple rental properties to help you gain experience.

    Building a Real Estate Portfolio: Mistakes To Avoid

    You may start gaining profits sooner if you build your residential property in more populated towns like Nairobi and its metropolitan areas. Success in residential real estate depends on the average number of tenants you have per month. The higher the number of tenants, the sooner you’ll get your ROI.

    1. Raw Land Real Estate

    Raw land means that there is nothing on the ground. If you want to start investing in raw land, you may have to consider a lot of factors, such as:

    • Which is the closest town/city?
    • What is ROI in that area?
    • How is the security around that area?
    • Are there social amenities such as water, electricity, schools, roads, etc.?

    These factors will highly contribute to the success of a raw land investment. But before buying raw land, ensure you run a title deed search to avoid losing your money to fraudsters. 

    The raw land investment is a long-term investment plan since you don’t have to develop it right away. In addition, you can resell it after some years at a higher price since land is an appreciating asset.

    One shortcoming of investing in raw land is you don’t know what your neighbors are planning to build on their land, and you have no control over that.

    1. Real Estate Investment Trusts (REITs)

    Do you want to invest in real estate but fear the risks involved, plus the high amount of cash needed? Well, publicly traded REITs can help you with that. 

    REITs are companies that own various types of commercial real estate, such as retail stores, warehouses, offices, and hospitality buildings. These companies allow you to buy shares and receive dividends annually. As long as the companies make profits, you will always get your share each year with fewer risks.

    REITs should return 90% of their taxable income to their shareholders annually. So that sounds like a good investment plan. However, you should be careful not to fall for Ponzi schemes parading themselves as REITs because you will lose money in the end.

    The Bottom Line

    The best real estate investment depends on your interest and goals. While it may be expensive to dive into real estate, some still require an affordable amount of money. For instance, if you are a beginner in real estate investment, you can start by buying REIT shares, which will help you gain some experience. In addition, you can try out rental properties, which also don’t require much money compared to commercial real estate.

    Frequently Asked Questions

    1. What are the main types of property?

    The main types of property you could invest in are residential property, commercial property, and raw land. The success of each property investment depends on location.

    1. Between commercial and residential property, which is better?

    Commercial property tends to do better than residential property. In most cases, tenants pay more rent for commercial property than residential property. As a result, it’s easy to break even with commercial property.

    1. How do I choose the best location for rental real estate?

    The best location to set up your residential real estate should have a high population growth. Locations near schools and in urban centres have high chances of success.

    1. What is the 1% rule in real estate?

    A 1% rule means that monthly rental income should be 1% of the purchase price. For instance, if you bought your rental property with Ksh.10M, the monthly rental should be 0.01×10,000,000 = Ksh. 100,000.

  • The Ultimate Guide to Making Money in Real Estate

    The Ultimate Guide to Making Money in Real Estate

    Making money in real estate is not as complicated as it seems. That’s why you find thousands of investors coming to property investment. 

    You can be the next tycoon once you learn the tricks you can use to succeed in real estate investment. 

    In this guide, you’ll know what you should do to create a profitable real estate investment, whether it involves property or not. 

    Key Takeaways 

    What is real estate investment?

    Real estate investment ranges from buying and selling raw land, residential, and commercial property. 

    The main aim of property investment is to gain high returns on investment. And that’s why you should be keen to know how to make that happen.

    4 Big Ways You Can Earn Money in Real Estate Investment

    1. Property Appreciation 

    Suppose you buy raw land at Ksh. 200,000 and let it appreciate. You can sell the land some years to come at Ksh. 300,000, and you’ll earn a cool Ksh. 100,000 without breaking a sweat.

    If you find out that your land has valuable natural resources such as water and minerals, the price of it will automatically skyrocket. 

    You can also buy a home and sell it later at a higher price. 

    If you buy a rental property, it will appreciate if you maintain it well. Don’t expect it to appreciate if you don’t do simple things like renewing the painting. 

    Once property equity increases, you can use it as collateral against a bigger loan to buy more property. 

    Alternatively, you can always sell your property at a higher price than the buying price and make profits. 

    Again, you will make profits if you increase your rental income gradually. However, you should improve the property’s appearance before you increase rental income. For example, you can change iron sheets, repaint, or add tiles to your houses.

    Top Factors to Consider before Investing in Commercial Real Estate in Kenya

    However, property appreciation depends on location growth and inflation. For instance, big towns will have a higher growth potential than smaller towns. Rental property near universities and colleges will grow faster as the student population grows.

    Inflation will also be a big factor in contributing to property appreciation. The USD was only worth less than 100 Kenyan shillings some years back. Now, in 2022, the price of a dollar is 120 shillings. That means that if that trend continues, land and property prices will keep appreciating. 

    However, you must learn to be patient with your property, don’t expect it to pay your bills after a few months of investing.

    1. Creating Regular Income 

    If you plan to retire early with real estate, you’ll need a continuous income flow to help you with your daily expenses. 

    The most reliable way to create an ongoing income from the property is by renting it to tenants. Remember that the tenant will pay you monthly, so you’ll have income. However, don’t use your rental income before implementing the 50% rule.

    If you buy a rental property, you can start getting your ROI as soon as you get tenants. The income level of rental property depends on location and the average tenant number.

    Beginner’s Guide to Real Estate Investment in Kenya

    Buying commercial property can leave you with more money since rental income from commercial houses, line offices, retail stores, and warehouses are higher than a rental property. 

    Regular rental income is the best way to keep you afloat in real estate investment. However, to continuously make profits, ensure you get a good property manager to help you make sober decisions.

    1. Real Estate Investment Trusts (REITs) 

    REITs are among the best types of real estate that can help you make money without owning property. REITs represent a group of companies dealing with commercial and rental properties that allow members of the public to buy shares. 

    Once you buy REIT shares, you’ll get at least 90% of the company’s annual income. That’s what the law supports.

    If you plan to start in real estate investment, starting in REITs will be a good idea to help you learn industry terms.

    However, you should ensure you don’t fall prey to fake REITs that will siphon your hard-earned cash.

    1. Buy and Hold Real Estate Property 

    Suppose you buy a single-family and rent them out. You will gain profits in terms of ROI. If you purchase many apartments, you can live in one and rent the rest. At least, you will save your house bills and still pay your mortgage using income from other apartments.

    You can also profit by buying old houses, renovate and resell them. However, you should first learn about renovating costs before purchasing the property. Alternatively, you can get more profits if you know or learn how to renovate.

    After renovation, you’ll sell the property at a profit. Isn’t that an excellent way to make money with real estate investment?

    Another way to make money with your houses is when you live outside the country. So if you own a home/ house in Nairobi or its metropolitan areas, you can rent out your house as AirBNB to tourists for a short term. That will boost your mortgage repayment. However, you will only make good profits if the area is close to a tourist destination like Maasai Mara or the coastal region.

    Factors to Consider to Succeed in Real Estate Investment 

    If you want to gain profits, you should understand what’s at stake in real estate investment. 

    • How much money do you need?

    You should know how much you need to buy real estate. This will help you search for the correct mortgage value.

    • Liquidity 

    How fast can you get a buyer if you decide to sell your property? You should invest in a property that’s easy to liquefy.

    • What do you know about real estate?

    Before investing in real estate, you should have all the information you need to succeed. You can also hire a lawyer to help you with the legal terms.

    • How prepared are you for risks?

    Every business has risks, but the degree varies from one industry to another. Like in real estate, the most considerable risk is fire. So, can you compose yourself if you lose everything?

    Conclusion 

    As you’ve read above, you can make money with real estate investment. All you need is to make calculated moves to help you make the right choices. 

    Real estate investment can help you retire early if you put in the right efforts.

    Frequently Asked Questions 

    1. Can I become wealthy through real estate investment?

    Yes. You can be super rich with real estate. All you need is to follow the correct blueprint to help you. It’s advisable to learn first before investing in real estate. You can start by buying REIT shares to gain real estate investment experience. 

    1. What is the best way to make money in real estate as a beginner?

    You can make money through property appreciation if you are a beginner. You can buy land, let it wait for five to ten years, and resell it. However, if you need quicker returns, you can buy a rental property. That will give you income as soon as you have tenants.

    Don’t waste time searching. Contact Property254 today and let us connect you with a qualified real estate agent in your town. Get started on your real estate goals now.

    Don’t waste time searching!

    Contact Property254 today and let us connect you with a qualified real estate agent in your town. Get started on your real estate goals now.

    Contact us
  • The 50% Rule in Real Estate Investment and How it Works

    The 50% Rule in Real Estate Investment and How it Works

    As a real estate investor, you want to profit from your investment. You’ll also need to know how long it will take to realize your returns on investment (ROI).

    Remember, it’s always advisable to determine your business progress, regardless of size. That’s why you can easily realize your property profits with the help of calculations like the 50% rule.

    This guide will show you how the 50% rule works and how it can help you in your real estate investment.

    What is The 50% Rule?

    The 50% rule in real estate means you take half of your monthly rental income to cater to the property expenses.

    However, we don’t include mortgages in these expenses. Instead, expenses like property taxes, insurance, maintenance costs, capital expenditures, utilities, and property management costs.

    Therefore, if your monthly rental income is Ksh. 200,000, you should use Ksh. 100,000 for those expenses.

    The 50% rule is an excellent way to dive into the real estate business. If you are new to property investment, this rule can help you avoid some beginner mistakes.

    This rule ensures that you don’t exaggerate real estate profits. You can easily track your real income by keeping clear monthly expense records.

    How Does the 50% Rule Work in Real Estate Investment?

    The 50% rule will tell you whether you made the right choice investing in real estate. After you get tenants on your property, ensure you record the monthly income. 

    Now, take half of the rental income and use it to cover expenses concerning the property. 

    The remaining half of your rental income should go to mortgage loan repayments and personal expenses. However, covering personal expenses with your rental income should be the last thing to do. Instead, you should evaluate the actual profits after the 50% share of expenses and mortgage repayment.

    The Ultimate Guide to Making Money in Real Estate

    Benefits of The 50% Rule in Property Investment

    • With this rule, you determine the growth potential of your rental business. You can save and eventually buy another property if you have a bigger share after the 50% rule.
    • It helps you evaluate real property income. If you are buying a rental property, you’ll request the owner to give you income and expenses records. That way, you’ll know the potential of the property.
    • With the 50% rule, you’ll know when to continue with the business and when to sell it.

    Use of The 50% Rule to Determine Your Property’s Cash Flow 

    If you want to know the real cash flow of your business, you will first know the gross rental income from your records. 

    Now, take half of the gross income and set it aside for property-related expenses.

    Afterward, take mortgage repayment from the other half. Now, whatever remains after paying the mortgage is the monthly cash flow of your rental business.

    However, if you didn’t use a mortgage loan to buy your property, the other half is your average monthly cash flow.

    Example:

    A monthly gross rental income of Ksh. 200,000 means you will have Ksh. 100,000 for property expenses. 

    Suppose you pay a mortgage of Ksh.80,000; you’ll have a monthly cash flow of 20,000.

    What is a Proof of Funds Letter (POF)?

    Accuracy of the 50% Rule 

    The 50% rule can help you know your expectations when starting out in real estate investment.

    This rule is just a guideline for whether or not to invest in real estate. For instance, if you get that the remaining half is far less than your monthly mortgage repayment, you should forego the property.

    You should only go on with the investment if you get at least 20% cash flow from your rental property.

    The 50% rule will give you a rough figure of potential earnings if you want to buy a rental property.

    If you get a higher cash flow amount after 50% and a mortgage investment, you can go ahead with the investment. 

    What is the 1% Rule in Real Estate?

    The 1% rule tends to go hand in hand with the 50% rule. The rule will show you how much rental income you should expect from a profitable rental property.

    The 1% rule insinuates that the monthly rental income should be at least 1% of the total property purchase price.

    Example calculation:

    If you bought rental property worth Ksh. 20 million, monthly rental income should be 1% of that, which is Ksh.200,000.

    If you cannot get that 1%, investing in real estate might be a bad idea. Instead, go back and search for the best locations with high rental yield potential.

    Conclusion

    The 50% rule will be a better blueprint to determine the cash flow you will earn on specific rental property.

    Although the figures you get are close estimates, they should help you make the right investment.  

    Always ensure you scrutinize rental property before investing in it. Consider all aspects that will make you realise your ROI as early as possible. 

    Frequently Asked Questions 

    1. What is the 10% rule of real estate?

    The 10% rule means that you should buy 10% less than the sticker price of the rental property. You should have excellent negotiation and bargaining skills to actualize this plan.

    1. Is the 50% rule accurate?

    Not exactly. But it gives the investor a rough figure to help determine the potential cash flow of the rental property.

    1. What is the best profit margin for a rental property?

    As an investor, at least 10% ROI will be a good rental yield. However, not all locations can offer such high ROI. For instance, local towns in Kenya will give an average of 6% ROI.

    1. Is rental property a wise investment idea?

    Well, if you want to retire early, you may consider real estate investment. Rental property brings income with little effort. So, it will be a nice investment that suits your retirement plan.

    Empower yourself with knowledge! 

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  • Top Tips for Finding the Best Airbnb Markets in Kenya

    Top Tips for Finding the Best Airbnb Markets in Kenya

    Have you heard about the Airbnb real estate business? Well, it’s a new thriving business in the real estate sector that does well in countries that get tourists. Most people call them vacation rental houses because they are seasonal. Some people rent for days and others for a few months.

    An excellent Airbnb business plan can help you get high monthly returns once you implement the plan. 

    This guide will show you how you can succeed in the best Airbnb markets in Kenya. By the end, you will learn the following:

    Keep reading to get to the root of this new and booming real estate investment. If you want to succeed in this business, follow this guide carefully.

    What is an Airbnb Real Estate Business?

    Brian Chesky, Joe Gebbia, and Nathan Blecharczyk, who were roommates and classmates, thought of starting online house bookings in 2008. They opened a website that, till today, allows travellers to book houses when travelling to any part of the world, including Kenya.

    An Airbnb is a business that involves renting homes or rooms to travellers or digital nomads. Airbnb has made lives easier for travellers since they will feel at home. They can cook, clean, and do anything, just like they would do in their homes.

    Ultimate Guide to Taxation of Airbnb in Kenya

    Airbnb is a business you can start if you have a vacant house or a room you don’t use at home. If you are near tourist destinations, there is high potential growth. This new rental strategy can potentially generate higher returns than average rental properties. 

    However, you can build or buy rental properties and do an Airbnb business.

    A report by the CBK showed that Airbnb business led to a reduction of hotel occupancy by 83.3% in the second quarter of 2020.

    Factors to Consider Before Investing in an Airbnb Business in Kenya 

    Your money is at stake, so you have to make the right moves before investing in Airbnb.

    1. Location 

    For any business, location is always a crucial factor to consider. In this case, you cannot put up an Airbnb business in rural towns and expect returns.

    That’s why you should look for locations in tourist attraction areas like along the coast, National parks, and also the Nairobi CBD for those going for business trips.

    Your houses should be ideal for couples on honeymoon, families with children, groups of friends, or digital nomads on vacation.

    1. Who are your target clients?

    Different Airbnb hosts different types of clients. For instance, you can have single houses for one person or homes accommodating a whole family.

    Beginner’s Guide to Real Estate Investment in Kenya
    1. How’s your social influence?

    You can only run an Airbnb through its website. As a result, clients should get a link to your property details, like what’s inside and the cost per night. 

    Therefore, you should be ready to market your Airbnb on social media or have the best social media influencers to do it. The more your property is visible to many people, the more likely you’ll get customers.

    1. Do you have enough capital?

    This factor is always a concern for any type of real estate investment. But it’s more intense with Airbnbs since you should furnish the house with all household items.

    If your clients feel more at home away from home, they will refer your Airbnb to their friends.

    1. Is it a side hustle?

    One thing you should know about Airbnbs and real estate is you won’t start making profits the following month. It takes a lot of time and dedication to pocket your first rental income.

    Therefore, starting an Airbnb as a side hustle is a good idea. When you put in the right effort, you can even retire early.

    Read:Top 7 Best Airbnb locations in Kenya.

    The Best Airbnb Markets in Kenya 

    1. Nairobi 

    Being Kenya’s capital city, Nairobi has thousands of global visitors seeking to close business deals. That fact makes it suitable for Airbnbs for busy business guys. 

    Since these people are not coming for some kind of vacation, the furnishing of the houses is simple. Most people don’t even require a television; a power supply and other essential things are just enough.

    1. Mombasa 

    Mombasa is the most thriving town in Kenya’s coastal region. This town attracts thousands of local and international tourists annually with free and paid beaches. 

    International tourists visit Mombasa when it’s winter in their home regions. In contrast, local tourists visit Mombasa during summer and festive, and Easter holidays. 

    That means you can rent throughout the year if your Airbnb has the best and most comfortable household items.

    1. Nakuru 

    Nakuru town mainly attracts tourists who like to see flamingos in Lake Nakuru. It also attracts investors since it’s a thriving business community with open-minded individuals.

    Always ensure you set up your Airbnb near transport means like road or rail, which will be convenient for your clients.

    1. Kisumu 

    Kisumu is also among the best Airbnb markets in Kenya. Kisumu city is known for fresh tilapia fish and a breathtaking view of Lake Victoria. 

    This town also attracts business investors from across the country and other countries. Setting up Airbnb near Kisumu Airport will be an excellent opportunity to land new clients arriving in the city.

    How to Make Money With an Airbnb in Kenya 

    • You should first create an engaging listing of available houses to let. You should include as many details about the houses as possible. Details like location, number of bathrooms, and bedrooms are critical.
    • Create a hosting account on the Airbnb website and fill in your house’s details and price. Most people charge Ksh. 3000 and above per night.
    • Create a reliable calendar to ensure you get clients at the required seasons. In addition, ensure that you always have space during high tourist seasons.
    • Share a link to your Airbnb houses with your friends and family. Also, ensure you factor in serious advertisement means like using influencers or paid Google Ads.
    • After you get clients, Airbnb will pay you 24 hours after the client’s check-in. You can get paid through direct deposit, Western Union, or Paypal.

    To Sum Up, 

    It’s an excellent idea to start an Airbnb business, especially if you already own a home near tourist destination areas. It will be good to earn money from your unoccupied rooms or property.

    Frequently Asked Questions 

    1. Is the Airbnb business profitable in Kenya?

    If you plan your business module correctly, you will surely profit. Locations with numerous annual tourists, like the coast, will bring more profits. For instance, let’s say you charge Ksh.3000 per night. If the client stays for one month, that will be Ksh.90,000. Isn’t that enough money to pay your mortgage?

    1. How do I find the best Airbnb markets in Kenya?

    Basically, tourist destinations are the best markets to set up an Airbnb business. The returns in these towns are insanely high.

    1. What do I need to start an Airbnb in Kenya?

    You need to pay a one-off application and annual license fee, register and get inspected by the Kenya Tourism Regulatory Authority(KTRA).

    Unlock the secrets of the Kenyan real estate market. join our upcoming webinar and gain valuable insights from industry experts.

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    Reach a wider audience of potential buyers. Get listed on Property254, Kenya’s leading real estate platform. Visit our website to learn more.

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