Real estate investment could be the next big thing to try out in Kenya. Indeed, you can be the next millionaire if you successfully invest in this booming business.
You should know that you need lots of patience when investing in real estate. That's because you will not get the returns immediately or after a short while.
However, you need to make excellent decisions before making your investment. That's why you need this guide to make nice moves in the business.
What is Real Estate?
Real estate can mean developed or undeveloped land. A developed real estate means you are buying an already complete building that would start bringing returns sooner.
On the other hand, undeveloped real estate means buying raw land that you would later build whatever buildings you need.
Types of Real Estate
You should understand the real estate you need to invest in to help you make sober decisions.
This investment involves the building of residential houses. To properly invest in this kind, you should choose a location close to schools, hospitals, and commercial premises.
Commercial real estate is the building of business premises. These kinds of buildings are popular in large town CBDs like Nairobi, Kisumu, Mombasa, and Nakuru.
Most likely, you will get business retailers and wholesalers on these premises.
As the name suggests, industrial real estate houses industries that manufacture, pack, and store goods. In each town, there is always a designated location set for industries. Therefore, if you want to invest in building warehouse godowns, you should invest in the allowed location.
Steps to Invest in Real Estate in Kenya
Save money first/ build your credit score.
Of course, you need a lot of money before you can buy your first real estate. However, saving enough money to develop a real estate business may take longer.
And that's where you should consider taking out a loan. In this case, you will need a high loan amount, so your credit score and earning potential should be high.
To build your credit score, you can take small loans and pay them on time. That will place you in an excellent place to get a higher loan when you need it.
Remember that you can still get long-term bad credit loans, but the interest rates will be very high. Therefore, strive for a higher credit score to pay lower interest rates.
Stabilize your income
Every lender would like to work with you if you have multiple stable income sources. Of course, no one would risk lending money to someone with an unstable income.
So, work on your primary income sources and make them as stable as possible.
In addition, always ensure you have multiple income sources that can supplement you during loan repayment.
Do thorough research
Before taking out a loan to invest in real estate, you should thoroughly research the suitable locations for your investment.
You should consider a suitable location for the type of real estate you need to invest in.
For instance, if you need residential real estate, you can search for land in areas like Ruiru, Thika, Kitengela, Mlolongo, etc.
City metropolitan areas do better in residential houses than in the CBDs.
In addition, you should also research the best deals you can afford to buy. That way, you will have a figure in mind when applying for a loan. However, remember that if you are after undeveloped real estate, you may have a long way to go before earning some returns. Therefore, ensure you have stable income sources to repay the loan and maybe fund the house building.
Your research should also include searching for title deeds via the eCitizen portal. If you get a suitable place to buy and the budget is within your reach, don't hesitate to request a title deed copy to verify. At least you will be sure about the investment decision you are about to make.
Take a loan
After you settle for the right place to buy, you can now head to borrow a loan that's enough for the purchase.
Close the deal
This stage is the final in owning property, but don't be too excited to make haste decisions. You should make electronic transfers and avoid carrying cash anyhow. That will reduce the risk of theft.
In addition, ensure you have some people to witness (both you and the seller) while doing the transfers.
Develop your property
Property development is the stage that will see you start earning sooner from your investment. You will need to build the type of real estate you need.
But what happens if you do not have enough funds and have a loan to repay? Well, this scenario is most likely to occur if you had taken a loan to buy the raw land.
And that's why you should strive to have more income sources. However, don't give up if you've no money. You can always top up your loan after some years of repayment. That will help you get some cash to develop your property.
Market your property
Now, you are about to reap the fruits of your hard labor. But it may take time before you reap.
However, you can make a difference by bringing your property to the ears and eyes of potential clients.
To market your property, you can choose the most popular advertising means like TV, radio, or social media. The more frequent you are in people's spaces, the more likely you will get clients.
Real estate investment is a good idea if you follow the correct procedure. That's why you should go back and reread this post if you want to see positive investment results.
Frequently Asked Questions
How much do you need to invest in real estate in Kenya?
The amount you need depends on the location you choose. In remote areas, you can buy land starting from Ksh.150,000. But in urban centers, you need at least 1M to purchase raw land.
What is an excellent rental yield in Kenya?
In Nairobi and its environments, you can get a return on investment ranging from 6% to 7%.
Is real estate investment profitable in Kenya?
Yes. Real estate is a business that grows directly proportional to population. So, it's profitable if you manage your investments wisely. Construction and real estate are the fastest-growing industries in Kenya.