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Real estate is seen as one of the surest investment options. This might be due to increased demand and pressure on housing which will definitely outstrip the supply. In the next three or four decades, the Kenyan population is projected to drastically increase to somewhere above 60 or 70 million.

10 Things to consider before Investing in Real Estate

  1. Buy when there is still time

Do whatever you can now to afford the property. It has been evident that properties appreciate very fast in Kenya, in a way that if you decide to save money and wait for some time, you might not afford it anymore. Look for what you can afford now and don’t let the figures scare you. Getting a loan from a Sacco is a good starting point. Look for properties that are affordable from companies that have such offers. If you get lump sums from per diems, bonuses, and overtime – these are all perfect funds that you can use for the deposit.

  1. Evaluating Your Investment Strategy

Vision is everything. Before you spend your money, have clarity on what your investment goals are. Not all properties will give you the same return. Although there are various forms of real estate investment, the two major classifications are: Buying to resell for a profit or Buying to rent. If you have the time to oversee construction changes, inspect site workers and go through the selling process, then buying and reselling is the best fit for you. Otherwise, buying to rent is a better option as you have the potential of getting two types of return. First, the value of the property appreciates in the long run due to improvements. It’s unlikely that you’ll have the property in the same state from one tenant to another.

  1. Analyze the area you are buying

If in 2010 three people bought three different pieces of land – one in Rongai, one along Thika Road, and another in Mombasa, if they were all to dispose of those properties right now, the values would be very different. Someone who does research easily gains. You need to evaluate why you need to invest in that location. Check what is coming up in that location and its relative distance from key urban establishments. If it is near the Standard Gauge Railway (SGR) for instance, it has to be near a station. Before committing any monies, do proper due diligence.

  1. Assessing the Type of Property to Invest In

Are you looking to buy a townhouse, vacation rental, student hostel, or apartment? The property you invest in will affect your financing. For example, a vacation rental would be expensive because of the finishing compared to student housing which will be more simplistic with only essential fixtures and fitting. Another factor to consider is the occupancy rate and flow of income. For example, a family home will attract longer-term renters. Families are perceived to be financially stable and able to pay rent regularly. On the other hand, student hostels could mean a regular change of tenants or dealing with those unable to pay rent. It’s important to keep in mind that you will not be occupying the property.

  1. Get a map of upcoming developments
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There is a map that is easily available and that you can also get online, which shows you all the roads in Nairobi, the ones that are to be built, and upcoming bypasses. Get government plans and those of other agencies that are involved in Vision 2030. Those plans will tell you exactly where the railways are coming, where the highways will be done, where roads will be expanded, where bypasses will be built, and where universities will come up. So you can always tell what the government is planning in terms of road development. Real estate investment companies do all that research for their properties in addition to finding which roads will be taking priority, this is also an option you can use.

  1. Working Out Expected Returns

How do you determine whether the rental property makes financial sense? You can assess capital growth potential to understand whether the value of your property is likely to grow over time. Study the average rental prices of similar properties in the area you want to invest in to get the estimated rental return and calculate the rental yield of your property. Rental yield is the percentage of estimated annual rental income divided by the cost of acquiring the property. You can use this figure to assess whether the rent you will receive can take care of the cost of maintaining the property, while still providing a profit.

Rental yield = (annual rental income / cost of acquiring property) x 100

A good rental yield is 7% and above. Compare your rental yield with other investment options like Government bonds, T-bills, money markets and shares in the Nairobi Stock Exchange (NSE) to weigh your options. Additionally, ensure that you can afford to take care of the costs of maintenance when the rental property is empty. As a landlord, this is not something you can avoid as it could take days, weeks or even months to get a replacement when someone moves out. That said, you can take care of this with proper risk management.

Additional Factors to Consider

  1. Consider the terrain

I have seen people buying rocks and hills. There are people who sell bushes, land in the middle of nowhere with no access. Make sure you view the property first to avoid such issues. That way, you see the terrain, the type of soil that is there, and check whether the land is accessible. You will also tell whether there is access to water and electricity and what other value that piece of land offers.

  1. Check the pricing

There are people in the real estate industry who overprice their property for no good reason. You can decide to use the services of a valuer, but you do not have to do this because basic research can help you. If you want to know the value of property in a certain area, you can just go to the internet and get the average. Do basic research so that you do not buy the overpriced property. It can easily save you Sh100, 000. Conversely, be wary of someone offering you a property that is seriously cheap compared to the properties in that area.

  1. Evaluating Your Financing
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Usually, investment properties will require a larger down payment compared to owner-occupied property. Your regular 3% down payment to own a home, will not cut it. Most banks in Kenya will require an average of 20% – 30% of the value of the property as the down payment for an investment mortgage. To start you off, here’s a handy list of mortgage companies regulated by the Central Bank of Kenya. But before you settle on which one, speak to a mortgage adviser to find out the range of options available. You want a bank that charges minimal interest and the shortest payback period. No one wants a mortgage payment plan that eats into their monthly profits! The good news is it’s possible to get a lower interest rate or more money from your bank.

Aside from the cost of acquiring the rental property, keep in mind other expenses that you need to cover before renting out the property. Additional costs that will not be covered by your financier include;

Maintenance costs
Agency fees
Property purchase tax
Closing costs; stamp duty and notary fees

  1. Use credible channels

In 2016 there were about 6,000 cases of fraud, according to the Kenya National Bureau of Statistics, so it is very easy to fall prey to con men. You need to do a lot of due diligence to prevent this. The other option, which is easier, is to just deal with established, credible organizations, which are known to conduct thorough research by default. In addition, any risk fall on them, not on you. Avoid agents and brokers. About 50 percent of them cannot be trusted, because they either have not done their own research. Do a basic search on the property and the seller and use a credible lawyer.

How to invest in real estate in Kenya to make money
How to invest in real estate in Kenya to make money

Top 10 Real Estate Companies in Kenya

Here is a list of the Best real estate companies in Kenya:

  1. Knight Frank
  2. Hass Consultants
  3. Optiven Enterprise
  4. Lloyd Masika
  5. Diamond Properties
  6. Villa Care
  7. Ryden International Limited
  8. Dinara Developers
  9. Karibu Homes
  10. Suraya properties limited

Let’s now delve into details below to know more about the top real estate management companies in Kenya:

  1. Knight Frank
    Knight Frank is one of the leading real estate companies in Kenya with its primary headquarters being in London. It was established in 1896 and has ensured the highest standards of integrity as well as quality in offering its advisory services to both commercial and residential properties. The real estate company boasts of having the biggest clients in Kenya such as the British High Commission, PriceWaterCoopers, Safaricom, among others.

Knight Frank offers a wide range of services to its clients in the real estate industry as below:

Feasibility and research consultancy
Management of projects
Property management
Apart from offering the services above, Knight Frank is also known for providing real estate jobs in Kenya.

  1. Hass Consultants
    Hassconsult is one of the best real estate companies in Nairobi. It offers investment developments around the city. Most of its properties are high end, ensuring high capital returns and rental gains. Hass consultants are among the best real estate companies in Kenya.

Its services include:

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Property market research
Property and facilities management
Asset Valuation
Property sales and letting
Joint venture financing and marketing

As an added advantage to its current clients and prospective clients, Hass consult offers Hass index. Hass index is the published property price in Kenya.

  1. Optiven Enterprise
    It is a registered real estate agency in Nairobi, and it’s among the best companies in Kenya. It is majorly known for purchasing land among middle and little income earners. It’s one of the best property buying companies in Kenya. Optiven Enterprise has been able to issue over 5,479 title deeds all over Kenya. The agency has also been able to win over ten awards while serving over 5000 clients. Some of its latest projects include: Victory garden’s in Kitengela, Garden of joy in Machakos and Shekinah gardens in Kajiado.
  1. Lloyd Masika
    Lloyd Masika is among the best real estate agents and companies in Kenya. It was established in 1979. Today it has three central departments: Management Department, Valuation consultancy and agency letting and subletting.
  2. Diamond Properties
    Diamond properties boast of creating wealth for several individuals and businesses. It has a team of dedicated property managers who are always on call. Diamond properties are among the best real estate companies in Kenya. More than 3200 title deeds have been issued with 47 phases of completed projects. Its experts are 24/7 online. Therefore you could get help anytime any day.
  1. Villa Care
    Villa care Kenya is a property management as well as real estate agency firm. It is about the best real estate companies in Kenya. The firm provides both residential and commercial properties with each a personalized approach. The other services offered include facilitating joint ventures between landowners and financiers. The unique proposition of this real estate agency is that it offers innovative marketing strategies for its clients.

Additional Real Estate Companies in Kenya

  1. Ryden International Limited
    Ryden international limited is a real estate agency located in Nairobi. It majorly specializes in Site acquisition services, Property management, estate agency as well as property valuation.

It’s CEO Iain Illingworth, has instilled in its employees a great sense of personal integrity, efficiency in performing work as a personalized way of handling clients.

  1. Dinara Developers
    Dinara Developers just like Optiven enterprise is known for being best at selling large parcels of land. It ranks among the most popular real estate companies in Kenya. It buys vast plots of land and then subdivides them to individuals. Apart from this, Dinara developers offer the development of quality and affordable housing.
  1. Karibu Homes
    This is a real estate agency dedicated to providing high quality and affordable houses for hardworking Kenyan families. The company also offer affordable mortgage solutions for people living in Kenya. Most middle-class Kenyans believe in these real estate companies in Kenya.
  1. Suraya Property Group Limited
    Suraya group is a real estate firm located within Nairobi. The property firm got incorporated in 2006, and it has been able to complete various real estate projects in Kenya. Some of the projects include Spring Valley Business park, Encasa, Four ways Junction Phase 1 & 2 as well as Rosslyn gardens. Suraya group holds values such as quality, affordability, innovation as well as a lifestyle as very dear to its core.

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