Pros And Cons Of Real Estate Investment In Kenya

Every Occupation Has Ups And Downs And Real Investment In Kenya Being One Of Them Is No Exception. If You Want To Invest In Real Estate In Kenya, You Need To Know The Advantages And Disadvantages Of The Venture. Here Is Insight Into Real Estate Investment's Pros And Cons In Kenya.

Kenya is one of the fastest-growing countries in the world. With a perfect blend of lush greenery, ambient temperature, and booming businesses in most of its areas, Kenya has become a hot-spot for many investors. However, in every seed of good, there is always a piece of bad. As many as the pros of real estate investment in Kenya can be, there are still cons that you should look out for.

Every occupation has ups and downs and real investment in Kenya being one of them is no exception. If you want to invest in real estate in Kenya, you need to know the advantages and disadvantages of the venture. Here is insight into real estate investment's pros and cons in Kenya.

Pros

If done right, real estate can be one of the best investments you can venture in. Here are the advantages of real estate investment in Kenya.

1.   Real estate appreciates over time

One of the best advantages of real estate investment is that it appreciates over time. Real estate is a long-term investment. Over the last few years, there has been a record upward trend in property prices, which is expected to continue. If you decide to sell your property after some time, you can yield profits by selling it at a higher price than you bought it for.

2.   Real estate is inflation-proof

It is known that real estate investors welcome inflation with open arms. This is because when there is inflation, real estate investors earn more. For instance, if you have made your investment in housing and prices of goods and services hike, rent also increases, thus earning you more money.

3.   Tax deductions

Real estate investors in Kenya have countless tax benefits. Property owners in Kenya receive tax breaks on insurance, maintenance repairs, legal fees, property management, property depreciation, and mortgage interest payments, just to name a few. Also, the investor’s profits are taxed as capital gain, which has lower tax rates.

4.   Regular income

Regular income is one of the many advantages of real investment in Kenya. If done properly, real estate can earn you a regular income. If you invest in an area with high demand, you are assured to get income regularly. One of the ways of generating income in a fixed duration of time is by investing in commercial housing. This will earn you money monthly when the tenants pay rent.

5.   You are your boss

Unlike many other investments, you are your own boss in real estate investment. All the decisions concerning the business fall solely on you. You can reap the most from your investment with the right information and management.

6.   Easy to understand

Many investments rely on difficult concepts and algorithms but real estate relies on simple principles that many are familiar with. A property investment can be easy to manage as it only requires proper care and you will reap the benefits. Investing in real estate is easier to understand.

7.   Benefits the community

You can make money from your investment and still benefit others. Investment in residential houses in an area with housing shortages helps curb the problem. Real estate investors also play an important role in generating job opportunities for the local community.

8.   Freedom and flexibility

If you desire to work under your own rules and at your convenience, real estate is the venture for you. With real estate, you choose the schedule that works for you and set the goals that will be reasonable enough for you. Real estate is great for those looking for a full-time hustle or a part-time hustle since the venture has various ways to invest to suit your needs.

9.   High returns

In the last few years, real estate has outperformed all the other types of investments in terms of returns. This is because real estate investment is resilient to many issues facing investment ventures in Kenya. The more you invest in real estate, the more the returns you get.

Cons

Despite the many advantages, real estate also has its disadvantages. The following are the major ones.

1.   Requires a lot of money to start

Starting out in the real estate investment in Kenya can be a hustle. The capital required to start can be hard to raise. In Kenya, the amount needed to start a real estate investment in a prime area is about five million. This discourages many from venturing into the business.

2.   Requires management and maintenance

A property purchased must be maintained and managed. This can be tough for those who want to venture into the investment as a part-time job. If one is not available for the investment, more money will be required to keep the property in good condition by hiring managers.

3.   Insufficient information

For some, real estate is an unknown venture. The lack of information shuns away possible investors from venturing into real estate. Real estate investors should therefore deal with the correct information to avoid needless costs.

4.   The real estate market is unpredictable

Even though real estate has proven to be resilient to most of the business pandemics, it is still unpredictable. Factors such as interest rates, demographics, government policy, and employment rates could lead to the depreciation of real estate investments. Luckily, this is preventable. Do enough research on the property you want to purchase to know some of the issues that may arise.

5.   Higher transaction costs

Real estate has higher transaction costs as compared to other investments. Most buyers ignore the transactional fees associated with purchasing a property. The transactional costs include title insurance, commissions, loan origination fees, and multiple closing costs.  In most cases, the transactional fees can be quite costly, leading to less profits.

6.   Corruption and bribery

Corruption is one of the major problems Kenya is facing. Unfortunately, corruption has spread its roots to most sectors of the country’s business scenes, including real estate. Recently, there have been numerous cases of land grabbing and fraud. In some cases, investors have received demands for bribes at some stages of the investment process, leading to financial strain.

7.   Infrastructure challenges

As Kenya grows, it still has its challenges, and one of them is infrastructure deficits. This is a major concern among investors since a country’s infrastructure plays a big role in the attractiveness and practicability of real estate investment. Poor infrastructure leads to poor distribution of investment across the country following that investors will choose to invest in the developed areas.

Mitigation and how to ensure all procedures are observed

While the cons can be intimidating, there are ways of reducing the risk of loss and undesirable outcomes in real estate investment in Kenya. The following are procedures to observe when venturing into real estate investment.

1.   Location research

The success of your investment relies greatly on its location. Conduct thorough research on the area before investing. For instance, investment in commercial housing will struggle in an abandoned street. Investing in the wrong location will also make it hard to resell your property if you wish to invest in land flipping.

2.   Engage local authorities

It is important to remain up-to-date with government plans for infrastructure development by connecting with the local authorities. Understand upcoming projects that could either make your investment more attractive and prosperous or less profitable. This will help you make the right adjustments to get the most out of the investment.

3.   Collaboration with developers

Collaborate with well-established developers who possess a proven ability to handle infrastructure obstacles and execute exceptional projects. Gain knowledge of how they became successful and also the mistakes they made to avoid making the same mistakes.

4.   Diversification

Many successful investors diversify their investments. Like the famous saying, never should you put all your eggs in one basket, it is not advisable to invest all your money in one investment. Broaden your investment portfolio across a wide variety of investments and regions.

5.   Regular communication

Be in touch with the workers or tenants to address their concerns. This will help your relationship with them and will motivate them to take care of your property as if it were theirs. Regular communication will also help address issues as they arise instead of addressing them after they have become a menace.

6.   Transparency and due diligence

It is important to uphold transparency as you make the transactions to avoid later implications from the government or the community. Conduct thorough due diligence. This will ensure that you minimize the risks that come with fraudulent activities.

7.   Community engagement

Engage with the local communities and stakeholders in areas where land ownership is communal to avoid issues such as unclear title deeds, land grabbing and fraud, and going against the community and cultural claims. This will help you understand and avert potential conflicts or claims.

FAQs for Pros and cons of real estate investment in Kenya

Is Kenya a good place to invest in real estate? Yes, Kenya is a good place to invest. The country is on a high growth trajectory, making it a suitable place to invest and be part of the country’s growth.

What are the tax advantages of investing in real estate in Kenya? Investing in Kenya has countless tax benefits. Investors in Kenya are given tax breaks on property depreciation, insurance, legal fees, property management, maintenance repairs, mortgage interest payments, and many more.

 What is the minimum amount to invest in real estate in Kenya? The minimum amount required to invest in real estate in Kenya is around 5 million. (According to industry experts)

Is real estate marketable in Kenya? Yes, real estate is marketable in Kenya. The rental income in Kenya’s real estate market is the greatest advantage.

Even with a few cons, Kenya is a great place to invest in real estate. The pros are more meaning the chances of making a profit in real estate investment in Kenya are higher as compared to other countries. However, be sure to do it right to avoid financial losses.

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