1. Naivasha

The Rift Valley region has been attracting high-end developers. Naivasha’s scenic landscape, wildlife parks and a lake popular with holidaymakers has put the once dusty town on the global property radar. Postcard developments here include Longonot Gate, Great Rift Valley, Osotua Villas, and Aberdare Hills Golf Resort, which was named as the Best Golf Development in Africa at the 2015 International Property Awards.

On the other hand, OLX, the online advertising portal lists more than 300 properties within the greater Naivasha area with prices ranging between Sh95,000 and Sh5 million an acre. However, the most popular locations are those around Lake Naivasha.  They also command higher prices than the outskirts. Lamudi, a Global property portal focusing on emerging markets states that despite the availability of land within Naivasha and its environs, construction of residential homes is yet to take shape.

“The availability of land in Naivasha is beyond the development rate of the town. This makes the area a real estate hotspot,” states Lamudi. Investors in middle to lower segments of the market should take the cue and come up with products that resonate with Kenya’s ballooning middle class.

2. Mombasa

Back to the cities, it is not only Nairobi that you should be looking at. Despite lying on an island, Mombasa has stamped its authority as a leader in real estate development along the coast. Apart from the well known, high-end products, the area has a growing appetite for middle and low end developments.

For example, Nyali View Park, a cluster of 144 units comprising of two and three bedroom apartments is located near City Mall, Nyali and selling between Sh3 million and Sh10 million in what could be considered a high end location. “The homes are popular with first time home owners and those interested to flip them over for capital gain. The uptake of such low end development is a trend gaining popularity in Mombasa,” says Mwenda Thuranira, CEO of Mombasa-based MySpace Properties.

3. Kisumu

The lakeside city too has seen unprecedented development within the last five years. Like Nairobi, the trend in Kisumu is to move away from the city’s hub to the outskirts. Formerly desolate areas such as Awasi and Kibos have seen developers erecting residential units for owner occupation or rental.

And while Milimani was the preferred address a few years ago, the picturesque Riat Hills has lately seen investments in billions of shillings.

In 2014, a high profile real estate developer in the name of Coromandele Design embarked on a project to develop 30 Swedish style villas on 8.5 acres with an initial budget of more than a billion shillings.

Rents in Riat range between Sh35,000 to Sh60,000. Gated communities such as Victoria Gardens have the middle class as the intended clientele with prices ranging between Sh9 million to Sh16 million. Elly Ongoma, a director at Eldon Properties and head of sales for Victoria Gardens, says first time home buyers are mostly going for the two bedroom units showing a need to develop for the lower end of the market.

“We are kick starting the development of low end homes that will sell between two and three million shillings. What we are calling for is for county governments to provide prerequisite infrastructure so that our targeted end buyers can benefit,” says Ongoma. Like Isiolo, Kisumu is also riding on the recent infrastructure upgrade such as Kisumu airport to international standards.

 

5 lethal mistakes real estate investors make without knowledge

By COLLINS OGUTU

 

1. Playing Lone Ranger. Building the right team of professionals is important to this line of business. Involving people who understand the game, the dynamics of apartments vis a vis bungalows. You need good relationships with at least one real estate agent, inspector an attorney and a lender. These people would help you with your own deals and assist with financing for prospective buyers as well as responding to legal matters whenever necessary.
2. Paying too much.

Investors tend to pay too much for properties. They pay too much for the properties. While the business may take ages to profit, paying too much could lock out your money thus the loss. Economic sensitivity is vital to this business just like any other.

3. 3. Skipping homework. Research and do more research. No one is perfect; Get your homework right before investing. Great would-be investors have failed terribly in the sector for thinking it would work for them without getting any prior knowledge.
4. Ducking due diligence. Investors often have to move very quickly on their deals. That doesn’t mean they sign a contract and write a check without plenty of research, though. A lot of young investors often hurry into the market with a hope of learning up in the process. There are never guarantees of the same.
5. Thinking you’ll get rich quick. You want to make millions of shillings overnight? Well think again. It takes time to convince prospective clients or to just sell the idea of that land to people. You may invest a lot but do not hurry your products to get you returns. It just doesn’t work. Those who have tried it in real estate have counted huge losses and eventually backtracked.

BELOW ARE 10 TIPS THAT WILL HELP YOU GET STARTED IN REAL ESTATE AND TURN INVESTING IN PROPERTY INTO A LIFELONG PURSUIT TO SECURE YOUR FINANCIAL FUTURE:

By the Daily Nation

1. START SMALL, START NOW

A common truism in property circles is that, with real estate, you don’t wait to buy, you buy and wait.

“Many people lose out on making a fortune because they think the money they have is too insignificant to get them into the real estate business.

They don’t know that there are investment packages and opportunities they can exploit if they seek guidance from a real estate agent,” Mr Cheboror offers.

To drive the point home, Mr. Kibire gives the scenario of two individuals with Sh100,000 each, and who both want to own a home in 10 years.

While individual A might think it is better to save until he can raise the capital required to build a home, individual B, who gets into a joint land-buying venture with his Sh100,000, will be better off as his stake in the venture will have risen over the years since the value of land always appreciates.

“There are many financing options available to people with an interest in the real estate, ranging from bank loans to mortgages and micro-finance savings packages. Just make sure the income or appreciation value of your property surpasses the interest on the loan to avoid burning your fingers,” advises Mr. Kibire

You don’t need to buy an apartment complex right out of the gate. It is okay to start small, even if it is with REITs or partnerships. Just start.

2. REAL ESTATE IS NOT A GET-RICH-QUICK SCHEME

Most people find the allure of buying property today and selling it after a short time hard to resist. However, the two professionals caution against getting into real estate with such an attitude because, like any other investment, there is always an element of risk involved.

“One virtue that will prove very vital in this business is patience, which goes hand in hand with the principle of delayed gratification.

A person seeking to make a fortune in the real estate sector should be prepared to work hard and learn over a long time to understand how the market works,” Mr. Kibire says.

3. DO NOT QUIT YOUR REGULAR JOB JUST YET

If you are looking to getting started in the property sector, quitting your regular job might not be a very sound move especially if it is the job that provided the initial capital for your investment.

According to Mr. Cheboror people who quit their jobs to concentrate on real estate are oblivious of the fact that they can get professionals to handle the management part of their investments.

“Property agents and land economists have obviously been in the industry much longer and are thus more experienced in competently managing your investments” he says.

Relying on professionals saves you time as it only requires you to play a supervisory role.

4. DO NOT UNDERSTATE THE IMPORTANCE OF DUE DILIGENCE

The average Kenyan looking to get into real estate is always paranoid. This is because cases of people buying land whose title deeds are later revoked are rampant in many parts of the country.

“We have had people asking us to do title deed verification when their investments have already gone up in smoke. By then it is too late, and there is little we can do. To avoid being sucked into such unscrupulous deals, we advise land buyers to consult professionals who will carry out due diligence to verify the legitimacy of the property in question” says Mr. Kibire.

Even when buying property from a family member, a friend or a person you think you know very well one should resist the temptation to skip carrying out due diligence as unforeseen circumstances could later lead to life-long scarring. “We know of people who spend the rest of their lives servicing loans for properties that turned out to be phony,” Mr Cheboror offers. Given the kind of emotions land issues raise, it is certainly better to be safe than sorry.

5. SURROUND YOURSELF WITH THE RIGHT TEAM

When getting started, it is advisable to build a team of professionals can one easily consult before making any move, especially one that involves high financial expenditure. A property valuer, a conveyancer, an accredited contractor and a loan adviser are a few of the professionals whose advice you cannot afford to shrug off. While adding the professionals to your payroll might seem costly at a glance, a closer look will reveal that it actually saves you money.

Mr Kibire, the CEO, cites the case of a client who wanted to buy a house in Nairobi valued at Sh10 million a week before the interview and before he could seal the deal, however the prospective buyer decided to call the valuation firm for advice. The team visited the property and advised the client not to pay a cent more than Sh7 million for the property. He later sealed the deal for Sh6.5 million. While the company only charged him 0.25 per cent of the property price for the services the client ended up saving a huge sum as is stated by Mr. Kibire.

6. BUY THE WORST HOUSE IN THE BEST NEIGHBOURHOOD

“The importance of location in any real estate investment cannot be emphasized more than enough. This is because property in prime locations is measured not so much by the cost of construction, but by the value and high appreciation rate of the land on which the property sits” as is stated by Mr. Cheboror. Investing in a simple establishment in a high-end neighborhood always pays handsomely however; the reverse can be the worst mistake an investor could ever make. Buying the best house in the worst neighborhood, he warns, will always turn out to be disastrous as the value of the land underneath hardly appreciates, and future buyers will most likely shun the property because of the neighborhood.

7. BEAR IN MIND THE 1 PER CENT RULE

When putting up commercial or residential property to let, seek advice from your agent and do your calculation in such a way that, when the property is finally ready for occupation, the money collected as monthly rent is always more than 1 per cent of the total investment cost. This is what Mr. Kibire refers to as the 1 per cent rule. Say one puts up rental apartments at a cost of Sh1 million. The total monthly rent collected from an apartment should always be at least Sh10,000 as this will enable you to recoup your investment in less than 10 years, However, the 1 per cent rule is not cast in stone and some investors recoup the principal investment in a shorter time, even four to six years however; in cases of individuals whose buildings are on prime land in places such as Westlands and Kilimani take as long as 30 years as the investors rest easy knowing that the land on which their buildings sit is gaining value at a much higher rate than the rents.  

8. GOOD BOOK-KEEPING WILL SAVE YOU A FORTUNE

Mr. Cheboror points out that many small-scale constructors do not appreciate the value of accounting for every shilling spent while constructing and thus end up getting duped by unscrupulous foremen and contractors, so building a house ends up feeling like pouring money into a bottomless pit. He advises that investors get into the habit of keeping all the financial records pertaining to the construction as this is useful in determining the amount of rent to be charged or the price of the building were it to be put up for sale.

Keeping records can also save you money when the time comes to file your tax returns with the Kenya Revenue Authority (KRA). The financial records put you in a good position to enjoy tax exemptions.

9. DO NOT FALL IN LOVE WITH THE PROPERTY

Mr. Kibire states that when buying property for resale one is better off not purchasing using their l and should leave their emotions at the door. “There are buildings put up for sale that are over-designed and over-decorated and thus have great curb-appeal as they are appealing at a glance. People tend to fall in love with such buildings and hence end up paying inflated prices only for them to get shocked when they cannot sell the building at a profit at a later date. “We always advise our clients that real estate is not a sentimental business. One should always be on the lookout for profits and not let the visual appeal of a property cloud their judgment,” he adds. However, when buying your own home, you can go ahead and fork top dollar for a property with great curb appeal.

10. AVOID THE PATH OF LEAST RESISTANCE

The temptation to cut corners to save some money will certainly arise at some point. The agents agree that taking shortcuts is rarely ever worth it and if anything it usually results in the loss of entire investments as well as even lives. Going by the book might seem expensive but it saves one a lot of mental agony and is actually cheaper.

Mr. Kibire advises one to hire only contractors accredited and licensed by the National Construction Authority. One should take note of the national construction regulations and county by-laws to avoid the possibility of your property being demolished in future. One should also conduct surveys to avoid encroaching on public land, and use only genuine materials during construction. He states that he has seen an entire buildings being marked as unfit just because the owners did not see the need to conduct the necessary inspections at the foundation stage.

When it comes to contracting services such as borehole digging and hiring heavy machinery, one should deal only with reputable companies to avoid getting into trouble with the KRA.