The real estate business in Kenya is one of the thriving ventures you can try as an investor. We all know that land appreciates with time, regardless of its location. However, the rate of appreciation depends on the activities around it.
In this blog, I will show you what you need to know about the real estate business in Kenya. You will learn the types of real estate investments and the considerations before you start the business.
You can rely on this information to make informed decisions for your real estate investment. You can count on real estate investment as a way to build a passive income stream for the near future.
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What Is a Real Estate Business in Kenya?
You could think of either a developed or undeveloped land to be real estate. So, whether you want to buy already developed land or raw land that you wish to develop, that’s all real estate business.
Real estate can also mean land with natural resources such as cash crops, dams, or even minerals. What depends is what you need to do with the land. All that matters is that you will still earn money through whatever you do with the land.
Let’s say you have some funds that you need to utilize on real estate. First, you need to understand the different types of real estate before making that investment decision.
What Are the Types of Real Estate Businesses in Kenya?
Before you venture into the real estate business in Kenya, you need to know the best type to suit your investment plan.
Residential Real Estate
Residential real estate in Kenya is growing at an alarming rate. So you can imagine how the demand for housing is increasing day and night.
To invest in a residential real estate business, you can get the best buy-to-let areas in Kenya or buy undeveloped land. If you get a completed resident estate, you will be sure to start gaining your Return On Investment (ROI) as soon as you get tenants.
However, if you start on undeveloped land, you will have to build everything from scratch. Therefore, you have to do your calculations right before jumping on this particular investment.
The residential real estate business in Kenya can also be selling houses to people who need to own permanent homes. You have to buy land, build houses, and sell them at a one-off cost.
However, before you can start selling houses to individuals, you should first build your residential home. Of course, you cannot sell houses without owning one.
We have different segments of residential real estate:
- Apartments. These houses are individually divided into small spaces from one home to another. However, there are no gates, and a door protects each house.
- Single-family home. These houses do not share walls, but they stand alone in a field. The places could still have private parking lots.
- Condominium. These houses share walls with other units on the same building or row. There are no individual parking lots or fields.
- Townhouses. Townhouses have multiple floors whereby each floor could be occupied by a single-family. The houses share one or two walls.
- A multi-family home is a single home that you can turn into multiple units depending on the size. You can choose to rent it all if you are going out of the country or stay in one unit and rent the rest if you are not moving out.
Mixed-use Real Estate
As the term portrays, a mixed-use property can fit any form of development in one space. For instance, you can have buildings that accommodate residential flats, retail areas, institutions, firms, or even entertainment areas. Therefore, that’s what we call mixed-use real estate.
However, not all locations can fit mixed-use real estate. Therefore, you should be more careful with the site you choose.
Industrial Property
You can also venture into industrial real estate, where you will rent your property to investors who need to set up manufacturing sites. Most individuals who venture into manufacturing or the supply chain need more space for offices or storage.
Therefore, your property space should comply with the leaser’s needs that they prefer. Industrial property can also accommodate manufacturing plants, factories, and warehouses.
However, you can not set up an industrial property anywhere you wish. Therefore, the location you chose should abide by the Kenyan laws of industrialization.
Commercial Real Estate Business in Kenya
Commercial buildings are always in the interest of entrepreneurs who want to set up businesses. In most cases, commercial buildings thrive in urban centers and semi-urban centers.
Recently, after Coronavirus invaded the world, most people in Kenya and the entire globe lost their jobs. As a result, the majority are now starting up small businesses to help them survive.
So, I would say that Covid-19 was an eye-opener to many. Most people saw the need to have more income streams. Thus, most are starting out businesses at every chance they get. And this gives you an opportunity as a commercial real estate investor in Kenya.
Commercial real estate will always grow as long as demand for products and services increases. Therefore, you should not have the fear when venturing into Kenya’s commercial real estate business.
Now that you know about the common types of real estate business in Kenya, I want you not to rush yet. Instead, here comes the most critical part that you should consider to succeed in the real estate business in Kenya.
Factors to Consider Before Starting a Real Estate Business in Kenya
1. Location
If you want to invest in the real estate business in Kenya, location is a critical factor. If you plan to gain financial freedom through the real estate business, it’s an excellent idea to choose a location where you’ll thrive.
For instance, if you focus on a residential estate, a location with proper infrastructure and security, not close to an industrial waste dump, will be a good site.
To make the residential in demand, if possible, you can get places close to beautiful scenarios like water or any other natural view. This is because people tend to feel good while next to nature.
In addition, the nature of your residential estate can also be in factor. For example, let’s say that you want to build. Most clients who need apartments for hire or buy usually need quiet places with high security, the best roads, and a proper network.
Still, if you focus on the industrial real estate business in Kenya, choosing a location close to other industries is an added advantage. And commercial real estate grows much in urban centers.
For any residential property you need to build, you should also make an effort to keep using the land surrounding it. This is because it can be developed into a more disruptive property like an industry in the future. As a result, that may chase away the residents you have. Hence a loss.
2. How is the real estate market?
The main aim of any business is to make profits, which doesn’t exempt the real estate business. Therefore, before you venture into the real estate business in Kenya, you should study the real estate market trends.
Of course, you would like to buy at a lower price and sell or rent at a relatively higher cost. For instance, ROI in Nairobi, Kenya, cannot be similar to other towns like Machakos, Nakuru, Eldoret, or Garissa. Therefore, study the area’s trend before you dip your feet.
Read Also: Businesses to start with 10k in Kenya.
3. How do you want to earn money through your real estate business in Kenya?
Well, this is a good question. Do you want to rent or sell your property to make a profit? Those are the two primary sources of income in the real estate business in Kenya.
If you choose to sell your property, you will enjoy a one-off profit, and that’s all. That’s why most individuals choose to buy or develop real estate for renting.
However, if you have enough capital to keep buying and selling at a profit, it will be good to venture into that. But I would advise you to be fast in learning the current real estate business trends.
The good thing about selling real estate properties is that you usually get your ROI when you get a potential buyer.
If you choose to develop your real estate property and rent it, there will be a continuous flow of income. However, you will take years, if not decades, to gain your Return On Investments.
4. Where will you get your funding to start a real estate business in Kenya?
Here comes the money question. In most cases, you will only manage to invest in the real estate business in Kenya if you take a mortgage loan.
You can not invest in the real estate business if you don’t have enough cash. This is because real estate needs huge cash to establish, not forgetting other costs like maintenance costs. But you can always find banks that will help you get your property.
However, it would help if you were careful since when you default on the loan, the lender will repossess your property and be left with nothing.
That’s why you should do your calculations well before you venture into this business. Ensure that you have the first year’s installments from different sources of income. And that will save you from possible frustrations.
If you have chosen the best location and suitable property investment, you should be able to pay for the installments as soon as possible.
5. How much do you expect in return from the real estate business in Kenya?
Regardless of the type of real estate property you want to invest in Kenya, you should have a figure in mind of what you expect in return.
This will help you know whether it’s worth the trial or not. It will be advisable to get an accurate evaluation expert in Kenya to help you approximate figures.
For instance, you need to do some calculations to get an annual rental yield.
If you want to gain the best from the real estate business in Kenya, the ROI should be more than 6%.
In addition, getting an expert will reduce the chances of falling into the wrong hands and losing your money in the end.
Now, I’m sure you want to make the bold step towards your financial freedom journey. I got your back.
The Best Buy-to-let Areas In Kenya
I know this has been the most awaited moment in your life; you are about to get into the financial freedom journey. A journey that you can only start with a single step!
Remember the factors I said earlier you should consider? Well, I have taken all that into consideration. Now let’s roll.
Nakuru Town and its Metropolitan Area
Being the largest town in Kenya, Nakuru is genuinely thriving in entrepreneurship. And as a result, all other types of real estate businesses are growing at a faster rate. Therefore, if you invest in Nakuru town, you should expect an ROI of not less than 6% and a capital appreciation of 8% or more.
The city has the proper infrastructure, hence attractive to tenants and business owners. That’s why it’s a sure bet to place on Nakuru real estate development.
The cost of land in this town can be as low as Ksh. 300,00($3000); thus, it’s cheap and high returns. So why don’t you try this one today?
Konza Technical City
Konza city is still under construction, part of the government project for vision 2030. However, since the South Korean government has invested approximately 10 Billion dollars into this city, it’s attracting investors all over the globe.
From the Technical part, there is a plan that Konza will host the first Information Technology University in Kenya. Therefore, that promises massive growth in the technology sector, hence more demand for housing in the area.
In addition, Konza is at the Major Mombasa-Nairobi highway, and the SGR is still passing near the area. Therefore, you will be fit to get anything you wish on this earth with no strain at all.
With a bit of cash like Ksh200,000($2000), you can quickly get a plot in this area. So you can buy one plot soon before they are depleted.
Nairobi City and its Metropolitan Area
Being the capital city of Kenya, Nairobi is still leading in all sectors of the real estate business in Kenya. That’s because Nairobi city has the largest metropolitan area, growing fast, primarily in residential real estate and commercial real estate.
People are moving to stay away from the city’s pollutants, hence focusing more on settling in the metro areas.
The Bottom Line
The real estate business in Kenya is an excellent investment to venture into to gain financial freedom faster. Remember that my sole goal is to help you gain more money by whatever means possible.
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