FACTORS TO CONSIDER WHEN INVESTING IN REAL ESTATE IN KENYA

The October 7, 2023 Hamas attack on Israel and the subsequent war in Gaza has upended the Middle East politics and created an escalating and increasingly complex security crisis that has threatened to engulf the entire Middle East region. Consequently, the subsequent growth in tension following the Iran’s attack in retaliation to the Israeli strike on the Iranian consulate in Damascus, Syria earlier this month has precipitated fear and anxiety among investors in the Middle East especially those in the Real Estate sector. Investors are now considering other geo- locations such as Africa with a high level of political stability for their investment. As a consequence of the Israeli-Gaza war and tension from a possible Iran-Israeli conflict, the longstanding regional political dynamics within the Middle East has resulted to an unusual flux leading to major investors reconsidering their interests in the region.

Kenya as an investment hub proffers a stable macroeconomic environment with the government operating sound macroeconomic policies which in turn create a conducive environment that promotes growth for the private sector real estate investment. As an investor looking to invest in Real Estate within East Africa region and more specifically in Kenya, you need to understand that the Real estate sector in Kenya is an attractive investment opportunity as the sector offers entrepreneurs the chance to earn passive income while simultaneously building their wealth in their physical asset. It is also worth noting that by investing in real estate, the investor is able to rent the property and earn regular income as well as increase equity in any other given property.

Historically, real estate investment in Kenya has and still is experiencing a high-performing growth because of its necessity. While economic factors may fluctuate over time, real estate is constant, in that people will always need houses or apartments. Due to its role in society, real estate has demonstrated the ability to stand and offer profit even in times of economic downturn in ways that other investments do not.

As an investor, you have to consider the following factors while investing in real estate in Kenya:

Property Type: As an investor you are required to consider which property type will best suit your goals. Are you comfortable working with a single-family home or would a larger multi-unit or even commercial real estate be better for you? It is crucial to do research and determine the ins and outs of each property type.

Location: This is the most important factor involved in real estate. As they say, you can change almost anything about a house, but you cannot change where it is located. Location will inform returns especially for commercial apartment as well as residential units.

Financing: Evaluate your finances as you consider real estate investing. It is crucial to have a strong understanding of where you stand in order to get an idea of how you will raise finances for potential deals. It is beneficial to look into the wide array of options, such as seller financing, crowdfunding or even working with a business partner.

Valuation of the Property: Property valuation is important for financing during the purchase, listing price, investment analysis, insurance, and taxation. these all depend on real estate valuation.

Investment Purpose: Given the low liquidity and high-value investment in real estate, a lack of clarity on purpose may lead to unexpected results, including financial distress especially if the investment is mortgaged. Look out for such purpose such as: are you buying for self-use, for leasing or to sell?

Expected Cash Flows and Profit: This is very important if you intend to invest in real estate for purposes of leasing for rental income or resale.

New Construction or Existing Property: New construction usually offers attractive pricing, the option to customize and include modern amenities. Though new construction may pose such risks including delays, increased costs and the unknowns of a newly-developed neighborhood, it has proven to have a high return once completed.

Overall Real Estate Market: As with other types of investments, it’s good to buy low and sell high. Real estate markets fluctuate, and it pays to be aware of trends. It’s also important to pay attention to mortgage rates so you can lower your financing costs, if possible.

Capital requirement: Real estate is a capital-intensive investment. Before investing, you need a sizable amount of capital capable of sustaining the asset from the first day to the day of completion this is especially for new projects. If you cannot estimate how much the entire project will cost you, consider engaging a qualified project manager with experience working on the same project as yours. That way, you will get a reasonable estimate to help you plan properly.

Property management: The type and scale of the property you invest in will directly determine which kind of property management will suit your case. For instance, one may find managing a shopping mall alone to be tedious and demanding while managing a few residential apartments for rent to be a manageable work.

Business obligations and legal requirements: As an investor you should be knowledgeable of the rules and requirements of the real estate investment industry and more importantly engage the trusted professional advisor like Advocates, Architects and Surveyors to take you through the legal requirements and compliance in general.

Lastly, understand that Real estate investment in Kenya is a profitable venture for those who are willing to put in the effort. In order to make a sound investment decision, you need to have the right knowledge to evaluate the potential of any property or project. Investing in real estate requires careful consideration of various factors as they can have a significant impact on the success of your investment. Seek and bring onboard other local professional to help actualize your investment dream.

At A.O.WANGA ADVOCATES we are happy to assist you in matters legal compliance as you embark on investing in Kenya.

For more information reach out to us via info@aowangaadvocates.com or +254794600191

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