The Kenyan real estate is no doubt lucrative. A glance at publicly available data reveals that real estate takes up a good chunk of investment portfolios. Unique trends and themes such as gated communities, smart offices and student apartments are gaining traction across the sector, with buyers willing to pay more for quality products that suit their lifestyles.
But real estate isn’t just a business for industry moguls and billionaires. With new schemes such as Real Estate Investment Trusts (REITs), fractional ownership, and alternative building technologies such as EPS, anyone can become an investor in the real estate business. For clarity’s sake, real estate comprises land, buildings, and may also in this context include real estate agents who are not themselves owners of these resources.
Despite its massive potential for profits and an ever-growing growth trajectory, real estate is also quite a risky business, especially where proper due diligence hasn’t been done. Use these 5 tips to your advantage as you embark on your real estate venture.
Understand Your Desired Segment Through Feasibility Studies
Real estate has diverse market segments. Property development comprises both land and buildings. Buildings may be further categorized into hospitality, residential, and commercial, with the latter, further being split into office, retail, and industrial. Whether you want to invest as a buyer for a single unit, as an agent, or as a developer, it is key that you understand which segment you’d like to tackle. Each of these segments is unique.
This kind of information will only be available to you as an investor through conducting thorough feasibility studies and engaging the right experts such as other professionals in the real estate industry.
Do You Want to Purchase or Rent?
The best way to look at purchasing or renting is from a utility standpoint. Purchasing with the intent of selling later is always hinged on uncertainty. It may or may not pan out as you had hoped. You may not have the mettle to market and sell the property yourself, in which case you’d want to employ the services of a credible real estate agent who understands the market better. Purchasing or building with the view of selling or becoming a landlord is always a mid-to-long-term game.
Renting a property and providing services and amenities such as gyms, smart offices, and even furnished apartments is a shorter-term and much safer way of gaining a steady ROI, although the return is much lower than selling units.
Does Your Business Require Constant Cash Flow?
Unless you are already established in the industry or have a substantial bank balance, you will most likely run into cash flow problems if you don’t plan yourself from the start. Eliminate unnecessary costs. As a startup, you may not need an office in a fancy part of town. A PC or laptop with a stable internet connection may be all that you need to source for clients and market yourself.
Understand Your Competition
You might sell at the lowest prices available, but Kenyan customers are inclined more toward quality; even tenants who rent. Understanding who your direct competition is provides a great way of knowing what your customers need and what alternatives you can offer without compromising on quality.
Never Miss a Step
Bureaucracy always tastes bitter before the result. However, you don’t want to miss any steps by “greasing hands”, filing fake paperwork, or opting for illegitimate methods; it always comes back to bite. Be prepared to spend your time in the trenches understanding the industry and educating yourself on procedures and what needs to be done. The result would be very happy customers on your part and no disputes, litigation, and wasted money coming to haunt you later.
Can You Make It In The Industry?
With these 5 pointers, and educated advice from those who have gone before you, sure you can! The rewards almost always outweigh the risks of plunging into real estate.
