Even though real estate investment is touted to require a significant financial outlay, there is a variety of entry points that can fit every pocket. From seemingly remote but high potential vacant parcels of land to multi-million commercial complexes, there is an opportunity on the spectrum for everyone. There is also the option to pool resources through an investment group and put up a development like this. Where you wish to invest alone, proper planning that allows you to diligently put away money for investment would be ideal.
You are an investment group or an individual and through sheer hard work, you have put together some money and are thinking about Investment options in Kenya. You have several questions running through your mind…. Is property a good investment? What advantages does real estate have over other investment options? Well, you are in luck because we are here to share some insights on why real estate is considered a good investment and why as a Diaspora Kenyan it is the best for you.
1. Passive Income
The top reason we recommend property investment to our Diaspora clients is the fact that once the investment is set up & running, one barely needs to actively participate in the day-to-day management. You basically set it up & forget it!
If you choose to buy a parcel of land, for example, all you need to do is settle your land rents and rates and perhaps, visit the site from time to time to prevent squatting and perform a regular search at the land registry to keep up with records. This you can outsource to us and have all your time free to focus elsewhere. In the case of rental properties, you can hire property management services and receive your income and reports on a regular basis without needing to participate in daily operations.
2. Recurrent income/Cash flow
For most of our clients in the Diaspora, we noted that one of their major objectives is to build recurrent income/predictable cash flows with their investments in Kenya. This is one of the benefits of investing in real estate. By buying or building rental properties you can immediately start reaping periodic returns through rental income. With consistent and concerted efforts over the years an investor can build a sizeable portfolio that would give them a regular income and that would enable them to have a smooth transition if/when they return to the country.
What would a smooth transition look like? Freedom to choose whether one wants to work when they return or not. Where one wants to work, the income offers flexibility to choose what type of work and how long they want to take before they can rejoin the workforce as they reorient themselves into the new environment. This eliminates the pressure of making decisions based on the urgency of needing money for upkeep.
Investment tip! Think about when it would be ideal for you to return to Kenya, do some research on how much would be reasonable for you to earn from your investments without working (living expenses or more depending on your plans), and work backwards to determine how much investment you need to be making today to build up to that desired income in the future. Do not wait until you have one or two years to your return to do this, plan five, ten, even twenty years ahead.
3. Appreciation in Value
The beauty of property as an investment is that, as long as you are finding correctly priced property in emerging areas and you are in the market for the long haul, you are bound to benefit from capital gains. Property in Kenya mostly appreciates because of ongoing infrastructure development and increasing demand as a result of an increasing population and a growing economy.
That Kenyans in the Diaspora are often away for long periods of time, makes it ideal as it allows ample time for their local investments to gradually appreciate. From vacant land to rental property, real estate generally appreciates in the long run.
Buying in emerging areas means that with the passage of time and expansion of urban areas to cater for increasing populations, parcels of land that seem far out at first become highly sought after. Being an owner of such property gives you the choice (when the time is right) to sell at a profit or develop the land to cater for increased housing demand.
The key to acquiring property that appreciates over time is to monitor market trends and have due diligence performed to establish what government and private sector plans exist that may add value to/take away value from a property if you acquired it. You then select the best option, put in the money, and watch your net worth grow.
4. Increasing returns/income and hedging against inflation
In addition to the fact that a properly selected and maintained rental property will appreciate over time, the same can be said about the rental income earned by said property. A landlord will typically earn more rent year on year commensurate with the increase in property value leading to higher cash flows.
As a landlord, you may also cushion your investment against inflation by aligning the rent escalation rate with the inflation rate. Given that housing is a basic need, rents tend to rise during inflationary periods. As an investor you should look for properties that will generate returns above the inflation rate.
5. Increased Capacity to borrow
Property gives you an opportunity to use other people’s money (OPM). Your position with regards to access to credit changes favorably the moment you acquire property. This is because lenders like collateral, the more collateral you can provide, the more money they are willing to lend (subject to your ability to repay). You also build equity over time as you repay the loan and your property appreciates in value. The option to borrow even more money against your asset(s) to acquire more assets and increase cash flow has a compounding effect on the wealth you create for yourself.
6. You can rent it now and live in it later
What better reason to invest in property than that it is an investment that pulls double duty? Seeing as you are away most of the time, your primary investment objective is to earn an income and grow your investment portfolio. Being strategic with your long-term planning means that as you acquire properties over time, you also put money into a property that can potentially become your home when you return.
One of our clients built a home for themselves which they are currently renting out. Her plan is to return when her children are grown. In the meantime, she sleeps easy, knowing that at whatever point she makes the decision to live in Kenya, she has a house she can call home. Another couple who’s apartments we manage, have converted one unit into an Airbnb. They take comfort in the fact that when they visit during summer or the Christmas holidays, they do not have to worry about accommodation, they have a beautifully furnished space they can stay in for the weeks they travel.
7. Helps diversify your portfolio & own a piece of home
You may be asking, what if I have no plans of returning to Kenya, what’s in it for me? Well, like any savvy investor, you do not want to put all your eggs in one basket. We are sure you are investing in the country where you currently live, how about you diversify that portfolio by putting your money in a different geographical location? I.e. Kenya? This not only helps you spread your risks but also ensures you own a piece of what will forever remain home.
We sincerely hope this information has been valuable and are curious to hear from you in the comments section below. What reasons do you have for investing in real estate in Kenya? Subscribe to our newsletter & see you back here soon!
