Top factors to consider before investing in property in Kenya

Many people invest in real estate because the general trend of property is that it increases in value. As such, your returns are guaranteed over some time. It is important for you to understand these factors before you invest in real estate.

1. Purpose

Before purchasing either land or a building, the first factor is to determine why you are making the purchase. For land, consider factors like: – Is it for immediate settlement, immediate construction or for speculation purposes. Are you purchasing for your use or you would like to resell?  The same case applies to purchase of a house. Will it be a house for you to live in or a house that you may want to rent out?

2. Type

Once the purpose is determined, you then must consider if you are making a commercial, residential, agricultural or an industrial property.  Commercial properties are generally used as outlets for sale and purchase of goods or services or for use as offices. Commercial properties are usually more expensive than residential property and attract different taxes and this impacts on your budget. For houses, additionally consider whether you need to purchase an apartment, townhouse, bungalow or a house with a separate servant quarter.

3. Budget

The budget you have available determines the locations you can afford including the size of either land or building. The budget should be enough to not only cover the purchase price, but sufficient enough to cover taxes, agents commissions and the legal costs of conveyancing.

4. Location

Location is usually the biggest determinant of price. If you are purchasing hoping for returns from increased sale price, then you would need to select property in an area that is experiencing or is expected to have a high price appreciation. If you are purchasing a house to live in, then you must consider a location that is easy to commute, is secure, have social amenities and factors like schools and availability of transport.

5. Property Tenure

In Kenya, there are two main forms of property tenure. These are free hold and leasehold interest. Freehold property gives the owner absolute ownership of the property and does not attract ground rent. Leasehold property confers to the owner a limited period to own the property which can be extended. As evidence of ownership, the government issues buyers with a Certificate of Title for freehold and a Certificate of lease for leasehold titles as a primary evidence of property ownership. Article 65 of the Kenyan Constitution limits foreigners to holding only leasehold titles for a maximum of 99 years but permits future renewals on condition that the subject property held under that title is economically active and it is not required for public use purposes. Any title that is on freehold that is purchased by a foreigner, a company not wholly owned by Kenyans or property held in trust whose beneficiary is not Kenyan changes to leasehold.

6. The current condition of the real estate market in Kenya

Conditions in the property market change from time to time. If you are selling a house, high property prices are a good condition. On the other hand, if the property prices are low, it is a good time to buy and a bad one to sell. Thus, before you invest in some real estate in Kenya, perform some research to find out the prevailing market conditions.

The Important Take Away

Buying property is every Kenyan’s dream and rightfully so.  And is very rewarding. Numerous people have made a fortune investing in real estate. If you want to join the ranks of successful real estate investors, the elements above are the ones which you should actively consider. They can make the difference between a few thousands in returns or millions.

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