Why you should buy Rental property in Kenya
The real estate market in Kenya holds opportunities for both Investors and Buyers. Some of the factors influencing Real Estate include;
1. Urbanization and Population Growth
Urbanization has such a great influence on Real Estate growth and investments. As the population grows and moves to Urban areas, there’s a need for more housing to cater to them. This in turn creates more demand for both residential and commercial properties.
To fully accommodate a growing population, there’s a need for development. This means commercial spaces such as offices, business centers, apartments, and retail spaces are required. This therefore opens up opportunities for pools of investors.
2. Increasing disposable income
Real estate investing has the potential to increase disposable income for the investor. By buying or setting up apartments for rentals in Kenya, investors stand to gain passive income from collecting rent. Also, Real Estate value often increases or appreciates and if you sell it, you generate profits. Real estate doesn’t directly create disposable income. However, profits generated from real estate can be a source of passive income or can be reinvested to create and build wealth.
3. Limited housing supply
Kenya faces a housing shortage, especially in urban areas. This creates difficulties for people in urban areas looking for affordable housing. While this might be a problem for Kenyans, it is a good opportunity for investors to invest in the sector. Because of this shortage, investors can expect high occupation in their properties. Also, their property value increases as demand exceeds supply.
Factors to consider when buying rental property in Kenya
1. Location
While looking for a place to set up your property or get land, consider areas with improved infrastructure and high demand for housing. This will guarantee good investment returns. Also, consider areas with potential for urban growth, as those gain value over time too. Investing in areas with high population growth means that there’s demand for housing which in turn translates to high occupation rates. This also means that investing in areas with high housing demand and not enough supply will have your property value appreciating.
It is also important to consider areas near or with potential growth for infrastructure such as roads, stable power, etc. These improve the quality of life and are likely to attract tenants. Areas near hospitals, schools, etc. are also good investment opportunities. They attract tenants who are ready to pay for premium services.
It is also very crucial to consider your target demographic. Is it young, elderly, families, or students? This will help you to align your property investments with the needs of those particular groups.
2. Property type
a) Long-stay rental properties
Long-stay rental properties provide leases for a period longer than 6 months. They include traditional rentals, furnished apartments, and Airbnb. While Airbnb is known to offer short-term stays, they also have options to rent monthly to their customers. This is the most popular way real estate investors make money investing in Kenya.
b) Short-term rental properties
Short-term rental property investors make a lot more than other rental property investors. Airbnb hosts can adjust their prices depending on the season. Prices usually skyrocket during peak tourist seasons in specific tourist attraction areas. Short-term rental properties have brought convenience and flexibility to the tourism industry, which never existed before. Some short-rental property hosts include companies such as Airbnb and Vrbo.
c) Commercial and residential properties
Both commercial and residential properties are in demand, especially in urban areas. People need retail centers and office spaces. etc, while others seek luxurious places to stay. Residential properties concern housing, such as apartments and gated community homes to single-family homes. All these in return offer an investor property appreciation, part-time rental income that is passive, and less risk because they are low-maintenance properties. On the other hand, commercial properties are far more about buildings like office spaces, warehouses, and retail centers. For instance, in most cases, commercial properties proved to offer higher return rates than residential ones. They generally have longer lease terms than residential properties, providing more financial security. They are riskier due to the need for higher maintenance.
3. Rental Income and expenses
As a property owner, you need to keep a clear record of your Rental income and other expenses. You can identify where a lot of your money is spent and make decisions such as cutting costs or increasing rent. It is also important to note that even under Rental tax, you still have to file Tax Returns. Having a clear record of all your income will make it easy for you to do so. Being able to track your financial records will help you see where you are financially as an investor, that is, is your property making you profits or do you lose money to it? It is also important to consider property management. It ensures smooth running for an investor. Consider the available resources, and how much you’re willing to risk. These will help you know if to use property management companies, and real estate agents or operate solely.
4. Financing options
Investors seeking to invest in Kenya have plenty of options to seek finances from. These include commercial banks and Saccos. Commercial banks in Kenya provide mortgage loans. They can also finance your property through loans, whether you are building or buying property. Some Saccos also offer land and home improvement loans to their members. Investors could also collaborate with finance companies to create projects.
The increase in the need for housing in Kenya has led to the expansion of the mortgage market, ranging between 12% and 14% as of 2024. This varies depending on the lender, and the amount of your loan, among many others. For one to qualify for a mortgage loan in Kenya, lenders consider some factors. They include income, employment status, and collateral. But these also vary among different lenders.
