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10 Ways to finance your real estate business in Kenya

10 Ways to finance your real estate business in Kenya

 Real estate is one of the most preferred methods of investing because
not only does it provide good returns, but it also cushions one from inflation.
However, real estate investment is very capital intensive. As the old saying
goes, “it takes money to make money” and finding the right sources of finance
is important.

This post provides ideas to get your business fired up and ready to go.

1.     Use employment Income.

If you are formally employed, don’t quit straight away to start your
business. Use the income you’re your current job to help get your real estate
business off the ground. You then start your real estate business as a side
hustle as you build up savings to start off your new venture. By working part
time in real estate, you maintain an income to keep you going as you learn and
start growing your career in real estate. You can
market your properties
on the side.

2.     Tap into your savings

Tapping your savings is the easiest way to start off. It may take longer
to save enough money to get started, but the upside is that you enjoy all the
profits. You can use your savings to buy a property and put it up for sale.
This may be land for sale where you buy a single plot and divide it or buy a
bigger piece of land and subdivide the same.

3.     Sell Properties to raise capital.

If you already have assets that you can sell such as vehicles, shares in
the stock market, or other pieces of land, then this could be a funding source
for your real estate career. If you have been saving for retirement, you can
withdraw some funds up to 50% from pensions. However, draining your retirement
account is typically a bad idea because it jeopardizes your future financial
security in case the real estate business doesn’t succeed.

Important: How
to use Google Maps to sell more as a real estate agent.

4.     Take a loan from friends or family

Many small business owners get started by taking funding from friends or
family who can give you a loan. While they may offer flexible repayment terms
or a low-interest rate, this option comes with risks if it jeopardizes your

Carefully consider what would happen if your real estate venture fails
or it takes you much longer than expected to repay the loan. It’s essential to
document the terms of a loan from family or friends, so there aren’t any
misunderstandings later.

5.     Get a business line of credit

A business line of credit from a bank or credit union allows you to tap
funds up to a limit when you need them for your business. As you repay amounts
withdrawn plus interest, your credit line increases to the original amount,
which you can continue to use.

6.     Borrow From the bank.

The above options have been using relatively cost-free money. If you
don’t have any savings or assets to fund your real estate business, another
option is to borrow from the bank. Many banks offer business loans to start or
expand your venture. The major hindrance to financing of property development
by banks has been high interest rates.

Related: How
Premier Agent helps you succeed as a real estate agent in Kenya

7.     Get a partner/joint ventures.

Pooling of resources is usually done by individual investors with common
investment goals mainly in real estate. The resource pooling creates greater
purchasing power thus more diverse and rewarding investment opportunities
through simple economy of scale.  Finding
a partner to team up with is always a good way to start. Beyond providing
financing, the partners may also offer services, expertise or a network that
would boost your success.  

8.     Joint ventures with capital investors

Joint ventures are arrangements where parties pool their resources
together. Normally, real estate joint ventures combine the real estate
development expertise and financing capability of a developer with a
landowner’s contribution in the form of land.

 With real estate in Kenya having
some of the highest returns, this method of financing is quickly gaining
traction. The land owner and the capital investors usually form a company
specifically for the project with agreed terms on how the profits from the
project will be shared. The firm owner transfers the land to the project
company while the investors provide funds for the construction of the project.

9.     Presales

This is where you prepare a show house and then request buyers to make
payment before completion of the project. The revenues obtained from buyers
reduce the capital that is needed to fund the project.

10.  Government funding opportunities

The government is usually the largest player in every industry. To
support various initiatives, funds have been set aside through various bodies
like the Youth Enterprise Development Fund, Uwezo Fund, Women Enterprise Fund,
Kenya Industrial Estate, Industrial Development Fund, Agriculture Finance
Corporation and the ICDC. Visit their websites and/or offices for more
information on eligibility and process.


As you can see from the above there are various real estate financing
options get you started in real estate. How you fund a specific deal greatly
affects the rate of return. Understanding the financial aspect is therefore
crucial. Remember, every investment option of real estate financing has its own
set of pros and cons, and the financing approach greatly depends upon type of
the property and the situation.

Take time to research the most accessible investment options.

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