Investing in income property in Kenya can be the decision away from gaining financial freedom. Property investment serves as a long-term solution to your financial needs.
But do you know how you should do it? Well, this guide explains how you can invest in income property in Kenya.
We have an actionable plan that has helped thousands of investors across the region.
Keep reading.
What is an income property?
As the name suggests, income property is meant to bring income to the owner. As a real estate investor, you can earn money with property in two ways. One is through renting to residents or commercial tenants. The other way is selling the property at a higher price, although this may take time before getting a reasonable profit.
However, selling can be better since you’ll get your profit as a whole while renting might take years to realise your dream annual returns on investment.
Step-by-Step Guide to Investing in Income property in Kenya
- Be sure of your finances.
One thing you should know about property investment is that it requires a lot of money. That’s why you should be sure about the sources of the funds. A mortgage loan will do good, but you must have a stable income flow.
Notify your bank that you need a buy-to-let property and your preferred location. The bank will assess your income statement to determine whether you can afford the mortgage. Afterward, you can go ahead with the next step.
However, if you are buying your property for cash, you only need to keep your funds in one bank account to ease the transfer.
- Search for a property agent
A property agent knows the ins and outs of all property listings in a specific location. For instance, if you need property in Nairobi, get an agent from where you plan to buy the property.
If you are a new investor, let the agent tell you about the areas with high returns.
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- Choose the best location with a high population.
The property agent should help you with this stage. They should help you search for a more populated area where you’ll experience an almost 100% occupancy rate.
Good areas for high returns include areas near colleges and universities and towns near the Nairobi CBD.
In these locations, you can either buy to rent or buy to resell. Either way, you’ll still get the returns you need.
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- Search for property to buy.
A good property should be located in a place with all social amenities. These houses tend to attract more people to rent or buy.
The property should also be in good condition. Hire someone to check the roofs and the internal section of the house. If some places need some fixing, notify the owner about it. If they are willing to fix it, good, and if they are not willing, you can negotiate the buying price. The seller will accept the bargain since you hold the cards here, especially if it’s a buyer’s market.
- Do a title deed search.
A title-deed search should help you escape any form of fraud. Once you log into your eCitizen account, do a title search to see the property ownership history.
Always request the seller for his property title deed and search for its authenticity.
- Send an offer to the seller.
After you are satisfied with the quality of the property, you can notify the seller you are willing to buy.
You can attach a proof of funds letter to your offer, which will draw the seller’s attention in case the bidders are many.
- Notify your bank.
After you agree with your seller, it’s time to get funds. Notify your bank and give them the property details, including the price.
Most banks in Kenya will send their property evaluator to assess the property’s value again. You will cover the cost of this evaluator, but it will be calculated in mortgage repayment.
If the bank’s evaluation agrees with the seller, you can go ahead to hire your attorney.
- Get a real estate attorney.
Buying property is a complex task. And sometimes, you may need to attend court sessions if something goes wrong with the property.
A real estate attorney will draft legal proceedings of property transfers. In addition, they can attend court sessions in the future if anything goes wrong.
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- Close the deal
After everything is right, you can close the real estate deal. This stage is important because it makes you a new property owner. During the transfer of the property, you should have your attorney and witnesses, as well as a bank representative. The bank representative does the job of transferring the money to the seller on your behalf.
- Market your property
You’ll need to reach new tenants for your property, so you should market it. You can use both free and paid advertisements.
Whether you want to rent or sell your property, you should target the audience in your property’s location.
Social media could be a good leverage to advertise your property to target clients.
In addition, you can use posters on nearby buildings and electricity posts to reach your next tenant or buyer.
- Manage the property
If you aim to resell the property, you don’t need this step. However, you can still maintain the property to high standards before getting your preferred buyer.
Those who want to rent should hire a property manager to maintain their income property to high standards. You should also learn the 50% rule to help you in proper management. To get the best out of your income property, you should ensure you earn at least 2% of the total property price.
Summary
Income property is a good way to create a long-term passive income stream. Property investment is an excellent way to facilitate your early retirement.
Once you follow the above guideline, you will make the best choice for your investment.
Frequently Asked Questions
- Is income property an excellent investment?
Yes. Investing in income property is a great way to build a long-term passive income stream. Property is known for its appreciating nature. Therefore, you’ll profit from your income investment if you plan well.
- Which is the best type of income property?
In Kenya, commercial properties generate a higher monthly income than residential properties. However, you should consider getting property in a highly populated area that will attract business people.
- How do income property owners make money in Kenya?
The main ways of making money through income real estate are by renting or selling. Other ways include Airbnb, leasing land for agricultural purposes, and leasing to industry owners.
- Can I make a living from property investment?
Of course, yes. You can create an income stream by building or buying rental property to generate monthly rental income. Once you get your monthly income, 50% should go to expenses. From the remaining half, pay your mortgage, and you’ll be left with cash flow. You can pay yourself and leave something for emergency needs concerning the property.
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