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Tips on buying your first rental property in kenya

Tips on buying your first rental property in kenya

Have you decided to buy your first rental property? Are you new to this type of investment? Is it safe to invest in real estate industry? One of the industries with highest returns is the real estate investment. You can never go wrong on this as it shows most of the wealthiest people have as well invested in it. Yes, is the answer to if it is safe to invest in real estate industry. You can never go wrong in this. However, you need to learn the process of investment in the industry and the tactics that would be involved in order to prosper in the industry.  Here are some tips on buying your first rental property;

  • Right Location

The heart of real estate investment is the location. The location determines a lot in relation to the property. It determines accessibility to social amenities as well as the value of the property. Investment where the area is not growing-that is in population wise and infrastructure-will have your money stuck instead of appreciating. While investing in real estate, it is advisable to invest in areas with amenities such as water, electricity, easier transportation and accessibility to working zones as it will attract more renters.

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  • Calculate your Returns

Before investing in rental property, it is wise to determine the rate of returns of the investment. Calculate all the operating costs; in terms of expenses and profit. Also, project the earning in years. You will be able to determine whether the investment is long term or short term invest-whether worth in future.

  • Determine rewards against risks

By determining your rewards against your risks, you know whether the investment is making sense to you or not. Some of the rewards include the value of real estate increasing translates to the value of your investment rising. Another one is that real estate investment is more stable than investing in stock markets as it can withstand most if the crisis time. You invest in physical assets rather than products you cannot see or touch. On the opposite note of rewards, rental income may not be able to cover all the mortgage value and may need for you to find other sources of covering it, making it one of the risks. Rental property is about the tenants. If one of the spaces is not occupied by a tenant, you may be required to pay the expenses still of the same space by yourself.  Another risk is that in case of immediate cash, you cannot sell real estate rental properties off faster unlike other investments like stock.

Regardless, there is need to know the worth of the rewards against risks worth.

  • Low cost rental property

The higher the cost of rental property, the higher the expenses. It is necessary to consider buying a rental property with minimal expenses. Remember the goal is to have minimal expenses while harnessing high profits.

  • Buying on cash versus financing it through loans

When it is your first rental investment, you may be wondering if the best idea is buying it through cash or financing it through a loan. This however depends on your investment goals. Buying in cash can be more advantageous than financing through a loan as it can develop a positive cash flow. Financing through a loan may have several expenses such as interest rates which is not applicable if bought through cash.

  • Factor in unexpected costs

Real estate investments have several hidden costs. It is necessary to think of such costs and know how to factor them in. For example, you might buy a rental property near a road and soon the road needs to be adjusted, how will you factor in such unexpected cost? Before investing therefore, it is necessary to know what to avoid and what to consider.

Investing in rental properties is one of the best ideas one can enter into. It is important to consider the pros and cons of these types of property especially if you are doing it for the first time.

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