Insights on Investing in Real Estate Successfully

We had the pleasure of having a conversation with CPA Alex Muema, Director of Ndatani. He shares some insights on the current situation in the real estate industry and how to be successful if you want to invest.

Here is his expert opinion which can help you make better-informed decisions if you are thinking of investing in real estate.

Table of Contents

1. Can someone buy property now?

This is the best time in a long while to buy property. There are more properties than buyers. Developers have been left with empty spaces. Meaning, you can easily get prices at a big discount in many places.

Additionally, because of the economic downturn, due to COVID, the banks are not making it easier for people to get financing. The Kenya Mortgage Refinance Company has been able to provide secure, long term funding to financial institutions to lend to potential homeowners.

With the credit rating, banks can sieve through their clients to see those who have good scores which lower their risk and give a lower interest rate.

I think people are spoilt for choice. There are developments all over, even in the counties. You can buy property not just in Nairobi, but also in Machakos, even Mandera with the daily flights. The choice is wide geographically and in the price range.

2. Are real estate prices negotiable? And how can someone go about it?

Yes, of course. When I quote a plot for say Kshs 1 million, that’s my asking price. I have factored in the cost together with the profit. Now that times are hard, I’m willing to negotiate on lower markup.

We also need liquidity. It’s easier to get a discount if you have cash or financing for the property you want to buy. Because developers have been stuck with their stock, they are willing to liquidate it.

And even then, people are willing to sell in instalments for six months or a year. So that we can handle this hopefully temporary difficult period.

3. How does the pandemic continue to affect the real estate sector?

People are working from home which means, they are looking for quality houses in the upper-lower or middle-income areas. They want to live in decent areas with fibre connections and a good transportation network.

When it comes to commercial properties, most places are empty. Businesses have opted to shut down their premises because more people are working from home which means fewer costs.

The challenge, of course, is that banks are not giving construction financing, hence developers struggling to get money to complete projects. The government is trying to get the Kenya Mortgage Refinancing Company to provide funds to developers.

4. Do you foresee this getting better in 2022?

With it being an election year, as usual, Kenyans will employ the wait and see attitude. But remember also, money pours during election time.

If you intend on buying, perform due diligence to know what you are buying is legit, do background checks and find out whether the seller is tax complaint and has the right documents.

This is to avoid getting caught by fly by night companies; today they are there tomorrow they’re gone. Look for companies that have been around for 5 – 10 years and have done successful projects because they have a reputation to maintain.

5. Apart from COVID, what other challenges do you see in the real estate industry?

From a developers point of view, it is quite costly in terms of getting permits, doing monthly payments for inspections and the entire process.

As a buyer, the biggest challenge is financing. People no longer have secure jobs, some are getting retrenched and employers are using the pandemic as an excuse to let go of people. Financial institutions are getting stingy with funds because of the risk involved – this is both to the customers and developers.

6. How has the evolution of online marketing impacted the real estate market?

With the challenge of physical meetings, people have been sourcing things online. They’re looking for a house to rent or buy, warehouses and financing to build.

For instance, we sell plots and get 30% – 40% of our clients through social networks. Technology is the way to go. There is no company right now doing real estate that doesn’t have social marketing platforms such as Twitter, Instagram, Facebook.

7. What should first-time homebuyers do?

Be ready to buy in the outskirts like Kitengela, Kangundo Road and Ruiru. You can move to your preferred neighbourhood once you’re financially able to. Additionally, this will give you more experience in real estate investment and you’ll know what to do if you decide to buy another property.

The same way you would want to upgrade to another location is the same way someone wants to upgrade to your status. Don’t be afraid to start small then invest in a bigger property that is more expensive.

Do your due diligence. If possible, view the property yourself if you’re buying land and ask around to see if someone is claiming the land you want to buy. Because having a title deed is one thing, while things on the ground could be different.

Shop around and narrow down your search to 3-4 properties. Then, look at the seller’s bankers, directors and lawyers. Are they reputable? Or is it a one-man show? An important thing is to find out if all the directors are insured. You don’t want to be in a situation where someone sells you land, then in an unlikely event, they pass on. This would complicate the transfer of ownership process.

8. Do you consider that investing in real estate is safer than investing in other assets? If yes, why?

First of all, everybody must sleep somewhere. Housing is prime and it starts with a piece of land. It’s secure because there will always be demand. In 2050, 70% of the population will live in urban areas. That means that there will be rural to urban migration, not necessarily to Nairobi. It could be to the county headquarters or sub-counties. Demand will grow between now and 2050.

9. What advice do you have for someone trying to sell their property quickly?

Have a reasonable price. When selling land, help the customer get financing. Shout about it and let everyone know you’re selling. Be patience. It takes time.

Give yourself a time frame of six months for people to get to know about the property you’re selling. And also to go through the conveyancing process. If you sell quickly, you could risk selling it at a loss.

As always, it is good to do due diligence before investing in anything. Take your time and don’t rush to buy before understanding all the details and following the right process.

READ ALSO: 8 Tips to Sell Your Land Faster

The views and opinions expressed are those of Mr.Muema.