With the demand for housing and commercial spaces on the rise, Kenyan real estate is a reliable vehicle for generating passive income.
This in-depth guide explores insights into the local market dynamics to help you understand how to invest in real estate in Kenya.
Table of Contents
What is passive income?
Passive income is income acquired with little or no active effort on your part. For example, the interest you accumulate in your savings bank account.
In the case of real estate investments, passive income is money you earn from properties you own or lease. There are 5 key avenues to earn such passive income.
5 passive income real estate tactics
REITS
In Kenya, Real Estate Investment Trusts (REITs) are an increasingly popular source of passive real estate income. REITs allow investors to access the real estate market without the need for substantial capital or direct property ownership.
With their diversified portfolios, which encompass a range of property types such as residential, commercial, and infrastructure assets, REITs offer a dual benefit of reliable dividend distributions and potential capital appreciation.
These investment vehicles are characterised by professional management, regulatory oversight, and the ability to trade shares on stock exchanges, making them an attractive and accessible option for individuals seeking to secure passive income within Kenya’s thriving real estate sector.
Short-term rentals
For those who own property, short-term rentals can yield higher returns than longer-term leases. Plus, it offers the flexibility to use the property intermittently. However, hinges on effective property management, a keen understanding of local regulations, thorough market research, and the cultivation of a positive reputation through guest reviews.
Rental housing
For those looking for lower effort and more security, traditional rental remains a solid option as the demand for housing remains consistently high. This does require a small amount of active effort due to tenant screening and higher maintenance needs due to the wear and tear of the property. With that said, it allows you to benefit from both property appreciation and rental revenue.
Lease out unused land
If you are looking for the lowest-effort leasing, then choose to invest in vacant land. It’s relatively hassle-free and as Kenya’s agricultural sector thrives and infrastructure expands, the demand for land is strong. Receiving regular lease payments while still benefiting from potential land appreciation is a great passive income tactic. It’s like having your own piece of Kenya’s economic progress, a hands-on investment that can bring you long-term financial stability in the vibrant real estate industry.
Rent out storage facilities
Investing in storage facilities is another hassle-free passive income stream. Storage units where people keep their extra belongings can provide you with a reliable stream of income because renters typically commit to longer leases. However, picking the right location as competition can be high, and ensuring security is in place to protect your renters’ belongings is a must.
Common passive income investment mistakes
While real estate holds great potential for passive income, beware of these pitfalls:
- Insufficient Due Diligence: Neglecting to thoroughly research and understand the potential risks associated with a real estate investment.
- Excessive Debt: Taking on too much debt to acquire a property, especially when the income generated may not cover the costs if it decreases.
- Overlooking Maintenance Costs: Failing to factor in the ongoing expenses required to maintain and manage the property effectively.
- Ignoring Volatility: Not being prepared for potential fluctuations in property values or rental income.
- Inadequate Tenant Screening: Skipping proper tenant screening, can lead to problematic occupants and income disruption.
- Lack of Diversification: Not diversifying your real estate portfolio can increase risk.
If you are ready to take the step into financial security through passive income, why not browse property to buy or advertise your existing property today?
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