How to invest in real estate in Kenya

Real estate prices in Kenya have risen rapidly in recent years. In large cities such as Nairobi, Mombasa, Kisumu, and Nakuru in particular, the prices for condominiums and houses have multiplied. This causes many people to want to jump on the bandwagon as they watch the price action and are afraid of missing out on the tempting gains.

Many people prefer to invest their money in an owner-occupied home to save on rental costs if they have sufficient equity. However, if you want to invest in real estate, there are a few aspects to consider.

Advantages of investing in real estate in Kenya

  • Inexpensive living: The owner-occupied property is a good opportunity to let the monthly expenses for the rent flow into your own pocket.
  • Useful investment: Real estate is a practical investment because the property can always be used even if its value falls. However, this applies above all to properties that have been paid for – otherwise there is a risk of high losses.
  • Low volatility: real estate prices have generally increased in Kenya in recent years. Some see this as a positive sign, while others believe in a real estate bubble.

Disadvantages of investing in Kenya’s real estate

  • High acquisition costs: Due to the price development, real estate in Kenya is often very expensive. In addition to the actual purchase price, there are also high additional costs such as notary and brokerage fees as well as real estate transfer tax.
  • Insufficient diversification: Owning a home is usually by far the largest investment. Often other funds are used for financing, such as the pension fund. The next real estate crisis, which experts are already fearing, could have dramatic consequences here.
  • Administrative expenses: A property has to be managed and for rented objects the owner is the contact person for the tenant. This means a lot of time and money. This responsibility can be passed on, but this causes all the more costs.
  • Maintenance costs: ownership obliges, especially with real estate. The maintenance of objects should always be considered. A ailing roof or a broken heating system can quickly cause high costs.
  • Low liquidity: The availability of money from real estate is hardly given. A sale can take a long time and is both labor and cost intensive.
  • High risk with financing: Those who want to invest in real estate often need financing with borrowed capital. There is an immense risk of losing equity if real estate prices fall. In addition, rents in Kenya are already stagnating in some areas, so that, according to experts, there is often no longer a reasonable risk-return ratio.