How to Make Money From Real Estate

 

Sometimes you don’t even need money to make money in real estate in Kenya. You need to be smart, determined and focused.

Real estate is a good investment opportunity. You may not be aware but there are people making money in real estate with zero investment.

It depends on what role you play in this lucrative property sector. This article discusses some ways of making money with real estate.

1. PROPERTY APPRECIATION

Property appreciation remains the prime way of making money in real estate in Kenya. The value of property always appreciates and if it depreciates it comes back up sooner.

a) Land

The good thing about property is that it keeps on appreciating as the years go by. Take land for example. A piece of land bought for Ksh.10,000 in 1990 is worth 3 million in 2020.

That is the reason many people buy land and don’t develop it. They wait for 10 years and sell. The profit margin is huge.

The land index by Hassconsult says that an acre of land at Upper Hill was selling at 30 million in 1990. In the year 2020, the same piece of land is worth 170 million. That is a 535% price increase.

That is how property makes you money. HassConsult Real Estate is a Nairobi based property dealership firm.

Nairobi land dealers go to the outskirts counties of Machakos, Kajiando, and Kiambu. They buy land cheap and sell the same later to private developers, SACCOs, and Housing Societies.

b) Homes

Those who choose to build houses for sale do make money too. If the cost of building a house is is 3 million the developer sells it at 4 to 6 million.

Those are new homes. Old homes do appreciate in value too. A house built in 1990 in Nairobi will have appreciated by more than 150% because of its location.

2. BUY AND SELL LAND

There is one profitable way of making money via land dealing. Buy a large track of land and sub-divide it into small portions.

This makes you a land dealer because you buy land in acres. Sub-divide it into smaller plots and sell to willing buyers.

Some buyers could buy to build homes or rental properties. Others might buyer to hold and sell at a higher price in the future.

a) Selling plots

After you sub-divided the land you will have to sell the smaller portions of land. These smaller portions are known as plots.

If one acre of land cost you 2 million, you could end-up making 6 million in gross sales. All you need is to sub-divide the land into one eighth (1/8) pieces (or plots of size 50 x 100 square feet.)

Sell a single plot at Ksh.750,000. After expenses, you should make at least 3 million in net profit.

b) You earn transaction fees when a buyer wants to sell their plot

There are some transaction fees that buyers are going to pay you. These fees are;

• Surveyors fee

• Title Deed processing fee

• Plot transfer fee

If you have little money and you want to get into the property business here is how you start.

Buy one plot with the aim of selling it at a profit. Say you buy it at Ksh.750,000. You can always sell it at 1 million or more later.

Put the money made into a new plot and save the balance. Find a buyer and sell it at a profit. Continue that way. Soon you will find yourself with enough money to buy 2 plots. And then three.

There are places outside but near Nairobi where you can buy a plot for less than Ksh.200,000. If you are under fifty years, you have the time to wait for 5 years.

The price will have appreciated in that period. 

3. BUILD OR BUY RENTAL PROPERTIES

Want to create a passive income stream? You should invest in rental properties. Here you earn an income throughout the year. It is almost a guaranteed income but not a 100% assured income.

How do you get into the rental business?

a) Buy land and build rental units

b) Buy new rental properties from property developers

c) Buy old buildings, renovate and rent them

Make sure you have the right location because you will need tenants. Choose a bad location and you won’t get good tenants.

You can get rental properties in Kenya in a cheap way. Property developers ask for 20% or less down payment. 

Say the developer is selling a house at 4 million Shillings. He wants a 20% deposit which is Ksh.800,000. If you can pay the deposit and rent the house, the tenant will be paying the remaining amount for you.

That’s an easy way of acquiring real estate. That’s being smart. That’s working smart not working hard.

Gakuyu Real Estate started with a single plot. Mr. Gakuyu didn’t even buy the plot, he exchanged his car for a plot with a retiring civil servant. The civil servant man wanted a car, Mr. Gakuyu wanted a plot. 

That’s how the multi-billion Gakuyu real Estate started. Like that!

4. LEASE OPTIONS – LEASE PROPERTY

If you can’t afford to buy you can lease a property for some years. All you need is a lease agreement (or contract.) Then use the leased property to make money.

You could lease land for agriculture purposes or you could use the land for any other profitable commercial undertaking.

Advantage of property leasing to Make Money in Real Estate

Property leasing affords you the use of a property. A property you get without requiring significant capital investment. 

Leasing comes with the option to buy the leased property. This is important because you will have used the property to generate income that buys it.

Example:

Business people lease buildings. They run colleges, schools, hotels, etc., in these buildings. In the end, they make so much money that they buy the building from the owner.

5. CONTRACT FLIPPING – BECOME A REAL ESTATE BROKER

You don’t need money to make money in real estate. All you need is to be smart and work smart. People in Kenya are crazy about land. Everybody wants to have a piece of land. The demand is so high.

What do you do to Make Money in Real Estate?

Find plot owners who want to sell. Tell them you will find a buyer for their property. Find how much they want for the property.

If the owner wants 2 million Kenya Shillings, find a buyer who will buy the property for 2.5 million. When the buyer pays, the Ksh.500,000 on top is your commission. That’s how it works. 

Work to bring two parties looking for each other together and make money in the process. Your job will be to find a distressed seller and a motivated buyer.

6. PROPERTY SHORT SALES

This involves working with banks. People take home loans (mortgage) and then they fall short in payments. Property short sales occur.

This happens when the current owner of their home is behind in mortgage payment. But the property hasn’t yet entered into auction stage (or foreclosure.)

The bank wants to unload (sell) the property as soon as possible. Because they want to recover the balance on the mortgage.

Properties on short sales are very cheap. Because the bank’s interest here is the mortgage shortfall. If you can clear the balance on the mortgage the bank is happy.

This entails working with the bank’s lending department. It involves the homeowner, the bank, and you. Parties have to agree on the sale price agreeable to all parties involved. But it is always a bargain for the buyer (you) because the other parties are desperate.

7. DEVELOP VACATION RENTALS TO MAKE MONEY IN REAL ESTATE

These are short-term rentals. And they are popular with tourists, celebrities, the rich, playboys, and slay queens.

This is a very profitable area of real estate. Vacation rentals are like hideout spaces for those who can afford them. In a hotel, you are in public but in a vacation rental, you get the privacy you deserve.

Those who want to relax live in these sort after rentals around the world. The best places to develop vacation rentals are Mombasa, Nairobi, Naivasha, and Nakuru. All tourist hotbeds in Kenya are good places to develop vacation rentals.

You need to get clients for only seven days in a month. And you are already in profit because vacation rentals are not cheap. People pay top Dollar for privacy, comfort, and luxury.

8. Commercial real estate developer

People need offices to run their businesses in prime locations. They also need a home to live in. It’s the business of commercial real estate developers to provide homes and office space.

Commercial real estate is lucrative. Done well, commercial real estate is a profitable venture. And many investors have become filthy rich through commercial real estate.

How do you start:

Start small and grow your business. Get prime locations and you have your golden bread and butter. Many billionaires have built their wealth via commercial real estate.

F.A.Q

Is real estate a good investment in Kenya?

Yes. Real estate is a good investment in Kenya because the returns are very high. There is a high demand for land and homes. The supply is deficient, and the demand for property is skyrocketing in Kenya.

The value of the property appreciates in a relatively short period. A good example is the land value at the Upper Hill section of Nairobi.

In 1990 one acre of land was going for 30 million Kenya shillings. In 2020 the same piece of land is selling at Kenya shillings 170 million.

That is a 535% rise in prices in a span of 30 years. That is a huge profit margin. That is the general trend in Kenya’s real estate.

Also don't forget to join our training on Business Plan Writing.

Most people who think about starting a business usually don`t consider writing a business plan.

I have read from different business experts about the fact that most start-up entrepreneurs do not write a business plan but what I have not read from anyone is why this is so.

Why is it that most people have fear (so to say) about writing a business plan?

I know the answer.

You see, there are many myths and lies you probably have heard about the subject of business plan. 

Some people present business plan as if it was a university thesis or an academic report to be defended before certain professors. 

Other people think that a business plan has to be 50 pages long and that it must be written in a certain “approved” format.

Well, I am here to tell you that all those opinions are not valid. 

Because there are some ugly lies around this important business step, most people are “afraid” of doing it.