Investing in Kenyan Property - New Hotel phenomenon set to sweep the Kisumu

Interest in the Kisumu hotels sector has increased significantly in the past two years following many years of intermittent development and association with other shared ownership vehicles, says one of the realtors in Kisumu county in her recent report: ' Hotels-The Kisumu Latest Hotel Phenomenon'

 A complex hotel is a hotel operating unit which is sold to individual equity investors, where each owner acquires a room, suite or studio whilst the whole enterprise is managed as a hotel operation under a single brand.

Buyers own their units the same as regular apartments. There is no time limit to ownership. All apartments come with either freehold or lease hold title deeds. These hotels model are similar to the serviced apartment or apart hotel sector and is suitable for an investor who wants to test the water in hotel investment.

We are seeing more and more sophisticated customers coming to the market and a change in demand patterns; the traditional timeshare products seem past their prime. This, plus an increase in investment appetite for the hospitality sector, suggests that the condominium market looks set to grow. Many international hotel brands have also declared that the Kisumu hotel landscape is ready for cooperative hotel developments, either in conjunction with self-contained hotel operations, as fully self-contained apartment’s plans or as a part of a mixed-use development plan such as the Nairobi Brand.

Cooperative hotels are significantly less developed in the Kisumu than in the capital of Kenya, in part owing to a low cost residential focused market as well as the lack of development in the hotel sector since the colonial period.

Alternative hotel ownership are featuring more and more in the hotels sector, with the rise of cooperative hotels and a shift in investor strategy, thus creating a new investor profile. At the moment, the Kisumu apartments market is being targeted and driven by private retail purchasers, typically reasonably net worth individuals attracted by a city center or a resort investment foothold although we are now seeing more and more first time property buyers moving into the Cooperative Hotel marketplace.

Mamboleo and Riat are particular favorites as an investment destination. There is room for a wider pool of institutional and real estate investors to invest in a portfolio of apartment units or the establishment of an investor-developer partnership.

A lot of this interest is being driven by the relatively cheap market prices in the Kisumu compared to Nairobi, especially Kenya Housing prices, and the easy payment options available for our Hotel Developments, but there are other factors, too. Offshore Property Investors, Foreign baby boomers as well as coast side Mombasa, are looking for ways to maximize their return on investments as they approach retirement, and so are purchasing second homes, particularly Hotel Investments where they can use the apartment for vacations and rent it out through our In-House Hotel Management when they are not using the unit thereby gaining rental incomes that on today’s purchase prices, give a projected on their investments of some 12-16% depending upon the mode of payment for the unit. 

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Investing in Kenyan Property: Commercial Real Estate Savings

For small companies, an office is an overhead that many feel they can do without, at least when starting up, but as a business grows and takes on staff, an office becomes an essential.

Even before that, there are many arguments in favor of a physical presence; an office can add credibility, and suggests permanence, that the company is going to be around in the future, perhaps particularly important for new companies.

But how much space should you rent or buy? Obviously this will depend on the employees that you expect to be working there, but you will need to factor in growth plans, whether you require an open plan working environment (allow 75-100 sq. ft. for each person) or individual offices (about 175 sq.ft) and meeting areas (215 sq.ft will accommodate a table and chairs for about six to eight people).

An alternative, particularly if your growth is uncertain is a serviced office, where you rent space by the number of workstations you require and by the month. This may not only help with cash flow, but also allows a company to grow or contract in a fairly flexible manner. There are no capital outlay costs for furniture or telephone equipment, all of which are provided and if you need meeting space, you pay for it by the hour.

Additional services, such as secretarial assistance are also available as required and the telephone is answered by a dedicated receptionist and in your company’s name.

On a price per sq.ft basis, serviced offices are more expensive, but this additional cost is often outweighed by the fact you are paying for just the space your business needs. 

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Commercial Kenyan Real Estate: Kenyan Real Estate marketing theories

By now, you’re probably pretty well acquainted with the process on of focusing on the property type and area you want.  You know the zoning which supports it and you’ve reviewed in detail the zoning maps.

Now what?  It’s time for some legwork.  You want to put into use some of that book learning and researching you’ve been conducting.

Take a look at your zoning maps with highlighter in hand.  Now highlight the areas you want to go look at.  Then you get in your car and drive around to take a look at those areas and neighborhoods.

It’s that simple.  It will be an eye-opening experience.

Here’s what you want to do specifically:

First, and most importantly, take your time.  This isn’t a race.  There’s no winners or losers for getting it done quicker. 

The expedition is about gathering information and getting a feel for the area.  Your goal is to review the area and the properties on an overall basis.

As you drive around the area, take note of any properties which are in transition.  Meaning they have signage that says “For Lease”, “For Sale” or “Sold”.  When you get back to your office check out the history of those properties.  Call the owners, brokers or agents to find out more about each of the properties.

Why would you want to do that?

Well, for one thing you are looking for pricing information.  For instance, how are people paying per square foot?  What are the terms and conditions?  The ones that are for rent are wonderful indicators, because you’ll be able to piece to together the income potential for the area.

Number two, you want understand how the market is appreciating over time.  Plus, it is wonderful feeling to discover a diamond in the rough.

Number three, if a property is for sale, it just might be up your alley (no pun intended).  And you can start the process of analyzing whether the property is a good deal.

Now, that you are starting to get a feel for the area, go ahead and visit the other areas highlighted on your map.  You’ll notice similar but different transitional aspects of each sub-market you scout out.

This is where it gets really interesting.  Start to ask yourself why the changes.  What are the reasons for the appreciation or lack of appreciation?  Then get your answers from the brokers or owners you are representing the properties.

It’s important that you ask these people because they definitely have the answers you and need going forward.  Your knowledge of the market will give you the opportunity to talk intelligently about the opportunities as well as the advantages and disadvantages.

The best part is you’ll start to make some good contacts, and maybe even friends or future investment partners.

As you continue driving around you’ll begin feeling more and more comfortable.  The process will become easier and you’ll start to notice the nuances and details.  And then you’ll automatically start making comparisons and evaluations.

Again, it is vitally important you take your time and take the time to enjoy the process of discovery.

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Commercial Kenya real estate investment is reaping benefits for investors

Commercial real estate investment’ refers to the class of real estate that is primarily meant for investing money for profits later on. Examples of such properties include:

•           Restaurants (including franchises)

•           Retail

•           Office buildings

•           Self-storage (Mini-storage) / industrial

•           Strip malls

•           Hotels (also called "hospitality")

•           Multi-family / apartment buildings

Why invest in commercial property?

Unlike residential real estate, Commercial real estate investment is evaluated, bought, and sold based purely on numbers - on a set of factors that describe what kind of return on investment you can expect with the property. Most Commercial real estate investment is expected to make a return for you on an on-going (monthly) basis. With the retail boom and increasing return on investment in the commercial real estate market, the value of commercial real estate have grown by leaps and bounds, particularly, in the commercial areas, where the local retail shops and shopping complexes have been replaced by huge and swanky malls.

What to expect?

Remember though! Commercial real estate investment is a long term opportunity, do not expect to increase your net worth over night. No one is going to profit all the time. Real estate investors have to suffer through times of little to no cash flow - it is part of the game.

This may cause panic but if you can stick with it for the long term, cash flow will increase. Investing especially in real estate is not for the weak of mind or body. It can be frustrating, and stressful. But for successful investors the rewards are priceless. 

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Commercial Kenyan Real Estate Desirability

For those who are looking for an excellent way to generate outside income, the commercial real estate industry is a great way to go. Many people have begun to invest in commercial real estate, and since this type of real estate is continually being purchased and sold, it has become an excellent way to invest money for a guaranteed return. Before one becomes involved in the commercial real estate market, it is highly important that they understand the commercial real estate industry and its many surrounding components.

A Basic Definition of Commercial Real Estate

First and foremost, it is imperative that one understands a basic definition of commercial real estate. Essentially, commercial real estate includes various real estate properties that have the potential to be able to generate outside revenue or even income for the owner. Whether the property has immediate potential for generating income or revenue immediately or perhaps in the future, it can still be labeled as commercial Kenyan Real Estate.

A Desirable Investment

Commercial real estate is an excellent choice for investors for a variety of different reasons. One of the main reasons that investors find commercial real estate to be such a pleasing investment is that is brings about both long term and short term financial benefits. In the short term, commercial real estate can help you bring in a better cash flow from the use of the property, and at the same time, in the long run the property will only appreciate in value, which result in long term benefits should you will choose to sell. Most investors also find that there is a lot less risk involved with commercial real estate than there is when dealing with other types of real estate. If you purchase apartment buildings or a strip mall, the risk of your investment will spread out among those who are renting from you, and even if you lose one of your renters, you still will be making money and seeing a return from your investment.

Commercial Kenyan Real Estate Properties

Another positive benefit of commercial real estate is that the scope of properties that you can invest in is quite large. Commercial real estate includes various different properties that make excellent investments. As long as the building consists of more than four units, it can be considered a commercial real estate property. Commercial real estate also includes other properties such as strip malls, apartment buildings, RV parks, industrial parks, mobile home parks, and commercial centers.

Jobs within the Commercial Kenyan Real Estate Industry

There are a variety of different jobs that are included within the commercial real estate industry, and all of them benefit from this excellent market. The investors have a very important job within the industry, since it is their money that is being used to make the property develop and become prosperous. Builders too have an important job, and many times they work within the commercial real estate industry to build new structures on commercial property such as apartment buildings or shopping malls. The lenders have a very important job, and they work to make sure that investors get the loans and mortgages they may need to be able to purchase commercial real estate properties. Also within the industry are the brokers who represent the owners and deal with the sales and property transfer issues. Last of all, but certainly not least, are the users who actually put the money in the investor's pocket.

Financing Commercial Kenyan Real Estate

Those who are planning on being involved in commercial real estate need to consider how they can finance any commercial real estate purchases. While few people can actually just purchase the property with money they already have, most people are going to be turning to other methods of financing the property. More than likely you are going to need to go to a lender to be able to finance any commercial real estate that you want to purchase, but there are a few things that you can do to make the process smother.

First of all, you will want to make sure that you have a business plan. You need to be able to show the lender why you want the property and how you plan on making it a successful investment. It is also important that you have at least a portion of the money needed for the property saved up so you can show that this is a serious venture and you are ready to make a personal investment in its success. Also helpful is a current appraisal of the property you are considering. This will help show the value of the property to the prospective lender. Having an attorney to help you and to check out legal issues will also be important, and in the end you should always compare several lending offers before making a final decision.

Getting Started

For those who are interested in commercial real estate and the financial benefits that can be enjoyed, there are many ways to get a start in the business. One of the keys to getting started is to glean all the information about the business that you can, whether from reading books, searching the internet, or speaking with friends and business colleagues that may have experience in commercial real estate investing. Checking into the area you live in and getting a look at what kind of commercial real estate is available and what the prices are running can help you begin to get a closer look at the costs and the availability of commercial real estate in your area. Attending zoning and city planning meetings may also give you insights and ideas for getting started as well. Lastly, one of the best things you can do is to start building a network of friends and business acquaintances that already have their foot in the door of the commercial market. Learning from their successes and mistakes can help you on your way to becoming a successful commercial Kenya real estate investor. 

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Properties Kenya condominiums – Disadvantages of Ownership

Purchasing a new residence involves many issues and condos may be on your radar. Before you buy, keep in mind there are disadvantages to condominium ownership.

Condominiums – Disadvantages

Condominiums are simply a collection of units in a structure or structures. All property on the interior of the unit is yours with few limitations. Everything outside of the unit, however, is considered to be in the common areas and subject to administration by the homeowners association for condominium communities. As with any bureaucracy, this can lead to problems.

1. Parking – One of the biggest pet peeves with condominiums is parking. While this may sound petty, it becomes a big issue over time if a particular situation occurs. One would think a condominium comes with assigned parking. In many developments, however, this simply isn’t the case. Instead, parking is on a first come, first serve basis. Over time, this situation can become extremely aggravating. With guests in the neighborhood, you may eventually find it difficult to getting parking!

2. Restriction – Condominiums are all about uniformity. If you prefer to express your individuality, the rules of a condominium may drive you insane. Since people live close to each other in condos, there has to be a number of rules to keep the peace. Many condominium associations, however, seem to go overboard with rules and one can often feel like a prisoner. You may be restricted from having pets, particular types of material in your units, renting to others, making noise outside during certain times and so on. Before taking the plunge on a condominium unit, you absolutely must read the rules and regulations for the association.

3. Association Fees – Homeowners’ associations need money to keep the gardening up and so on. As a unit owner, you are responsible for paying monthly homeowners’ association fees. Before taking the plunge, you need to make sure you understand the current fees. You should also look back in time to see how much the fee has risen over time. Paying an extra hundred bucks or so a month probably will not kill you, but what if the monthly fee is Kshs. 45,000 shillings?

The decision to purchase a condominium can be a complex one. While there are distinct advantages, the devil is in the details. Make sure you understand what you are getting into before taking the plunge. 

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Property sale in Kenya: Contracts When Selling Your Home without an Agent

A recent survey revealed that approximately 30 percent of homeowners intend to sell without a real estate agent. I bet more would if they didn’t fear the contract side of the process.

It is undisputed that you can save millions of shillings by selling your home without an agent. Typical commission fees charged by an agent equal six percent of the sales price. On a Kshs 27,000,000 home, the fee of the real estate agent equates to Kshs 1,260,000 shillings. That is a lot of money you are leaving on the table.

If a seller can save so much money by foregoing an agent, why don’t more people do it? Simply put, they are scared of the process. In particular, real estate contracts can be a scary issue for most homebuyers. How do you know if you are doing it correctly? What if you don’t? Will you lose the home? Will there be lawsuits? Frankly, most people have nightmares about the idea of dealing with these issues. This need not be.

First off, most real estate agents do not know anything more than you do about contracts. They are in the business of selling real estate, not being legal experts. Moreover, most real estate contracts are of the pre-printed form variety. All and all, you need not be overly concerned with this issue. Of course, it isn’t my property.

There is a very simple way to get around the stress associated with dealing with real estate contracts and documents. The answer is found in the legal field. Specifically, you can hire a real estate lawyer to handle everything. You will get a legal professional that is one your side and who knows the details of the real estate process inside out. Frankly, they are a heck of a lot more competent than real estate agents when it comes to the transaction.

Ah, but isn’t it true that attorneys are incredibly expensive? Well, yes. In this case, however, they are much less expensive than paying a six percent commission to a real estate agent. Keep in mind our example above where we are paying a realtor Kshs 1,260,000 shillings in commissions. Most attorneys charge in the Kshs. 18,000 an hour range. If it takes 20 hours to handle the transaction, which is probably on the high end, you are looking at Kshs. 360,000 in legal fees. In practical terms, you get much better advice and save some money on commissions. In such a scenario, hiring legal counsel absolutely makes sense. Frankly, I am surprised more people do not do so.

The biggest barrier to selling a home by owner is often the fear of contract documents. Follow the above advice and you should have no problems. 

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