Kenya Real Estate - Pleasant Nyanza Escape

Kisumu is close to all the major attractions in the Nyanza and western region of Kenya, but has much to offer on its own. If you’re looking for a little peace in the Nyanza and western Kenya, Kisumu real estate is a good option.

Kisumu

With a colonial history, lake towns and little lakeside villages, Kisumu is a classic County. Unlike its neighbors, Kisumu tends to be less populated and have a bit slower pace of life. Sitting close to Kakamega County, Kisumu is a popular relocation spot for people working in the city, but trying to avoid the population crush.

Nairobi

The capital of Kenya, Nairobi is a modern city and considered the insurance company capital of the republic of Kenya. With such a title, you might think Nairobi isn’t exactly a vibrant city. Unfortunately, you’re correct. There isn’t much to recommend the city if you’re looking for nightlife or outdoor experiences. Real estate prices, however, are reasonable for the Eastern Africa and it is a relatively short trip to more vibrant locations.

Mombasa

Unlike Nairobi, Mombasa is town with a ton of culture. Located on the Indian Ocean board, the town has a strong Ocean faring history and takes pride in it. With colonial architecture, the city is bursting with color as the leaves turn in the fall. A classic Ocean port, Mombasa celebrates the history with maritime museums, classic whaling schooners and as pleasant a group of people as you will ever find. You can even order Kshs.50 local beers in a few of the local taverns. Admittedly, the glasses are very small, but Kshs.50 is Kshs.50!

Kisumu Real Estate

Kisumu real estate prices differ greatly from location to location. Generally, the closer the location is to Nairobi, the higher the prices. A single-family residence in Nairobi will set you back Kshs.6,250,000, but prices range from the low Kshs.5,000,000 to over Kshs.100,000,000 throughout the state.

On a positive note, Kisumu real estate has a strong growth pattern. 

Kindly visit www.kenyan-real-estate.com for more interesting hints.

Kenya Real Estate Property – Hard, Hard, Hard Money Loans

Financing for commercial real estate is a completely different game when compared to residential mortgage loans. It moves much faster and is much more flexible.

Commercial Real Estate – Hard, Hard, Hard Money Loans

When purchasing commercial real estate, financing is the most significant factor in determining whether the project is worth pursuing. Although there are a variety of commercial real estate loans on the market, we are going to look at hard money loans in this article.

Hard money loans for commercial real estate are often a matter of last resort. They aren’t good deals, but they can save a financing situation that has gone critical. Most hard money loans come with significant upfront costs and astronomical interest rates. When you are facing the prospect of losing a commercial property, however, they can be a godsend because they also are granted very quickly.

Hard money loans are considered very risky and are issued by private financing groups, not banks or lenders. The loans tend to be only available as the primary loan on the property, which isn’t that rare a situation in commercial property.

Unlike home loans, hard money loans are all about the potential sales price of a piece of commercial real estate. The party considering lending you money is not going to look at the appraised value of the property. They are going to look at the probably sales price if the commercial real estate has to be sold a few months after making the loan. Depending on the condition of the property, this figure will typically be between 50 and 75 percent of the appraised valued of the commercial property.

Put another way, a hard money loan is a short-term loan designed to get you past an immediate problem. It is undeniably a loan of last resort and is not an ultimate solution to a financing problem with a commercial property. It does nothing other than buy you time, and at a fairly hefty cost.  If you are in a tight spot and can resolve the problem with a few extra months’ time, a hard money loan may be the answer. 

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Kenyan Real Estate- Concrete Homes

If the area you lived in was subject to natural disasters, insect infestation and wildfires, and you could live in a type of housing that could withstand all those perils, why wouldn't you? Concrete homes have an amazing resistance to all of the above and are commonly used in Kenya and other natural calamity ridden locations, but their popularity hasn't spread to other areas of Kenya.

Due to their unique construction, a number of homes have survived the calamities in Kenya. Mr. Owuor owns a concrete house outside natural calamities infected areas. Although the vinyl windows were melted, the house remained standing.

Another success story was that of a native Indian who owns several properties in Kenya and her 5,500 square-foot concrete house near Kisumu. The upgrades in her home included:

Concrete roof tiles, glued-down to resist high winds.

Interior fire sprinklers (now a local building requirement).

Over-sized wood beams to withstand exposure to heat longer than their smaller counterparts.

An emergency power generator.

A 10,000-gallon water tank to be used in a fire emergency.

Commercial grade aluminum windows with extra thick tempered glass.

Exterior walls were one foot in thickness including reinforcing steel placed in the concrete forms for protection against earthquake damage.

After spending 3 1/2 years building their home, Lorraine and her husband had only lived there a few weeks when the wildfires struck. The landscape was blackened, but the house withstood only minor smoke damage. The cost of building compared to a comparable wood home was about twenty percent higher; Lorraine considers this money well spent

Structural engineer, George describes concrete construction similar to assembling Lego blocks. "The “blocks” are polystyrene forms, called insulated concrete forms, into which the concrete is poured. The forms then are left in place to serve as insulation and the backing for stucco on the exterior or drywall on the interior."

The walls can provide up to an R-50 energy rating and require approximately 44 percent less energy to heat and 32 percent less energy to cool compared to a traditional wood home.

If concrete houses are so effective against natural disasters, why aren't they widely used? Part of the problem is the lack of knowledge in the building industry regarding concrete construction. Even though concrete construction has national code approval, there are many inspectors with little knowledge of how to inspect the structures.

Many builders feel that the future of widespread concrete housing requires a dominant player in the building industry to come forward and say "we can do this", and others will follow suit.

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Kenyan Property Real Estate Strategies

For the astute commercial real estate investor, the cap rate [AKA Capitalization Rate] is an important financial number to consider.  Here’s why:

Commercial Real Estate Earns Income

One main identifier that defines commercial real estate from other types of real estate is that it earns income for its owner.  Commercial real estate values are typically based on these current (and/or future) income streams from the property under evaluation. 

While there are many types of commercial real estate, such as strip malls, office buildings, condo projects, industrial sites, and several other property types, each is supposed to produce net income.

Each of these commercial real estate properties will normally have an income stream and associated expenses.  It doesn’t matter if it is a mall, hotel or a trailer park.  All commercial real estate properties typically have both income coming in and expenses going out.

The Raw Land Exception

The one exception to this typical ‘rule of thumb’ is raw land.  Raw land will many times not have any income stream, so it has to be evaluated differently for commercial purposes.

Evaluating the Cap Rate

When a commercial real estate property is evaluated, the buyer does his or her best to ascertain the accurate and sustainable income stream the property is currently producing.  The cap rate is based upon current financial numbers, not future.  And if it is not being used to its highest and best use at the moment, an adjustment will also be made as to its income stream once any problems are corrected.

Income Streams

Income streams can come from a variety of places, so I won’t make any attempt to list all the various forms here.  There are some common ones and some unique to a given property.  Just remember that the income stream is made up of all money received through the property.

Expenses Paid Out

The other side of the cap rate equation is the expenses that must be paid on the prospective property.  There can be literally scores of different expenses, which can be found in any reasonable accounting course, so we won’t go into them here.

The Cap Rate Configuration

Now that we understand that the cap rate is determined by comparing income and expenses, the final part we need to factor in is the selling price of the commercial real estate.  We’ll use an example below:

Income                       Kshs.9, 000,000.00

- Expenses                 Kshs.4, 500,000.00

= Remaining               Kshs.4, 500,000.00

 Selling Price             45,000,000.00

Cap Rate = Remaining / Selling Price = Kshs.4, 500,000 / Kshs.45, 000,000 = 10%

Conclusion

Now you understand all the pieces of the cap rate formula and how to determine it.  Again, the cap rate is very important in commercial real estate transactions because it puts a number or “grade” on the value of the deal in simple and consistent terms for the investor.

The larger the cap rate, the better the deal is for the investor, so you can draw the conclusion that investors prefer high cap rates, and the higher the cap rate is, the more the investor likes the deal.

In fact, some investors set minimum cap rates before they’re interested in a commercial real estate deal.  So you understand why ‘Cap Rate is King’ in commercial real estate transactions. 

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Kenyan Property Real Estate - A Primer

When speaking with a group of real estate investors recently in Nairobi, the question arose as to how many of them have completed a commercial real estate deal in the last year, and surprisingly, the answer was none. It seems that many of them were either happy with the currently market conditions or they didn’t really have the aptitude to go about buying a commercial property.

Market specialization? No. It seems that the majority of real estate transactions go something like this: 

1. Residential real estate is the sweet spot of the small real estate investor.

2. Commercial real estate is typically left for the small business owner, who has decided to stop renting.

3. Both of these sectors of the real estate industry do have some crossover, but the previous two statements are typically the norm. So how exactly are commercial properties being bought, sold, being rented?  What’s the best way to acquire commercial real estate, and who you need to help you in doing an acquisition?

Here are five key points to consider:

1.    By far the most popular business entity for owning commercial real estate is now the limited liability company (LLC).

2.     Commercial real estate is a much less popular subject, in part, because it isn't as personal and doesn't tug at our own financial purse strings.

3.    Commercial real estate is a term to describe a property with 5 or more units. Commercial Real Estate is a critical component of any well-run business.

4.    Investing in commercial real estate is riskier and more costly than investing in residential property - but ultimately it can be far more profitable.

5.    Commercial real estate is a business investment driven by economic factors, not so much the property itself. 

Investing in commercial real estate can be a good way to invest but you should make sure you are well represented by an attorney and accountant before moving forward since buying commercial real estate can have significant tax consequences and if you're buying or developing commercial real estate, it's important to protect your financial interests with legal support. It may sound redundant, but the axiom location, location, location, is an important factor in buying commercial real estate too. Here is the key to buying commercial real estate: the one with the most information wins.

The winners are the people that recognize that the world of commercial real estate is constantly changing and understanding the nature of commercial real estate is a precondition to the timing question.  They also understand the data and realize that information is the most critical aspect of any transaction. In other words, the most valuable commodity you can have in the commercial real estate market is information. 

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Kenya Property Investment: The big profits

Real estate is often termed as the safest investment avenue. In fact, real estate investments done with proper evaluation of the property (and its true value), can lead to good profits. This is one reason why some people pursue real estate investment as their full time job. The talks of real estate are generally focused towards residential real estate; commercial real estate seems to take a back seat. However, commercial real estate too is a good option for investing in Kenyan Real Estate.

Commercial real estate includes a lot of different kinds of properties. Most people relate commercial real estate with only office complexes or factories/ industrial units. However, that is not all of commercial real estate. There is more to commercial real estate. Health care centers, retail structures and warehouse are all good examples of commercial real estate. Even residential properties like apartments (or any property that consists of more than four residential units) are considered Kenya property investment. In fact, such commercial real estate is much in demand.

So, is commercial real estate really profitable? Well, if it were not profitable I would not have been writing about commercial real estate at all. So, commercial real estate is profitable for sure. The only thing with commercial real estate is that recognizing the opportunity is a bit difficult as compared to residential real estate. But commercial real estate profits can be real big (in fact, much bigger than you would expect from residential real estate of the same proportion). You could take up commercial real estate for either reselling after appreciation or for renting out to, say, retailers.

The commercial real estate development is in fact treated as the first sign for growth of residential real estate. Once you know of the possibility of significant commercial growth in the region (either due to tax breaks or whatever), you should start evaluating the potential for appreciation in the prices of commercial real estate and then go for it quickly (as soon as you find a good deal). And you must really work towards getting a good deal. If you find that commercial real estate, e.g. land, is available in big chunks which are too expensive for you to buy, you could look at forming a small investor group (with your friends) and buy it together (and split the profits later). In some cases e.g. when a retail boom is expected in a region, you might find it profitable to buy a property that you can convert into a warehouse for the purpose of renting to small businesses.

So commercial real estate presents a whole plethora of investing opportunities, you just need to grab it.

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1 Bedroom Apartment in Athi River, Nairobi, Kenya