PROPERTY
Real Property Vs. Real Estate
• Terms may be used interchangeably
• Real Property: Land and everything of value
attached to it, such as foliage and
permanent structures, or found under it,
such as minerals and water
• Estates: The type of property right that
expresses the time dimension with respect
to which rights in land may be held. The
question of how long the rights in land will
be held.
Classification of Property
• Residential
– Low income
– Middle Income
– High Income
– Luxury
• Commercial – Offices and Retail (Shops)
• Industrial
• Hospitality – Hotels, cottages, serviced and
furnished apartments
• Public use - Recreation, Churches, Hospitals
• Agricultural
Why Invest in Real Estate?
• Income
• Capital Appreciation
• Preservation of Value
• Security
– Real – You can touch it, visit it, improve it
– Indestructible
– Social Status
• Leverage
Housing
• Housing is a basic human need
• Owning a real estate for housing:
– Is not an investment asset
– It costs in maintenance rather than
being a source income
• This need can be satisfied through
renting.
Investing in Real Estate
• Long Term Investment
• Capital Preservation
• Capital Appreciation
• Source of Income
Myths of Real Estate Investment
1. It requires huge amounts of capital
– Partnerships
– renting out extra space - Airbnb
2. Speculation is an investment strategy
– Always add value
3. Prices of property always go up
4. Hot properties are about to get finished
5. You can succeed in investing by sheer luck
Investment Strategies
• Additional Income source
• Diversification of Investment portfolio
• Retirement strategy (income and activity)
• Succession Planning strategy
• Capital Appreciation
• Maximizing return and value of current
assets
• Business – Buy, develop (or improve) and sell
Capital Appreciation
What causes capital appreciation of property?
1. Population growth
2. Industry, Business activity - may be
influenced by gov’t or private sector
investment
3. Infrastructure Development – road, rail
4. Spending power – expanding middle class,
demographic changes
Selecting Property for
Investment
• Yield – Cost of property as compared to its annual
income
• Capital Appreciation – How much activity is within that
neighborhood? What are the future prospects?
• Market – Which units are in demand? Which ones are
preforming better within the sub-market? What
features increase demand for units?
• Budget – How much do you have? How much can you
afford to borrow? Joint ownership (spouse, chama,
partnership)?
Identification
• Define what you are looking for based on;
– Investment objectives
– Tastes and preferences
– Budget
• Define in terms of:
– Accommodation (no. of rooms/ bedrooms)
– Amenities (differentiate required and desired)
– Location and accessibility
– Stage of construction or age of the property
Due Diligence
• Physical visit
• Search of title at national government registry
and local government registry
• Inspect survey map (Survey of Kenya)
• Verify the ownership and owners details
(search – registrar of persons/ companies)
• Ensure property is in the market.
• Contact residents/neighbourhood associations
• Use reputable professionals to advice
Conveyance Process
The documents to expect
1. Expression of interest form
2. Letter of offer
3. Sale Agreement
4. Title Deed document
Professionals
1. Land Economist/ Property Market Expert
2. Conveyance Lawyer
Real Estate Investment Trust -
REIT
• A collective ownership of real estate through
securities that are traded in the Nairobi
Securities Exchange.
• The value of the portfolio is divided into
smaller securities which are floated to the
market (public or private), and subsequently,
may be traded in secondary market.
• Income REIT – Stanlib Fahari I-REIT
How to Find Property
Bank Repossession
Public auctions
Inheritance property
Family disputes
Relocating
Rundown properties
Quick sales