Friday, March 29, 2024

Tips to get you started in real estate

Mr Edwin Dande, the managing partner and chief executive officer of Cytonn Investments Management Ltd, says that to enter the property market, newcomers can invest in unit trusts that are geared towards real estate or join  investment cooperatives that focus on real estate.

However, he adds that  investors should do a thorough search on the capabilities and credentials of the investment manager they choose.

“The biggest mistake most  Kenyans make is what I would call blind investment. One should not invest just because people are doing it. Real estate investment, like any other investment, should be informed by thorough market research and a good knowledge of the capabilities of the different investment managers. And with the Internet, this information is available at the click of a button,” he says.

Mr Dande notes that besides investing blindly, many people do not consult real estate experts before they invest.

“Real estate investment is very risky so when you make a mistake, it is very hard to correct. That is why we end up with Kenyans buying plots whose title deeds take ages to process or buying property in an area where there is little  prospect for growth,” says  Mr Dande.

The Cytonn boss says that in addition to getting sound information, investors should seek trusted brands to ensure that they get clean title deeds.

With regard to construction, Mr Dande suggests that newcomers research on the market needs of a specific location so that they can develop an asset that can be rented or sold within a short time.

“Construction makes good sense if you have a good understanding of the prevailing socio-economic trends in a location and are working with trusted and experienced professionals to guide you on how to avoid sinking huge amounts of money on sub-standard structures,” he says.

“You need to understand the location where you intend to invest in terms of occupancy rates, rental yields, rate of unit sales and potential capital appreciation. If you don’t, seek advice from experts,” he says.

Mr Dande says the next thing you need to ascertain is that you are dealing with an existing property with a title deed, and which is not subject to any dispute or litigation.

The final step is to determine the purpose for which you are buying the property; is it for occupation, putting up rental units or for speculation. Once this is clear, you should seek the services of qualified real estate players.

Young, freshly employed people or those doing their own businesses should join cooperatives if they want to realise their dreams of owning a house, Mr Dande says.

“There is this belief by freshly employed graduates that one needs a lot of money to invest in real state. That is not true. You can start by investing Sh10,000 in a cooperative and begin enjoying the same returns as those enjoyed by the big boys. You don’t need to physically own the real estate in order to start reaping the attractive returns from it,” he explains.

Meanwhile,Peter Wairegi, the chief executive officer of Resort and City Ltd, that has built houses in Makuyu and Longonot, considers, knowing the person yo are dealing with the most important factor to consider  before buying any property.

“If you see an advert for a property for sale, the first thing to do is go to the land office and pay just Sh400 for a search for the real owner and verification of the title deed. This could save you from losing millions of shillings,” says Mr Wairegi, who authored the book, Kenya Real Estate Principals and Practice.

He adds that one should also visit the property and while on site, do a quick search to establish the true owner.

“Talk to one or two neighbours and in most cases they will give you the correct name of the land owner. If the title deed details at the land office do not tally with the details you  get on the ground, you should think twice about buying the property,” he suggests.

Having the telephone contact of the person selling you the land is not enough, says Mr Wairegi adding that, just to be sure, you could send a little money to the person via M-Pesa to confirm their true identity.

“There are cases where the person selling the land is using a relative’s phone contact to dispose of property that is in dispute, so sending them cash via M-Pesa  will enable you to tell whether they are  genuine or a conman,” says Mr Wairegi.

He says if it is company land, you should countercheck the information with the Registrar of Companies to determine whether the company actually exists or wound up long ago.

After establishing the true owner of the land, he advises, ensure that  any written agreement you sign is witnessed by a lawyer.

He says a new investor should also consider the price of a property an important indicator, adding that if it is unusually low, you should  be extremely wary  about the deal.

“Nobody in Kenya, not even in the so-called marginalised areas, will sell you land at a throwaway price and if you come across such a property, remember the saying “ when the deal is too good, think twice” because you might be buying a ‘fake’ property, cautions Mr Wairegi.

He adds  that another factor that most property buyers ignore at their own peril is having a succession plan for it.

“You must inform your family members of any transactions you make  in relation to the property you are buying because, should you die without having informed your next of kin, the property ends up as unclaimed asset,” he offers.

Regarding construction, Mr Wairegi says you should get  a reputable contractor and set aside emergency funds just in case the cost of materials shoots up, or the contractor vanishes before completing the job.

“It is important to do your homework on construction and you should  know the process from the beginning to the end. But this is possible only if you have an approved plan from the relevant authorities, and which has been scrutinised by experts,” he adds.

While looking for property, Mr Wairegi says, it is crucial to keep abreast with the trends in the country to know where you can buy property and recoup your money in the shortest  time.

“If you hear there are plans to construct a by-pass, or that the government will make the Nakuru-Nairobi highway a dual carriage way, this is valuable information that you could use to buy property along the route as such mega infrastructure affects the price of land,” says Mr Wairegi.

Meanwhile, Mr James Wathigo, a director at Longonot Gate Development Company, which is developing a multimillion golf course in Naivasha, says the basic consideration is to weigh the price of the property vis-à-vis what you want to do with it.

“The price of land, for instance, should be within acceptable limits and you should not let the seller inflate the price, so it is important to have a mental picture of how much it is worth,” he says.

Mr Waithigo, a lawyer, says the next step is to establish the authenticity of the seller of the property by finding out whether he or she has the authority to sell the land in the first place.

“For instance, how does the seller get the authority to sell the land? Is he or she the owner of the property or an agent of the owner? These and many other questions must be fully answered,” he says.

But more importantly, the investor needs to establish whether the documents are genuine, as well as know the history of the parcel of land they are buying.

“How did the owner of the land acquire it? Are there any disputes over the land? This information can be easily obtained from different sources and should you go to the site and should  you find it not fenced, insist on having it fenced before you pay any money becaue  if there is another owner, you will know as he or she will come to claim the land,” says Mr Waithigo,  a former Nakuru town clerk in the defunct local authority.

He says if the land is lying idle, you should be extra careful before committing any money.

“In certain places, one must also be very careful as there are double allocation of title deeds, particularly in areas where the land previously belonged to the government and the defunct local authorities. It is, therefore, important to establish how the owner got the land and whether the allocation was lawful,” he adds.

He says many investors have been duped into buying public land that was meant for public utilities such as schools, so you should be careful to avoid being conned into buying property that was hived off from a forest or a playground.

“You must use your common sense, so before signing on the dotted line, you should ask yourself, “Am I encroaching on public land?” To avoid such a grave mistake, a site visit is a must,” says Mr Wathigo.

He notes that a written agreement that is made without a lawyer present is not legally binding and must be avoided at all costs, considering the high cost of land.

He stresses that it is important to know the relatives of the person selling you the land, noting that there have been cases where people take advantage of the fact that they have relatives with identical names to sell land that does not belong to them. As the buyer, you realise this only after you have signed the sale agreement and have paid for he land. .

For those buying property through the agents, he says it is crucial to conduct a search on the property as the agent is not bound to do that kind of work on your behalf.

“The agents are not  interested in the true owners of the land. All they want is to be paid their commission, irrespective of whether the land documents are genuine or not. So it is the responsibility of the buyer to check such details,” says Mr Waithigo.

Alternatively, you could insist on meeting the owner of the property.

Regarding construction, he stresses  that one must make sure the plans are approved by the relevant authorities and use a registered contractor who can be traced in case something goes wrong.

And Mr Gilbert Kabage, a prominent property investor in Nakuru Town, says that many first-time investors have lost money because they did not seek advice from established agents.

“Before buying a piece of land there are procedures to be followed but apparently, many tend to ignore them and rely on fake agents with no physical address. The investors realise their blunders only after they have been conned,” says Mr Kabage.

He advises first-time investors to do a little homework by finding out about the deals such agents have sealed in the past to avoid such pitfalls. “If an agent is selling you land, ask him or her which other successful deals has he or she concluded. His or her response will help you establish whether they are genuine or briefcase  agent,” says Mr Kabage.

 

The following feature was first published in the Daily Nation.

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