All investment opportunities come with their own set of challenges and advantages and investing in properties or real estate is no different. It comes with the advantage of securing a financial future but at the same time can also put you in a lot of debt. This is why it is of primary importance that one should first understand before they take up an investment. In this article, we detail out both the pros and cons of investing in real estate in Nairobi, Kenya.
Let’s first take a look at the pros of investing in real estate.
Advantages of Investing in Real Estate in Nairobi
Creates a cash flow: You can lease your real estate to third parties and generate current cash flow or you can wait for its value to appreciate and achieve substantial returns on your investment. Cash flow also refers to the profit you make after you have paid off your mortgage and all operating expenses. You can use the returns on your investment in various ways, from supporting your family to building a business or reinvesting in other properties.
Acts as leverage: You can use your real estate to get a loan to buy more real estate. The bank will create a mortgage with your property undertaken as security to back up the loan. This can help you generate more income with your lying funds instead of having to block them in a property, which eventually means more cash flow for you
Lower risks: When you invest in securities and stocks, there are usually dramatic and short term gains and losses, which is quite the opposite of real estate investments. With real estate, the markets do not fluctuate as often as with other types of investments, making them more secure and safe. These real estate investments, also at the same time add diversity to your investment portfolio without completely exposing you to the threats of market volatility.
Less complicated: It is fairly easy to understand real estate compared to any other type of investment. To invest in real estate, all you need to know is about inflation and market prices, while for securities and stocks, there is a whole lot of literature that you need to get your hands on before you can start investing for good returns.
Cons of Investing in Real Estate in Nairobi
Having discussed the benefits or advantages of investing in real estate, now let’s take a look at the disadvantages that you may face while investing in real estate.
Slow liquidity: A major drawback of investing in real estate is that you cannot quickly sell it if you are in urgent need of liquid funds. This depends on various factors such as the demand for real estate in that area, market prices and the state of the economy. This can cause you a delay in accessing money in case of an emergency.
Overhead costs: When you buy a property, you should also consider the overhead costs that you will bear in the future for its maintenance and upkeep. Apart from the maintenance costs, you will also have to bear the mortgage, taxes, insurance and other such charges.
Issues with the property: While it may be fairly easy to buy a property, it can often be a bad buy if you don’t have the right team by your side. An already constructed house or apartment can be prone to mould which may not be apparent when you buy it, or it can have other issues like termites in the walls or poor quality materials used in construction. This is why it is very important to do a thorough home inspection with knowledgeable people by your side to identify any issues that may come up later.
Cash flow restriction: When you buy a house, you block a chunk of money in that investment, which can restrict your cash flow. If you are taking a home loan, then you will have to also adjust your cash flow as per the changes in the interest rates.
In other words, a real estate investment can be both good and bad for you, depending upon the kind of things you consider before you make the purchase. Thorough research and understanding of real estate is key to making a good investment. An ideal real estate investment in Nairobi, Kenya would be Mi-Vida Homes that is a perfect combination of design, modern engineering, trusted construction, on-time delivery and an impeccable record.
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