Buying and owning real estate more so in Kenya is an investment strategy that can be both satisfying fruitful in the long term returns. Unlike stock and bond investors, prospective real estate owners can use leverage to buy a property by paying a portion of the total cost upfront, then paying off the balance, plus interest, over time.
A traditional mortgage generally requires a 20% to 25% down payment, in some cases a 5% down payment is all it takes to purchase an entire property mostly in Kenya and the majority of East African Countries. This ability to control the asset the moment papers are signed emboldens both real estate flippers and landlords, who can, in turn, take out second mortgages on their homes in order to make down payments on additional properties.
The first way to invest in real estate is also the most popular one – buying an investment property to rent out to others. You can go for a traditional, long-term rental or for a vacation, short-term rental. The most important advantage of this investment strategy is that you can start making money right away – as soon as you buy a property, get it in a rentable shape, and find tenants.
Here are several ways in which investors can make money on real estate:
- Aspiring real estate owners can buy a property using leverage, paying a portion of its total cost upfront, then paying off the balance over time.
- One of the primary ways in which investors can make money in real estate is to become a landlord of a rental property.
- People who are flippers(..AKA Real Estate Trading), buying up undervalued real estate, fixing it up and selling, can also earn income.
- Real estate investment groups are a more hands-off way to make money in real estate.
- Real estate investment trusts are basically dividend-paying stocks.
The key to success with rental properties is buying a profitable property in a top real estate market. To achieve this goal, you have to conduct both real estate market analysis and investment property analysis to know exactly how much rental income you will make (depending on your rental strategy) and how much your return will be.
Remember to always go for positive cash flow properties from day one. Unless you have a positive cash flow rental, you will be losing money instead of making money, and no real estate investor wants that.
Whether real estate investors use their properties to generate rental income, or to bide their time until the perfect selling opportunity arises, it’s feasible to build out out a robust investment program by paying a relatively small part of a property’s total value upfront. But as with any investment, there is profit and potential within real estate, whether the overall market is up or down.