SHOULD YOU INVEST IN LAND?
Real estate is a good investment in Kenya because the returns are very high. There is a high demand for land and homes. The supply is deficient, and the demand for property is skyrocketing in Kenya.
The value of the property appreciates in a relatively short period.
There is one of the many profitable ways of making money via land dealing. Buying a large track of land and sub-divide it into small portions.
This makes you a land dealer because you buy land in acres. Sub-divide it into smaller plots and sell to willing buyers.
Some buyers could buy to build homes or rental properties. Others might buyer to hold and sell at a higher price in the future.
After you sub-divided the land you will have to sell the smaller portions of land. These smaller portions are known as plots.
If one acre of land cost you 2 million, you could end-up making 6 million in gross sales. All you need is to sub-divide the land into one eighth (1/8) pieces (or plots of size 50 x 100 square feet.)
Sell a single plot at Ksh.750,000. After expenses, you should make at least 3 million in net profit.
Investing in land may seem to be easy. People make money every day from buying and selling land.
Those who are successful in this business have done well their homework and have perhaps learnt some important investment lessons the hard way.
Investing in land like any other business involves risk taking. As an investor, you should be putting your money into an asset while ready to face any challenge as well as setbacks that may come along.
There are several pros and cons to investing in land.
One ought to be very careful before investing in any land because many have burnt their figures while bidding for the same.
For those who want to take the plunge, there are few things you need to consider.
Before you settle on a particular choice of land you should conduct a thorough market research. You need to find out why the land you want to purchase is vacant. You can buy land only to discover later it cannot be effectively used, let alone developed.
It is worth purchasing land whose zoning permits its highest, and best use.
A friend of mine bought some land, 1/8th acre, for 1 million in 2014 in some remote undeveloped area. He decided to sell the land in mid 2016 and the only serious prospective buyers were two, who offered 800,000 and 900,000 shillings after more than 2 years.
So if you buy land that you can’t use instantly due to its remoteness, you will be tying up capital and hoping that after five years of doing nothing, you find someone to buy the land at a profit.
Lack of utilities like water electricity, good sewerage system, and good communication network is a huge setback for any land investor especially if you want to set up real estates or even for personal settlement.
Market demand is also another factor to consider. Areas where people would want to rent or build housing units is a nice opportunity. Lands in upcoming settlement towns like Machakos, Kisii, Kitale, Kakamega are good.
In fact, if you have a million shillings, you are likely to get prime land in your home county HQ compared to what you would get in Nairobi.
These towns provide a quiet area for privacy away from crowded cities. These towns have room for future expansion and thus probabilities for high returns.
Another thing to watch for is the risk of acquisition and encroachment. Purchasing land in which government utility belongs e.g. road or a park will cause your investments to sink.
In some scenarios, your legal right over the land gets jeopardised, resulting in litigation and unnecessary legal costs.
These auxiliary expenses can sometimes outweigh the appreciation in the value of your land.
There’s also the risk of the land being taken over by the government by way of compulsory acquisition like a case where the government want to set up infrastructure.
A good case is the Standard Gauge Railway. The compensation received, may not always be satisfactory.
In as much as you would have found the right place to pump your cash, you should be on the outlook for fraudsters. With preying cons around prowling for gullible buyers, buying land is tricky.
Unscrupulous land brokers are out there waiting for your cash. Some fraudsters work with the ministry of lands officials to issue you fake title deeds. They will do anything to hit you especially if you are a jackpot investor.
Employ the services of a lawyer and engage the Land commission who will help you verify the authenticity of the land you want to purchase. If the ministry gives you fake information concerning the land then you are entitled to compensation from the state for losses incurred.
Before investing in land remember, land business, like any other business, has good and bad deals… not all land deals are good even if you don’t get conned.
Written By
Timothy Angwenyi
Business Consultant
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