Syovata Ndambuki

Apartments are great first time investments for property enthusiasts as they present unmatched opportunities, compared to other property types. For starters, an apartment unit can help you say goodbye to your landlord as you find your way to your ultimate dream home. Though many people are comfortable with renting (compared to paying mortgages) you never make any returns from renting- hence if you have enough money to buy an affordable apartment, you can easily kickstart your homeownership journey while also building your investment portfolio. This apartment may serve many purposes in the future. You could use it to secure a bank loan which will help you build your ultimate dream home or retirement house. You could also resell the unit in a couple of years and use the proceeds to build or buy a better house. But let’s say you decide to keep it forever, this very unit can earn you rental income, if you rent it out to a tenant or turn it into a furnished apartment for short-term stays. Rental income may be you gateway to financial freedom or retirement income to survive on in your sunset years.

But before you rush to google search “best apartments in Kenya” let’s look at two of the most important factors you need to consider before buying an apartment. One common mistake among property buyers is trying to find a perfect unit, in the perfect location, based on their idea of an ideal home. Well, if you are going to live in that unit for long, you might focus a lot on these things but they do not matter. It’s simply an investment. Leave your emotions at the door when you start viewing and focus on the capital gains and the occupancy rate.

Capital gains: In simple terms, capital gains is the value or interest an investor gains when an asset is sold. The value is gained over time, often during the holding period. This kind of value could apply to any type of asset, including real estate. Think of how people sell an old piece of art for millions, though it was worth very little in the beginning. In a growing real estate market, property-be it land, a standalone house or an apartment- accrues value in the background as daily use goes on. You could buy an apartment at Kshs. 2 million and resell it at Kshs. 4 million in the future. If you had been saving up over the years, you may use your savings, plus the money you made from the apartment’s resale to buy another home or simply invest in something else.

But there is no guarantee that you will make double the money you paid initially. Many factors influence how property accrues value and as you can imagine, some properties gain value faster than others. The secret is often in the location. Before buying an apartment, ask your agent or the developer about the capital gains. They might break down the location’s potential for you but you also want to research by yourself. The first thing you want to look into is how the pricing for similar properties nearby has changed over the past three to five years. If there hasn’t been a significant change-this could be attributed to one of two reasons. On one hand, the location’s proverbial “bubble” might have already burst. This means the location has already “lived through its prime years” and values are not increasing significantly anymore. On the other hand, the location could still be in its early stages of development and it will take a bit of time before it hits it’s prime years. Properties with rapid increments in value are definitely in their prime. Needless to say, if you are buying an apartment with the hope of reselling, avoid locations whose bubbles have already burst. You will not make a profit if you decide to resell.

Still on researching the location’s potential, look at ongoing and proposed developments. Agents rely heavily on the nearby amenities and infrastructure when selling property. And that’s because they influence property prices. A major road construction or expansion could turn property hoarders into overnight millionaires. Other amenities that influence property values include, major malls, schools, industrial zones and commercial centres.

Occupancy rate/Rental Income: Many property owners in the Kenyan market rarely resell. Property has a lot of sentimental value and it can be difficult to let go. But since we’ve established that an apartment unit is an investment, the numbers have to make sense if you decide to hold on to it. One simple way to make money from your unit is through renting it out. You are probably thinking ” I should go for properties with the highest amount of monthly rental income”. Well, that’s one way to look at it. But the secret to maximum rental income is in the occupancy rate (the number of months in a year a rental unit is occupied by a paying tenant). Occupancy rate is mostly determined by location and the type of property. Sometimes the unit’s features could play a role. A studio or a one-bedroom unit in a good location is likely to attract tenants all year round compared to a three bedroom or a four-bedroom in a similar location. If your main focus is on turning your investment into a rental property, then go for smaller units.

On location, the most popular neighbourhoods for tenants are almost obvious. A one bedroom unit in Ruiru might earn you more money in the long-term than a similarly sized unit in Karen. There are many ways to research on a location’s occupancy rate. A simple walk through the neighbourhood can reveal the location’s popularity with renters. Or you may simply talk to experts and property managers about the neighbourhoods you are considering. Factors such as accessibility, security, proximity to commercial or industrial zones, water, access to public transport and social amenities also influence a location’s popularity among renters.