Possible Risks in Real Estate Investment and How to Reduce them
According to the risk-reward concept; the higher your risk in a particular investment the higher the possibility of gaining greater returns. This might seem like a direct concept and one that is easy to implement, but before agreeing to risk, ensure you have determined the suitable risk level for your investment.
There are quite a good number of reasons why the Real estate industry is one of the best options for your investment portfolio. The top reason is real estate is an asset that increases in value over time. Your investment is a definite means to earn a passive income and also a tangible asset.
In this article, we will explore the risks that you may encounter when investing in real estate.
Use of land
Most real estate companies in Kenya focus on the purchase and sale of bare, undeveloped land. The companies acquire the land in bulk and subdivide it to smaller plots for sale. The subdivision is efficient and beneficial as it allows all Kenyans to become landowners. For example, The Wealthsmith company has about 38 acres of land in Nanyuki that is subdivided into 1/8th acre plots for sale.
The use of land is a common risk in real estate because most people are not aware of restrictions that can be put in place. As a real estate investor, find out if the land you are purchasing is controlled or zoned for a specific use. This is important because some areas have land that has been zoned for residential use only and if you are interested in any other use, you may have to consult relevant authorities in the area.
Access to amenities
How easy is it to access amenities (if any) in from your plot?
Amenities such as access to water, electricity, schools, hospitals, shopping centers, fencing services are added advantages and crucial to consider when buying land. Access to amenities, the contribute to the development of your land and help you in cutting down costs.
Consider asking your realtor about the available amenities on-site and any other value-added services from the company.
No Income, but Expenses
Investing in bare undeveloped land means there is no income-generating development on the land. This means when you buy the land, you have other expenses to incur to further increase the value of the land.
Before spending money on a real estate project, you should have a clear investment plan and vision for your land. Find a way to convert it into an income-generating source. The first step to achieving this is doing your research to find out which projects can do well in the area or consult your realtor to find out the type of projects other investors in the area are engaged in.
As we always state, the secret to real estate in Kenya is to properly do your research and work with professionals in the Real Estate industry such as The Wealthsmith Limited.
You can find out more about real estate investment by scheduling a consultation with us today.