Which one is More Lucrative?
As times change and priorities change in the course of time, the question of owning a real estate property is seemingly becoming harder to answer. Land has been the prime commodity in real estate investment for a long time. However, focus is slowly shifting in the real estate spectrum and Kenyans are looking into investing in housing rather than on land. This move, which is the result of a noticeable opportunity of inadequate housing, is prompting new investors into investing in housing rather than land.
In this article, we compare and contrast land and housing as investment options, to help you in making an informed choice in where to put your money.
Benefits of investing in Both Land and Rental Properties
- Both are safe commodities in the real estate shelves. The risk to reward ratios is significantly low, the only risk to your money being buying an illegitimate piece of property from con artists.
- It is easy to start investing in land and housing in Kenya. You do not need to be a specialist to start investing in land or rental properties.
- The learning curve to becoming a great investor is low. Unlike investments such as stocks and shares that require learning a lot of stuff to start making money, land and housing investments do not require as much knowledge.
- It is easier to receive financing. Finance institutions in Kenya offer very flexible and competitive rates for investments in real estates. Lenders are more willing to offer up an investment opportunity in land and housing properties than they would on other types of investment.
- Land and houses act as leverage and collateral when seeking funds from financial institutions. Lenders offer up financing equivalent to almost 95% of the value of your property.
Is Land a great Investment Option?
Land is a popular option for real estate investing in Kenya. A land investment in Kenya appeals to many people because you do not have to do much after buying. All you need to do is wait for a few years, after which you can resell it at a profit.
While there are ways in which you can add value to your new land investment, most people will wait to simply resell it or pass it froth to the next generation as a wealth possession.
You can opt to develop the land, which will sharply boost its resale value. However, the location of your land investment will influence how great an investment it will be in the near future.
Housing as an Investment Option
Real estate housing investments are fast becoming the go-to option for Kenyans who wish to put their money into good use. If you are looking for an investment option that can give you real returns over a period, the real estate housing investments are your choice option.
For most people nowadays, paying hefty loans on buying a house is not an option. Rather, people are setting themselves up for success by making financial decisions that help them draw closer to their goal in entering the housing industry.
A housing investment starts by setting aside a small portion of your income aside. You can then save up enough of your income to get into the business. However, financial institutions can help you build or buy rental properties.
What to Consider when Getting into Land and Rental Properties Investments
Land and rental properties can be a successful investment if some considerations are made. These considerations determine how worthy your land will be to potential buyers, or how your rental properties will be to your potential tenants.
- The Neighbourhood- Ensure that you invest in an area that has the target population that you desire. If you are looking to have a higher- middle class Kenyan as your tenant or buyer, then you will need to find a property in a befitting neighbourhood.
- What are the available social amenities around your property? If you want to attract the right type of buyers or tenants, it is important that you anticipate their wants before investing in a land or rental property. Gyms, schools, shopping malls, and transportation networks are attractive boosts make your investment more valuable.
- Security is one of the major make/ break selling points for land and housing investors in Kenya today. If you are looking to attract potential land buyers or residents to your rental property, security should be a priority check.
The debate for whether to invest in land or in housing properties continues to be a haggle for many investors today. However, it is important to note that owning land over property has its upside and it downsides as well.
Comparison – Land and Housing Investment
While land appreciates lucratively over a period of years, housing investments provide you with income as soon as the property starts to receive tenants. This way, both investments are lucrative moneymaking opportunities.
Land deals involve exchange of ownership from one hand to another. As a land property investor, you will always have to be on the lookout for more land to sell. On the other hand, as a housing investor, you will lease or rent your property for profit and for as long as you live. This proves to be a greater benefit for a longer period.
Contrast – Land vs Housing Investments
Investing in land promises capital growth while investing in housing properties promises rental yields, which many consider as passive income.
Capital growth means that property increases in value over time. Yield is a measure of the returns you get in rent. To understand what your yield is, divide the annual rental income by the price of purchase of the rental property.
Land offers capital growth that is a direct and effortless way to create income and wealth. The net worth grows as the value of the property increases with time. On the other hand, rental property owners may receive positive cash flow right from the first month.
In Kenya today, lower yield and increased tax on rent have made rental housing a less lucrative investment option today. As a result, this has given land investments a head start in providing real and assured income.
The demand for land in urban areas is at an all-time high. However, economy is growing at a slow rate. A slow rate of growth in the economy means that the general commodity pricing is rising faster than the rate at which income is growing. The factoring of these growing prices means that rental and house-buying prices are going higher than how people can manage. This is making it hard for people to afford housing. While the housing investors feel the cringe of slow economic growth, land investors continue to enjoy the wealth of their investments in time.