Real Estate Tips for first-time land buyers
Buying real estate in Kenya especially in the current economic climate, when property prices appear flat, may seem like a risky speculation. However, for the astute investor, whether you plan to redevelop an existing property or build a new structure, buying the right land is a sound investment if you know what to look for, how to get the best from the experts involved and if you do the necessary research beforehand.
How great it is to leave the city for a place of solitude and relaxation! Whether you are considering buying land as an investment or for personal use, finding the property of your choice and improving it to your dreams are attractive incentives. If a raw land purchase is in your future, here are a few things you should know:
Defining your real estate requirements
People buy real estate for a multitude of reasons. A growing number see it as an alternative investment to developed property – something that is indeed safer in the medium to long-term than plunging one’s finances into shares or the volatility of the stock market.
Empty nesters, having built up sufficient equity in a family home that is perhaps now too big, may look to acquire land for a bespoke self-build project constructed to their specifications and lifestyle needs. Others buy property as a gift, maybe to assist their adult children in realizing the dream of building their own first home – while developers will always be interested in plots to redevelop into flats or houses for quick profit.
Whatever purpose the land is needed for and whoever buys it, the rule caveat emptor (‘let the buyer beware’) still applies. The key to successful land acquisition is thorough research to mitigate the risks, and asking yourself four essential questions:
- Purpose – why do you want to buy land?
- Use – is the land suitable for your plans?
- Cost – does your budget cover the value of the property, building, legal and survey fees, plus a contingency for the unforeseen?
- Resale. – will your project realize a profit?
Determine How Much You Can Borrow for your real estate needs (If Necessary)
The loan amount for which you qualify is the maximum amount the lender feels you can afford based on your income, not necessarily the amount you want to pay. The total mortgage payment plus any fees divided by your gross income is the first ratio and is traditionally required to be below 28%. The full mortgage payment and any fees plus any fixed monthly payments divided by your gross income is the following ratio and is typically required to be below 36%. Also, check your credit report to know your creditworthiness. An excellent credit rating will result in the faster approval process and possibly a lower interest rate.
You should also consider selecting a suitable lender: There are many mortgage companies from which to choose. Several have information available online, including pre-qualification forms. Your Realtor should be able to recommend a reputable company based on previous experience. Family and friends are also good sources for lender recommendations.
Budget and know your costs associated with real estate.
The total price of real estate will depend on several factors, notwithstanding its location, size, proximity to transport links and whether it benefits from any planning permission. Property sold with planning permission is always more expensive than the normal plots
You should also count the extra costs: Spend some time analyzing the additional costs associated with the land purchase. Remember there might be extra costs such as logistics, legal fees, transfer fees, district board fees, stamp duty tax, land survey costs(if the survey is required) e.t.c. That you might be required to pay before closing the purchase deal.
Land values are also relative to the general state of the ever appreciating property market, so currently prices are more competitive than, say, a year ago.