Topical Feature:Join, Learn, Grow-Consider a Real Estate Investment Group. 

A typical real estate investment group buys and builds property and then sells them to investors as rental properties. In exchange of finding tenants, handling maintenance and other responsibilities, the group receives a portion of the investors monthly rent proceeds. It has similarities to a mutual fund in that investors can reap some of the benefits without having to manage them. Most of them have a provision that requires the investor to pool a portion of their rent to cover mortgage payments in the event of vacancies.

Now, this is what real estate investment groups have evolved to but we cannot forget that initially a ‘proper’ real estate investment group is all about networking via learning, mentoring and using strength in numbers to your advantage. It wasn’t merely just an investment club where money is collected and the monies used to purchase a property. The main focus this week will be on revisiting the original idea behind real estate investment groups.

A real estate investment group will constitute current and futures investors of the real estate market who provide a great source of your first reliable group of buyers and if you have property to sell/let then you have a ready-made buyer/tenant list and the same applies to you as the buyer. This is the beauty of these groups as it provides strength in numbers.

These groups can help you decide if a market is good for investment or not, it can also guide you on how to find early opportunities to get into a particular market, it then helps you learn what market rents and property values typically are in an area while providing you with references to find money from private lenders when you find it hard to borrow from a financial institution.

Real estate investment group are also worthwhile for the most seasoned investor as mentoring new investors can be very fulfilling. It is also worth to note that opportunities to learn from others even the so called ‘newbies’ can offer you a new perspective in the market. As a seasoned investor you are also set to refine and sharpen your own investment practices by teaching others and keeping up to date with fundamentals. Remember, you only remember a fraction of what you learn by 100% of what you teach.

Global Trends

This week, we turn our focus on the expected impact of Brexit on the real estate market with particular focus on London’s commercial and residential markets. The news on Brexit has shaken up the property market as investors choose to pull out of publicly traded real estate companies in Britain and the EU while global developers begin to reassess projects and transactions that were already in the pipeline. Many of these listed companies have lost billions of dollars in value as fear spreads of a decline for property in a less integrated European market.

The city that will experience the biggest hit is that of London as it is expected that it will shed thousands of jobs as EU citizens may require going through non-British work permit requirements that may be unaffordable to many. There is also the risk that many organizations may choose to relocate their operations to other counties in the EU thus another bit of the workforce will be taken out of the London real estate market.

However, this is likely to take years to realize a full impact on the real estate market so for now this is all a risk that is starting to manifest itself. What is apparent now is that uncertainty about how Britain will proceed and the likely economic consequence of its decision causing a market slow down on the uptake of leasing and sales deals.

The US is facing an affordability crisis whereby renters are finding it difficult to keep up with their rents. A rental listing website known as Apartment List conducted an analysis between 1960 and 2014 proving that median rents have increased by 64% and this is expected to continue. Between 2000 and 2010, a recession and then housing bust in 2008 caused inflation adjusted household incomes to fall by 9% while rents increased by more than 18% during that same period.

Kenya Trends

Even with a troubled 2015 where the Kenyan shilling depreciated sharply against the US Dollar and the increase in external debt pushed Treasury bills to more than 20%, the real estate sector remained fairly strong with an average year on year growth of about 5.5%. (KNBS)

Growth in the real estate sector has been boosted by infrastructure developments that have ‘modernized’ satellite towns and made them attractive to investors and tenants alike who choose to move away from the city of Nairobi.

Decentralization of the government to the County government has also created investment and development opportunities in those counties. The country’s construction sector continues to see robust growth over the past couple of years and is in line and a key component of the country’s medium to long term economic growth.

The Kenyan economy has an average growth rate of over 5% and it was recently upgrade to lower-middle income status. This was essentially brought about by prevailing political stability which has created a safe and better environment for local and foreign investors. The growing middle class searching for affordable, secure and inspirational housing has contributed to the number of housing developments in the country. This has led to infrastructure development in satellite towns again contributing to the growth and attractiveness of those towns.

According to Africa Property News, Kenya is the leading country in East Africa in property developments because of ‘its stability and investment opportunities’. In the retail real estate market, there has been a surge in the number of malls throughout the country while mixed use developments begin propping up.

Last year, Garden City, a mixed use development located along the Thika Superhighway opened its doors to the public. Other mixed use developments such as Two Rivers received a financial boost from Old Mutual Property worth $6.3 million.

Below are the existing and new retail zones in Nairobi:

This week in the Kenyan Real Estate Market…

According to popular real estate site Lamudi, these are the current trends in Nairobi for the week:

Interest Rate Watch

T-bills rates have remained fairly stable over the past 4 weeks with a downward trend noted across the three T-bills. On a week-on-week basis, T-bills have remained unchanged.

The stable trend in T-bill rates is an indicator of stability in other interest rates in the market alluding to lower expected mortgage rates. This is in turn means cheaper credit will be available to boost investment in the real estate market.