If you would like to consider investing an apartment building, there are fundamental factors which you need to take into account before you invest a single coin. The end result and return thereof which largely based on how well you addressed those factors. As a Kisumu Property Developer, it’s our business to help investors make right decisions before investing any money in a real estate property.
Here are the factors to consider when investing in a real estate property similar to an apartment.
1. Cash Flow
Will the property bring net positive cash flow? Simply put; will I make profit from this investment? This is very important to ask enabling you to assess the market critically.
What will help you make good judgement here depends on these factors;
The demand in the local marketplace for unitsIf there exists a huge demand in the market, you will not end up with long vacancy period. This will guarantee you start getting returns immediately the property is performed and even when a tenant gets out, the time that is required to bring in another tenant will be a short one.
The type of market you really want to invest inThe type of market will dictate the huge amount you can charge as rent. If you operate outside the expected range, you certainly will miss out on tenants. Therefore the market will impact directly on the things you can receive as rental income. There are estate were a two bedroom unit in an apartment attract monthly rental income of between Ksh.20, 000 and Ksh30, 000. The same two bedroom unit if moved to another estate will attract a maximum of Ksh15, 000.
The cost of financingIf the cost of capital or finance is high, the return will be reduced. If you secure financing at an interest rate of less than 10%, you then stand a chance of sincerely making good return from the investment than if you secure funding at an interest of 13% or more.
How much your down paymentThe amount of deposit you commit will reduce the funding required hence the costs associated with financing. If you set a deposit of 40% of the cost of the project, then you will simply look for financing of 60%. If another person places an advance payment of 20%, the remaining 80% will just be financed by debt capital hence more interest expense.
Once you have checked it out all these points, after this you need to ask whether you will make money by investing in the property you have in mind? If you don’t possess a clear answer, try and find a property developer who offers consultancy or financial analyst.
2. Appreciation
You need to consider whether the place you desire to invest as the good potential of appreciation of property value and rental over a period of time. You need to invest in a place where rental income is likely to go up and not down over quite some time.
If you buy in an estate where rental income or property value rarely appreciates, then you are putting your money into a high risk area. If the value does not appreciate, there is a high chance the fact that the value will come down over the same length of time analysis.
5. Risk
Risk is something to plan for. It’s said that you expect one of the best but you prepare for the majority. You need to ask yourself are you aware of what happens if all your assumptions were wrong. If you expected the units to actually be fully occupied or at least 70% occupied and today you only attain 35% occupancy? You expected the value of the property to go up that gives you secure funding but overall the value has dipped?
When you plan very effectively the potential risk, you may be adequately conditioned for any outcome. Before investing in any property development project, assess the risks involved and then determine if you will still receive money if the risk occur.
For more information on real estate developer kisumu service, contact us, WEST KENYA REAL ESTATE.
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