When you want to bear in mind investing an apartment building, there are fundamental factors which you need to contemplate before you invest a single coin. The end result and return thereof which largely based on how well you addressed those factors. As a property developer in Kisumu, it’s our business that will help investors make right decisions before investing any money in a real estate property.
Here are the factors to consider when setting up a real estate property much like 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 really is a huge demand that are available, you will not go through a long vacancy period. This will guarantee you start getting returns immediately the property is finished and even when a tenant gets out, the time it takes to bring in another tenant will be a short one.
The type of market you desire to invest inThe type of market will dictate the amount you can charge as rent. If you operate outside the expected range, you will miss out on tenants. Therefore the market will impact directly on the things you can receive as rental income. There will be estate were a two bedroom unit in an apartment attract monthly rental income of between Ksh.20, 000 and Ksh30, 000. Exactly 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 rate of interest of less than 10%, you then stand a chance of constructing good return from the investment than if you secure funding at an interest of 13% or more.
How much of your down paymentThe amount of deposit you make will reduce the funding required hence the cost of financing. If you locate a deposit of 40% of the cost of the project, then you will only look for financing of 60%. If another person places a deposit of 20%, the remaining 80% will most definitively be financed by debt capital hence more interest expense.
Once you have checked out all these points, you then need to ask whether you will make money by investing in the property you have on your mind? If you don’t have a clear answer, explore the a property developer who offers consultancy or financial analyst.
2. Appreciation
You need to consider whether the place you wish 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 inclined to go up and definitely not down over quite a while.
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 period 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 lowest. You have to ask yourself do you know what happens if all your assumptions were wrong. If you expected the units to remain fully occupied or at least 70% occupied and in fact now you only attain 35% occupancy? You expected the value of the property to go up enabling you to secure funding but today the value has dipped?
When you plan perfectly the potential risk, you might be adequately readied for any outcome. Before investing in any property development project, assess the risks involved and find out if you will still generate income if the risk occur.
For more information on real estate developer kisumu service, contact us, WEST KENYA REAL ESTATE.
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