How Soft Markets Are Creating Massive Investor Profits for Property Investors in Kenya

by | May 31, 2026 | Bargain-Hunting Series, Property Market Advisory Series, Real Estate Market Intelligence | 0 comments

  • Soft Markets Explained

  • Soft Markets and Market Cycles

  • Key Signals of Emerging Soft Markets in Kenya’s Real Estate Markets

  • Why Soft Markets Matter More Than Bull Markets for Investors

  • Key Signals Marking the Emergence of Soft Markets in Kenya’s Real Estate Markets

  • 5-Step Process to Position Yourself to Leverage Soft Markets in Kenya

      • #1. Build Deep Market Intelligence

      • #2. Understand the Seller’s Motivation

      • #3. Research Deeply and Validate with Professionals

      • #4. Hone and Apply Negotiation Discipline

      • #5. Define Your Exit Strategy Before You Enter

  • Key Takeaways

Soft Markets Explained: Where Smart Property Investors in Kenya Make Their Biggest Moves

In real estate cycles, soft markets are the quiet, unglamorous phases where most people hesitate, but seasoned investors start paying very close attention. These are conditions where buyer demand thins out, listings linger, and sellers compete for the attention of a shrinking pool of buyers. The result is a market that feels subdued on the surface, but underneath, it is quietly rearranging wealth.

Often described as a buyer’s market or a depressed phase in the property cycle, soft markets emerge when oversupply meets weakened demand. Certain property types or specific locations may feel this pressure more than others, creating pockets of price softness even when the broader market is stable. In Kenya’s evolving real estate landscape, these shifts can appear suddenly, reshaping pricing dynamics in both urban and emerging investment corridors.

Yet within this slowdown lies the paradox: soft markets are precisely where outsized investor gains are born. As prices recalibrate and motivated sellers become more flexible, opportunities open up for those who can read the cycle early and act decisively. For property investors in Kenya, understanding soft markets is less about fearing decline and more about spotting the quiet doorway to significant profit.

Soft Markets: Understanding Market Cycles

Cycles are normal and, without exception, all markets go through both cyclic and non-cyclic patterns which collectively form a trend or a path against which their growth or decline can be measured. In an open market, cycles are determined by demand and supply trends, which are in turn determined by perceptions of the market and occurrences both within and extraneous to the market.

Why Soft Markets Matter More Than Bull Markets for Investors

Bull markets feel exciting because prices are rising, demand is strong, and confidence is everywhere. But for investors, that same energy often means one thing: competition. Everyone is buying, sellers have the upper hand, and good deals become rare. In that environment, profit is usually squeezed into timing or luck rather than strategy.

Soft markets, on the other hand, shift the balance. When demand slows and uncertainty creeps in, prices become more negotiable, and sellers are more flexible. This is when motivated selling appears, undervalued opportunities surface, and patient investors can acquire quality assets below peak value. In simple terms, soft markets don’t reward noise—they reward positioning.

This is why seasoned property investors often pay more attention to soft markets than bull runs. Bull markets build momentum, but soft markets build portfolios. They are the phases where entry prices are reset, negotiation power shifts, and long-term returns are quietly manufactured before the wider market notices the turnaround.

Key Signals Marking the Emergence of Soft Market in Kenya’s Real Estate Markets

Soft markets rarely arrive with dramatic announcements; they unfold gradually, shaped by a convergence of economic pressure, structural imbalance, and shifting sentiment. In Kenya’s property landscape, they are best understood not as sudden downturns, but as periods where momentum quietly thins and the balance of power tilts toward buyers. Recognising them early requires reading both the visible data and the quieter undercurrents that shape market behaviour.

One of the earliest signals is a build-up of unsold inventory alongside slowing transaction velocity. Listings increase in key segments such as apartments and land in growth corridors, yet absorption fails to keep pace. Properties remain on the market longer, price reductions become more frequent, and sellers begin competing more aggressively for a shrinking pool of active buyers. This dynamic is often amplified when macroeconomic conditions tighten—rising interest rates, constrained liquidity, and reduced mortgage access all combine to suppress purchasing power. At the same time, currency volatility can push construction costs higher, forcing developers into either delayed launches or reluctant pricing adjustments.

These pressures are often reinforced by structural and cyclical forces. Overdevelopment in specific nodes can flood the market with near-identical stock, particularly in speculative zones where future infrastructure promise outpaced real demand. When anticipated roads, utilities, or zoning upgrades stall, projected value loses its immediacy, and buyer enthusiasm softens. Layered on top of this are regulatory and fiscal shifts that increase friction in transactions, from taxation changes to approval delays, all of which slow the natural rhythm of deals.

Finally, and perhaps most decisively, there is the psychological dimension. In periods of uncertainty—often heightened during election cycles or broader economic transition—buyers delay decisions, sellers hesitate to adjust quickly, and the entire market enters a collective holding pattern. It is this interplay between measurable economic stress and intangible sentiment that signals a true soft market: not a collapse in demand, but a quiet recalibration where caution becomes the dominant currency, and opportunity begins to accumulate beneath the surface.

So, now that you can identify the onset of soft markets, what can you do to position yourself as an investor?

5-Step Process to Position Yourself to Leverage Soft Markets in Kenya

Soft markets reward structure more than instinct. While prices fall into more negotiable ranges and sellers become increasingly flexible, the real advantage belongs to investors who operate with a clear system rather than an emotional response. Positioning yourself effectively means combining market awareness, behavioural insight, and disciplined execution into a repeatable process.

#1. Build Deep Market Intelligence

You cannot recognise a bargain in a market you do not understand. In soft markets especially, value is rarely obvious—it is relative. You need a clear sense of prevailing prices, absorption rates, listing durations, and recent transaction benchmarks within specific locations and property types. This allows you to distinguish between genuine value and superficial discounting.

Soft markets often create “false bargains” where prices drop, but fundamentals remain weak. Strong market intelligence ensures you are not just seeing lower prices, but understanding whether those prices represent real value creation. In essence, you are training your eye to recognise when the market is mispricing opportunity rather than simply repricing risk.

#2. Understand the Seller’s Motivation

In a soft market, the seller’s psychology becomes just as important as the asset itself. Behind every listing is a story: liquidity pressure, debt obligations, relocation, stalled development financing, or simply fatigue from prolonged holding costs. These motivations determine how flexible a seller can be on price and terms.

Investors who take time to understand these pressures gain a quiet but decisive advantage. A highly motivated seller in a soft market is often the gateway to real value—because negotiation is no longer theoretical, it becomes situational. When urgency exists on the other side, your leverage increases significantly.

#3. Research Deeply and Validate with Professionals

Even in soft markets, not every low price is a good deal. A true bargain is not defined by discount alone, but by entry equity—buying below intrinsic or growth-aligned value in a location with durable demand potential.

This is where professional input becomes critical. Valuers, experienced realtors, and seasoned investors can help you triangulate whether pricing reflects temporary softness or structural decline. Online property platforms and historical price trends also help you contextualise where the market is heading, not just where it currently sits. Without this layer of validation, softness can easily be mistaken for opportunity when it is actually stagnation.

#4. Hone and Apply Negotiation Discipline

Soft markets shift power toward buyers, but only those willing to exercise it intelligently. This is where negotiation becomes less about aggression and more about precision. You are not simply asking for a lower price—you are shaping terms that reflect the realities of the market cycle.

This may include price adjustments, extended payment structures, conditional terms, or additional value inclusions. The key is to negotiate firmly but strategically, ensuring that the deal reflects both current market softness and long-term investment logic. In a buyer-leaning market, hesitation is costly; clarity is currency.

#5. Define Your Exit Strategy Before You Enter

A soft market can tempt investors into accumulation without direction. But the most effective investors enter with the end already in mind. Your exit strategy determines whether the acquisition becomes a wealth-building asset or a long-term liability.

This means defining your target returns, expected holding period, and the market conditions under which you would sell or refinance. Even in a discounted entry environment, time can erode returns if exit planning is absent. A strong acquisition is not just about buying well—it is about knowing exactly when and how you will transition out.

In essence, leveraging soft markets is not about reacting to downturns. It is about entering them with structure, reading them with clarity, and exiting them with intention. Those who master this sequence don’t just survive soft markets—they quietly compound advantage while others wait for certainty to return.

Key Takeaways

  • Soft markets create opportunity by shifting power from sellers to buyers, but only for investors who are prepared.
  • Real advantage comes from understanding local pricing dynamics and spotting where value is temporarily mispriced.
  • Seller motivation is a critical lever—urgency often unlocks better pricing and flexible terms.
  • Not every discount is a bargain; due diligence and professional validation protect you from “cheap but weak” assets.
  • Negotiation is a strategic tool in soft markets—used to shape value, not just reduce price.
  • The strongest investors enter with a clear exit plan, ensuring every purchase has a defined path to profit realization.

Buyer Agency Explained: Why It’s a Game-Changer for Kenyan Property Buyers

by | Jun 10, 2019 | Bargain-Hunting Series, Property Market Advisory Series, Real Estate Market Intelligence | 0 comments

  • What Is Buyer Agency and Why It Matters

  • How Buyer Agency Works in Kenya

  • Benefits of Buyer Agency in Kenya

  • Common Misconceptions About Buyer Agency

  • When Buyer Agency Is Most Valuable

  • Choosing the Right Buyer Agent

  • Enhanced Buyer Agency—Adding Value Beyond the Basics

  • Final Thoughts on Buyer Agency

Navigating Kenya’s real estate market can be complex, and that’s where Buyer Agency shows its true value.

In Kenya, the real estate market has traditionally been oriented towards sellers, creating the widely held presumption that property agents primarily represent sellers in the market.

Buyer agency is almost a myth.

With dedicated representation, buyer agents help you find the right property, negotiate better terms, and safeguard your interests from start to finish.

Let’s explore how partnering with a buyer agent can deliver smarter, more efficient property transactions.

What Is Buyer Agency and Why Does It Matter

Defining Buyer Agency

Buyer Agency is a professional arrangement where the agent represents you, the buyer, not the seller. This ensures loyalty to your interests through the entire transaction.

Core Responsibilities of a Buyer Agent

  • Identifying properties matching your criteria
  • Conducting market research and due diligence
  • Guiding you on pricing and negotiation
  • Coordinating inspections, paperwork, and legal support

Fewer hassles in managing the due diligence, documentation, transfer and registration processes. Reduced time between the identification of properties matching your requirements and closing. Less money paid on the capital cost(s) of the transaction. Fewer mistakes and a guaranteed best-value deal.

Buyer agency allows buyers to leverage the superior industry knowledge, connections and networks of property agents who are better placed to secure you the best deal possible.

Against the possibility of expensive mistakes, the decision to go the buyer agency route may also be justified.

How Buyer Agency Works in Kenya

The Buyer Agency Agreement

This formal contract outlines:

  • Scope and duration of representation

  • Fee structure—who pays and how much

  • Conflict-of-interest policies and confidentiality clauses

Exclusive vs Non-Exclusive Buyer Agency

  • Exclusive: The agent works solely for you, never for the seller

  • Non-Exclusive: You retain the flexibility to work with multiple agents

Advantages of Exclusive Agency

With exclusivity, your agent’s loyalty is guaranteed, increasing their motivation to leverage networks and time to find the right deal for you.

Benefits of Buyer Agency in Kenya

Access to Off-Market Properties

Buyer agents uncover hidden deals through their network, giving you a first look at unlisted properties.

Expert Negotiation on Your Behalf

With in-depth data and market insight, agents negotiate on price, closing terms, and even seller concessions to your advantage.

Streamlined and Professional Process

From inspections to legal review, a buyer agent ensures smooth coordination, saving you time and stress. 

Common Misconceptions About Buyer Agency

“Buyer Agents Are Too Expensive”

While there’s a fee, buyer agents often save you more than they cost by avoiding hidden issues and negotiating better deals. Gathering, understanding and assimilating market information necessary to make the best-informed decision can be a tall order.

The buyer’s agent is better-placed to do this; helping you to analyze offers on the basis of comparables and market trends; using their market intelligence built-up over time to find you bargain offers – not just the ones that may be in their repertoire of offers – that will save you money, using their intimate knowledge and networks to help reduce the hassles, stress and time between searches and the likely hurdles that will be encountered along the path to completion of registration of the transfers.

“I Can Do It Myself”

Without expert support, buyers can overpay, miss key risks, or struggle with complex legal steps. A buyer agent provides protection and clarity.

Real estate transactions are an emotional affair that can induce panic, fretfulness and exhilaration all at once. It is understandable that these emotions will show up because of the money involved. A sober, clear mind can be helpful.

When Buyer Agency Is Most Valuable

Ideal for First-Time Buyers

If you’re new to property buying or unfamiliar with legal processes, buyer agency is a valuable guide.

Essential for Investors and High-Value Buyers

For multiple or high-value property purchases, strategic representation helps optimise your portfolio.

Unlocking Off-Market Opportunities

Agents with strong networks can reveal exclusive listings before they hit the public market.

Buyers agents don’t just search for comparable offers that match your requirements, they seek to find bargain offers providing you with you greater value.

In addition, they will negotiate the most favourable price and terms and make sure that all pertinent documentation and disclosures are handled at the appropriate stages of the transaction.

Industry knowledge can be critical to the buyer for conveyancing advocates, financing (securing mortgages), property valuations, insurance, and all other relevant matters from acceptance to close. 

Choosing the Right Buyer Agent

Important Vetting Questions

  • Do you represent only buyers?
  • Can you share past negotiation examples and savings?
  • What is your fee structure and contract term?
  • Are you experienced in our target locations and property types?

Red Flags to Observe

  • Dual representation of buyers and sellers
  • No clear written agreement or fee transparency
  • Limited local market knowledge or lack of proven track record.

Enhanced Buyer Agency—Adding Value Beyond the Basics

Data-Driven Market Insight

Top buyer agents review comparables, title histories, and valuation reports to guide your offers.

Legal & Due Diligence Support

Rather than navigating legal disclosures alone, your agent connects you with trusted lawyers and helps interpret key documents.

Customised Deal Structuring

Know your financing—from cash, mortgage, or instalment—agents ensure your offer aligns with your financial profile and lender terms.

Conclusion: Final Insights on Buyer Agency

When you partner with a Buyer Agency, you gain more than access to listings—you gain a strategic advocate. In Kenya’s fast-paced and often opaque property market, this representation can be the difference between overpaying and securing your dream home at fair value.

Land Banking in Kenya: How Smart Investors Position Before the Boom

by | Sep 19, 2018 | Bargain-Hunting Series, Real Estate Market Intelligence, Writer's Commentaries | 0 comments

  • What is Land Banking?

  • How Land Banking Works

  • What Land Banking Isn’t

  • Considerations Before You Enter a Land Banking Scheme

  • The Investment Rules for Land Banking
    What Should Investors Expect From Land Banking Schemes?

  • Inherent Risks in Land Banking Schemes

  • Key Takeaways for Anyone Investing in Land Banking Schemes

Land banking is an investment strategy built around acquiring significant parcels of undeveloped land, or securing the right to purchase such land at a predetermined future date through mechanisms like lease options, with the intention of selling at a later stage when value has appreciated.

Land banking is the practice of buying land and holding it for a long period with the expectation that its value will increase over time.

Think of it as “parking capital in soil.”

Instead of developing the land immediately, an investor simply acquires it, secures ownership, and waits—sometimes years or decades—for surrounding growth, infrastructure, and demand to push prices upward. The profit is realised when the land is eventually sold at a much higher value or developed later at a strategic time.

How land banking works in simple terms:

  • Buy land in an area with future growth potential (roads, urban expansion, industrial zones, etc.)
  • Hold it while value appreciates naturally over time
  • Sell or develop when demand and prices have significantly increased

The incentive to an investor is obviously the opportunity to cash out of the scheme with significantly higher capital gains than would otherwise have been achievable through an outright purchase of the property.

The proponents of the scheme “acquire” the right, theoretically, to sell the land via a leasing option and to either finalise the transfer to their investors upon maturity of the agreed term of the contract; or to redeem the option at the prevailing market rates at such agreed future date.

Land Banking Explained

Land banking typically involves undeveloped land located within or near fast-growing urban areas, emerging towns, or regions earmarked for future infrastructure development. The scheme’s proponent (usually the seller or developer) acquires or controls such land and then conceptually subdivides it into smaller units for sale to investors.

Investors do not usually purchase the land outright. Instead, they acquire rights through lease agreements or redeemable option contracts that grant them the ability to purchase the land at a predetermined future date and price. These arrangements are structured as option contracts, often with a fixed maturity date (a “sunset clause”) and agreed contractual terms that lock in future purchase conditions.

In many cases, these schemes are also marketed as managed investment structures, sometimes with financial incentives designed to encourage participation and early commitment. The structure closely mirrors seller financing, where the buyer secures the right—but not always the obligation—to purchase property at a fixed price in the future. Depending on the terms, the option may be either optional or effectively binding upon maturity, with the seller obligated to reserve the land for the option holder once the agreement is in place.

By paying an upfront option fee, the investor effectively buys time and price certainty, committing in principle to complete the purchase at the end of the option period. This fee is typically determined by the duration of the option (often ranging between 10 and 25 years) and whether the arrangement is discretionary or mandatory. Because these rights are treated as investment instruments, they are often transferable to third parties, although such transfers must usually be formally registered and approved by the scheme’s proponent.

What Land Banking Isn’t

When most people in Kenya say they are “doing land banking,” what they often mean is this: buying a small residential plot, fencing it, and waiting. It feels disciplined, almost financial in spirit. But banks do not “buy and wait” in isolation. They deploy capital into structured instruments, diversified portfolios, and time-bound yield expectations. Even when they hold land or real estate exposure, it is never a passive, sentiment-driven holding. It is underwritten against macroeconomic models, liquidity cycles, interest rate environments, and exit scenarios. This needs to be the thinking when you refer to “banking” – scale and purpose, not speculation.

You have not become a “land banker” because you have purchased five small residential plots across three locations.

What you have done is acquire fragmented land holdings.

Land banking is not defined by multiplication of plots. It is defined by capital strategy, spatial foresight, and structural positioning within a growth corridor.

True land banking is not about accumulation. It is about anticipation of transformation—owning land before infrastructure, zoning shifts, or demographic pressure crystallises its value. Without that directional thesis, multiple plots do not compound strategy; they simply multiply exposure.

So the uncomfortable truth is this:
Owning more plots does not elevate you into a land banker. It may only mean you have diversified your waiting time across several inactive positions.

In land banking, scale without strategy is not sophistication. It is dispersion disguised as discipline.

Considerations Before You Enter a Land Banking Scheme

Land banking can be a powerful wealth-building strategy, but only when it is entered with clear eyes rather than broad assumptions. Before committing capital, investors must interrogate the direction of growth, not just the presence of land. Where is infrastructure moving? Which corridors are absorbing population and commerce? And more importantly, what forces will transform today’s idle land into tomorrow’s demand hotspot?

Equally critical is understanding liquidity and time horizon. Land banking is not a quick-turn strategy—it is a long arc that ties up capital while waiting for external catalysts to do the heavy lifting. Without a defined exit pathway, realistic holding capacity, and a tolerance for illiquidity, what begins as strategic patience can quietly become financial stagnation. In land banking, conviction must always be matched with clarity, otherwise you are not positioning for growth—you are simply waiting on hope with paperwork.

The Investment Rules for Land Banking

Each land-banking scheme will usually have its own investment rules elaborating the rights of the buyers and the sellers, the contract periods of the options as well as exit clauses to protect the rights of both parties. The general idea with these schemes is very similar to off-plan investing – buy today at an understated/undervalued price with the prospect of making significant returns at maturity of the project. Similar to off-plan schemes, they are often sold on concept, unlike actual subdivision schemes, so that the investor is basically pooling their funds with other investors to acquire a larger parcel, as if based on shares and not necessarily with the rights that attach to actually owning the property.

Investor Expectations

The investor will be looking at the scheme to see if the opportunity to invest today makes economic sense and whether the returns that will be accrued in capital gains/ appreciation in value over time offer a sound investment. Obviously, the main factors that will cause the appreciation in value include settlement of local populations within the vicinity of the property, development of multi-dwelling residential properties, and institutional and commercial developments. However, forecasting the progression of these factors 10, 15 or even 20 years down the line may not be as easy as many investors may be given to think.

The investor’s success in a land banking scheme lies in their knowledge of the market and their ability to think strategically and follow paths of development in undeveloped areas in proximity to growing towns.

The ability to identify and invest in strategic properties or real estate market segments that are poised for strong growth in the near to long-term is a useful tool in the arsenal of savvy real estate investors.

It is a great equity growth strategy but one that requires patient capital and a high investor acumen.

Inherent Risks in Land Banking Schemes

Land banking schemes are complex. Unlike subdivision schemes, they are based on theoretical or notional allocation without any formal transfer or actual ownership of the land in question. As an investor, before you consider land banking as a possible investment avenue to expand your real estate investment plans, you should be adequately informed about how the scheme you are investing in works and understand the risks you would be assuming.

  1. Buying anything on the concept rather than on actual tangible evidence of the same is always fraught with a higher level of risk. The risks of investing in land-banking are much akin to those of investing in off-plan schemes. Not dissimilar to off-plan schemes or fractional property ownership schemes, land banking schemes are often touted as a cheaper, more affordable option of real estate investing.
  2. Are you familiar enough with the market to understand the proposition? There are risks to do with rezoning and even reclamation of the property during the life of the option, which may interfere with the buyer’s rights under the Option Contract. In addition, the contract is premised on the vendor’s prospects of the market. If compelled to exercise the option earlier than the sunset clause, there may be stiff penalties resulting in loss or negative returns.
  3. Like off-plan schemes, land-banking schemes are not uniquely regulated financial instruments. Their proponents are essentially leveraging a high-risk capital-raising mechanism with little to no risk on their part. Indeed, because there is no requirement compelling the vendor offering Option Contracts to demonstrate legal ownership of the property, the investor may very well be scammed.
  4. All high-yielding opportunities also carry a high degree of risk. In the case of land-banking, the risk that the vendor can over-subscribe a project, leaving investors high and dry, is imminent. There is also the risk of the scheme’s complete failure owing to insolvency if the scheme was premised on creating new property developments which are eventually not approved by local authorities.
  5. For the investor, a land banking contract is not much more than options to exercise the right to acquire land. They rely heavily on the proponents of the schemes transacting and conducting their business with a very high level of integrity and trust. Additionally, because the investor isn’t provided with any formal ownership documents (title), the investor cannot leverage the “acquisition”. Equally, transfers can only be authorised by the schemes’ proponents.

An investor must take all measures to secure their investments in these schemes by individually determining whether land banking opportunities are compatible with their investment plans. A good place to assess the opportunity would be your investment goals and strategy.

Key Takeaways for Anyone Investing in Land Banking Schemes

  • Land banking is not plot accumulation—it is strategic positioning ahead of growth corridors and infrastructure change.
  • Buying land without a clear growth thesis is not investing; it is capital parking with uncertainty attached.
  • Real returns depend more on location trajectory than purchase price or number of plots held.
  • A “cheap” plot in the wrong place is not a bargain—it is stagnant capital with maintenance obligations.
  • Liquidity matters: land banking is inherently illiquid, meaning your exit is slow, not flexible.
  • Time is the dominant variable—expect long holding periods (often 15–20+ years for meaningful real gains in steady 10% compounding scenarios).
  • Taxes, inflation, and currency depreciation quietly erode headline returns—net wealth is what remains after these forces, not before them.
  • Entry without exit planning turns strategy into speculation; you should define how and when you will exit before you buy.
  • The real edge is not in owning land, but in owning the right land at the right moment in the growth cycle.
  • Ultimately, land banking is less about quick wealth creation and more about long-duration wealth preservation and timing arbitrage.

Bargain Hunting FT.5: Key Takeaways For Real Estate Investing

by | Sep 11, 2018 | Bargain-Hunting Series, Real Estate Market Intelligence | 0 comments

  • Real Estate Investing 101

  • A Clear Real Estate Investing Blueprint

  • Diversify to Minimise and Diffuse Risk

  • Bulk up on Market Intelligence

  • Build a Real Estate Investing Network, Cultivate an Investor Mindset

  • Continuous Learning Is Essential to Successful Real Estate Investing

  • Achieving Real Estate Investing Success

      • #1. Keep it Simple, Take Action Today

      • #2. Develop a Real Estate Investing Plan

      • #3. Research and Learning Will Impact Your Success

      • #4. Learn From Your Mistakes to Make Progress

      • #5. Vigilance is Everything to Succeed

  • Real Estate Investing: Key Takeaways

At the time I was mulling this blog, James, a long-time friend, was the first person who came to mind. Over the years, he has become somewhat of an ‘aficionado’ on real estate investing.

Who better to give me his Key Takeaways for Real Estate Investing and provide insight on the subject than someone who can speak authoritatively out of their experience?

By developing his own real estate investing plan and building the skills of a consummate real estate investor, he has masterfully navigated his way into successful real estate deals, in the process racking up a spectacular portfolio of investments built up over two decades.

I invited him to lunch with a small group of friends where I’d asked him to give us practical insights into his journey in the world of real estate investing. He happily obliged, and I was thrilled. These were the 5 key takeaways from that conversation:

1. All successful investors develop a clear investment plan and habitually review their progress, adjusting it based on their successes and failures.
2. All successful investors diversify their investments to spread and minimise risk. Consider investing in different market segments and for different utilities (capital gains and income).
3. The savviest investors build up market intelligence by observing and following market trends and can eventually predict market behaviour as well as determine their effect on different market segments.
4. All successful investors develop an investor mindset. They learn how to remove their emotions from the transaction, place their objectives above aesthetic and superficial considerations, and have clear exit plans for each investment both at the point of acquisition and at the time of review if necessary.
5. All successful investors continually develop the skills and capabilities that they require to improve the outcomes of their investing activities.

How Can You Achieve These Key Takeaways For Real Estate Investing?

To be very clear, they seek out the best deals that are compatible with their investment plans for both capital gains and income yields. Although these bargains often exhibit poor aesthetic qualities and carry a higher level of risk than other properties in the market, the savvy investor can “see” the potential beyond their flaws and capitalise on those flaws to make a killing

So what strategic steps should new investors take to position themselves in the real estate market?

#1. Keep it Simple, Take Action Today

Purpose to step out of your comfort zone and to actively pursue a real estate investing journey. Starting out at the tender age of twenty-three when he made his first acquisition, James has gone to work on building an impressive fortune through a regimented approach to investing in real estate. Starting out is the most daunting part.

  1. Start early if you can.
  2. Start late if you must.
  3. Start with the resources available to you and gradually work your way towards leveraging resources from your networks and thereafter with traditional financiers (they will be convinced to support your endeavours if you can prove that you have successful investment models that give demonstrable returns).
  4. Start. Period.

#2. Develop a Real Estate Investing Plan

Determine a focused and clear plan for your real estate investing which will allow you to define the opportunities you shall consider. A strong investment plan incorporates and defines, amongst others, the specific investor’s:

  1. Objectives
  2. Strategy
  3. Tastes and preferences (which determine the specific niches the investor will operate in)
  4. Risk appetite/tolerance
  5. Resources
  6. Domain, i.e. target market

Compatibility with your investment plan determines the suitability of the deals you find in the market and good deals are only those that are a fit with your investment plans.  If your plan is not well-defined, you are likely to get caught up in bad investments. Consider developing selection or analysis criteria for each category of real estate investments within your plan to help determine which investments are suitable.

#3. Research and Learning Will Impact on Your Success:

Be committed to learning all you can on the real estate market and your success will be both demonstrable and evident. Market intelligence is key to any successful real estate investment plan.

#4. Learn From Your Mistakes to Make Progress:

Not all his investments panned out successfully or as he’d hoped. But James is fairly comfortable in the knowledge that he has secured a nest egg to see him through the retirement years and to sufficiently meet with the educational aspirations of his children. He credits much of his success to learning from his mistakes and making progress towards honing his investor skills and instinct.

#5. Nose in the Air, Ear to the Ground:

It’s often the market-savvy investor who finds the best deals first. But to do so, you’re going to have to build your intelligence on the market over time and with diligence.

1. Put in the legwork: Go to the field as often as possible and develop a culture of constantly studying the environment and making note of changes that are happening. This will allow you to become familiar with the market and to collect information on prevailing market conditions. You cannot determine whether what you are getting is a bargain if you don’t know the market.
2. Be organised, disciplined and prepared. Be accurate and methodical in your data gathering. Develop your own criteria for appraising opportunities. Follow a discipline in your decision-making process devoid of emotional criteria. Plan and position yourself to be able to close on bargains before other investors crowd you out and leverage the opportunities.
3. Separate the wheat from the chaff – apply an analytical process to review opportunities, eliminating those that don’t meet the basic selection criteria, then those that fall outside the criteria until you are left with those that give the best returns (whether that is capital gains, cash flow, or yields).
4. Own what you know, and get to know what you don’t: Local knowledge in the market where you are pursuing deals is necessary. Get to know local agents in the specific location you are looking at. People in the vicinity such as vendors, transport service providers, and even the gatemen can be a treasure trove of information – strike up conversations with them and treat them well!
5. Your network is your net worth: Build a network of associates in the public sector offices and in as many professions whose offices interact closely with the real estate industry. This includes lawyers, surveyors, property agents and managers, architects, property developers, building contractors, engineers, managers in financial services institutions (banks, cooperative societies). They will provide credible investment leads and steer you to exceptional opportunities. Another source of property bargains is movers and firms that provide relocation services.
6. Attend public auctions. Better yet, get familiar with a licensed auctioneer who can give you leads on public auctions. Preying on the misfortunes/missteps of others may initially seem sleazy. However, there is no obligation to buy and, if nothing else, the experience will be instructive. There are some true gems to be found here.

To continually maintain and nurture the networks that feed your investment pipeline, you will also need to improve your interpersonal skills – listening, negotiating, communicating and interacting with your networks. The investment in continuous learning and improvement of your skills and capabilities will build up your market intuition, help you engage with your networks more meaningfully and help you sell faster.

Bargain-Hunting FT 4: Investing in Distressed, Bank-Owned Property

by | Sep 5, 2018 | Bargain-Hunting Series, Property Market Advisory Series, Real Estate Market Intelligence | 0 comments

  • Understanding Distressed Property

  • Why Banks Sell Property

  • Opportunities and Risks Associated with Distressed, Bank-Owned Property

  • Repossession and Auction Distressed, Bank-Owned Property

  • Profiting From Distressed, Bank-Owned Property Sales

  • Distressed Bank-Owned Property: Where is the bargain?

  • Rehabilitation and Restoration of Distressed Bank-Owned Property:  and Common Mistakes to Avoid

  • Final Investment Takeaways

Understanding Distressed, Bank-Owned Property

Distressed, bank-owned property is a property whose owner is under financial or legal pressure, making it likely to be sold below its market value. This often occurs due to mortgage default, foreclosure, unpaid debts, bankruptcy, tax arrears, or other circumstances that force a sale.

Opportunities and Risks Associated with Distressed, Bank-Owned Property

For investors, distressed properties can present opportunities to acquire real estate at discounted prices, although they often require careful due diligence to assess legal, financial, and physical risks. Investing in Distressed, Bank-Owned Property is a real estate investment strategy that can yield high returns. It is most ideal for capital growth (buying low and selling high) but can also be applied for income and equity growth strategies.

The inherent risk with such an opportunity is always understanding market dynamics and performing your due diligence sufficiently enough because you are betting on the property delivering not just value from the dip in price, but that you will also be able to offload it to cash out quickly and that it doesn’t have any underlying, inherent issues that may put you out of pocket and wipe out any profits you had hoped to make

Repossession and Auction of Properties

When mortgage-borrowers default on their responsibility to make their monthly mortgage payments, the credit officers at the bank will attempt to seek advice from them. Eventually, if the default persists without remedy, the bank will follow due process to recover the balance on the defaulted loan. This process culminates in the repossession and auction of the property.

A mortgage-borrower may take legal steps through court orders and injunctions to prevent the process from proceeding if they can show cause or make good on the loan balance. However, once the process has been cleared by the court, the bank can take measures to repossess and dispose of the property to the highest bidder at public auction. Distressed Bank-Owned Property will be valued and a foreclosure value assigned. At public auction, the bank may indicate a reserve price, usually the bare minimum at which the bank is willing to dispose of the property.

Profiting From Distressed, Bank-Owned Property Sales

A simple example would be negotiating to acquire a property valued at KES 5M for say KES 3.5M and then disposing of it in the open market for say KES 4.8M or as close to its open market value as possible. The transaction above, after costs, can yield a net profit of KES 1M. Depending on the condition of the property, and if the investor is merely looking to make immediate capital gains on the property, he can even commence the sale of the property as quickly as is legally possible.

In both instances, the circumstances driving the sale is the pressure to meet with the financial obligations arising out of default on mortgage payments. The main distinction is that distressed sales are triggered by the borrower while the latter is triggered by the financier (bank). Both represent an opportunity for real estate investors to make massive profits.

Distressed Bank-Owned Property: Where is the bargain?

Properties that have come under the hammer are usually sold either at public auction or sale by private treaty. Lenders prefer public auction because they are deemed to be the faster route to disposing of property as opposed to open market sales.

Rather than getting involved in managing property – which is not their core business – mortgage financiers are inclined to offer substantial markdowns just to offload them from their books. This is what makes them great bargains. In addition, except in a sale by private treaty, the lender is not obligated to secure any of the defaulter’s interest in the property. This means that the price may be significantly lower than the market value of the property.  Defaulters ultimately lose their entire investment since there is no legal requirement on the lenders to recover any amounts from the sale of a collateralized property above the outstanding loan.

The best bargains rarely make it to public auction. These are usually referred to as short sales or sale by private treaty. On the initiative of either the property owner or the lender, when the borrower falls behind on their mortgage payments and the lender has commenced legal action to recover the property, the property may be sold. These properties are much more profitable because both the lender and the property owner are highly motivated to sell rather than bother with the cost, hustle or risk necessitated by public auction.

Short sales are usually win-win for both the lender and borrower, which means both parties are looking to mitigate their losses and are willing to accept less than the full balance owed on the existing mortgage. They work especially well if the property condition is bad enough to reduce the current market value below the loan balance (usually dilapidated properties). At the bare minimum, short sales can guarantee the investor potential returns of up to 15% of market value on securing distressed property. The Land Act prescribes that land or property must be sold at a reserve price when sold under public auction.

Distressed Bank-Owned Property: Rehabilitation and Restoration

Any investor needs to understand the process that leads to the auction of real estate properties. It may take an extended period of time between default and completion of the judicial process that approves the sale of a property by public auction, especially where the process is heavily contested by the borrower. This means that by the time of sale, some properties can be collected at much deeper discounts as they may require rehabilitation. Make sure to investigate the physical state of a property on offer. Properties that are occupied tend to be better maintained and would have lower costs of restoration compared to vacant unoccupied properties, which tend to be rundown.

Conclusion

Being auctioned is an ignominy – just about one of the worst experiences you could face. It is an unpleasant experience. And auctioneers are possibly some of the most loathed individuals. It comes with the territory. Auctioneers conjure up terror, and the disgrace of going into unmanageable debt is unfortunate. But as sure as the sun will rise in the east, it will happen. Setting aside the emotional conflict that may arise from leveraging these situations allows seasoned investors to create an opportunity for themselves. Public auctions in many parts of the world have a much more pleasant “whiff” about them because they are associated more with the voluntary disposal of fine things – homes, art, jewellery and even charitable causes. Not so in Kenya! In the lingua franca, being auctioned is referred to as “kuchotwa”, which loosely translates to “getting scalped”.

According to reports by the Central Bank of Kenya, the outstanding value of non-performing mortgages stood at KES. 22.0 billion in December 2016, with an average mortgage loan size of KES 9.1 million. While mortgages are not the preferred form of financing the acquisition of property, the same source cites that there were 24,085 mortgage loans in the market in December 2016, a decline of 1.5% from the year before, with banks being forced to rein in their loaning practices through tighter credit measures.  With the relaxation of interest capping rules, the market will inevitably see growth beyond Q3 of 2018 after the market bounces back from the slump of 2017. The volume of premium bargains available in the market is deep. This is perhaps one of the most important tools the top 1% of successful real estate investor use to fast-track their capital growth. Time to jump in!

Bargain Hunting: 5 Keys to Find Great Property Deals

by | Aug 27, 2018 | Bargain-Hunting Series, Property Market Advisory Series, Real Estate Market Intelligence | 0 comments

  • Keys to Find Great Property Deals: Everyone Loves A Bargain

  • The Vulture and The Hyena

  • What are your Objectives?

  • 5 Keys to Find Great Property Deals

      • #1. Find the Motivated Seller
        #2. Get Your “Ducks in a Row”

      • #3. Study the Market

      • #4. Leverage Your Networks

      • #5. Investment Opportunities Hiding in Plain Sight

  • Keys to Find Great Property Deals: More Options

  • Keys to Find Great Property Deals: Takeaways

Property is ubiquitous and the Keys to Find Great Property Deals are available to any committed property investor disciplined enough to set off after their goals unwaveringly. If you are at that point in life where it has dawned on you that your current financial resources may not be sufficient to keep up with the lifestyle you desire or to meet the growing financial needs of your family, then this is for you. And if you are simply looking to increase your income and work towards financial independence gradually, then read on.

Keys to Find Great Property Deals: Everyone Loves A Bargain

At least all investors do, and they realize that bargains equate to profits, plain and simple. The most prolific bargain-hunters are capable of fashioning some sort of a win out of calamities, whether theirs or those of others. In this series, we explore how seasoned real estate investors seek out bargains to grow their wealth through bare-knuckled, unabashed opportunism –  taking a regimented approach to achieving their goals.

Keys to Find Great Property Deals: The Story of The Vulture and The Hyena

In African anthology, certain animals are disparaged and vilified for their opportunistic nature. So to be compared to, say the Hyena, or the Vulture, is most disagreeable. Scavengers are tenacious and in the natural world, they possess some of the most unique and amazing qualities. They have guts, literally, comparable to none others in the animal kingdom. Hyenas organize socially in matriarchal societies and have the strongest jaws of any animal on the planet. Like vultures, they have an acute sense of smell. Vultures have eyesight only comparable to that of their higher-flying ornithological compatriot, the eagle.

Becoming a great real estate investor is in part a study of the amazing qualities these creatures possess. Much like the hyena and vulture, the success of bargain-hunters is achieved through tenacious effort, knowing where to rummage for opportunities and learning how to sniff them out. Their overall success is not built on overwhelming strength or dominance of the food chain, but rather on their opportunism, vision, and tenacity. Much as how these creatures are able to pick up the scent of a fresh kill miles away, real estate investors learn to hone-in on investment opportunities. Bargain-hunting, tenacity, and opportunism are synonymous, there can’t be one without the other.

Whether you are looking at meeting additional financial demands for the educational requirements of your children, or you are considering the resources you will require for your retirement or whether you simply want to have additional cash to spend on your lifestyle, learning how to invest will be critical. Real estate is a great avenue to pursue these goals.

Keys to Find Great Property Deals: What are your Objectives?

The goal of any investment strategy is profit. Setting out clear objectives of what you want to achieve gives your investment clarity and purpose. Your objectives will then determine the market segments you will be focused on. For each objective, you will be looking at properties in different market segments best suited to achieving the objective.

For long-term capital growth, for example, you may consider vacant land in a rapidly developing area that can provide capital gains (appreciation) within a reasonable period of time. While for income, you may consider rental property. Success will lie in aligning your acquisitions with your goals – the right property for the specific purpose

5 Keys to Find Great Property Deals

The intrinsic properties of real estate make it one of the best investment tools for wealth creation available in any investors toolkit.

Here are 5 tips on how you can find an investment property.

#1. Find the Motivated Seller

In the world of real estate, profit is made at the point of purchase and not the point of sale. Otherwise, as the investor, you will be obligated to hold the profit for an inordinately long period of time before you can cash out. The motivated seller represents the single best opportunity to strike a big bargain. When the seller is motivated, half the task of negotiating a great deal is already accomplished.

Wherever you see the phrase ‘quick sale’ or ‘distressed property’ right there is your motivated seller! This individual is hard-pressed for liquid resources (i.e. cash) to finance some other priority which itself has been triggered by the occurrence of some unprecedented/unexpected or unplanned event or circumstance.

  • Unplanned events: An individual may accrue additional financial costs associated with the relocation of family out of the country for reasons of employment or to meet the cost of additional financial burdens associated with hospitalisation or educational requirements for a family member and so on. This, in turn, may necessitate the disposal of assets within the shortest possible time to raise the funds to make this possible.

  • Calamity: this includes the loss of income, hospitalisation, and even loss of life. For instance, an individual who has lost their source of income is highly motivated to make a quick sale of a mortgaged property at a time of sharply spiking interest rates.

  • Sometimes, quick sales are driven by a combination of events; individual circumstances unique to a seller which are then aggravated by occurrences in the market. For example, an investor who purchased a property on a mortgage may want to sell the property before racking up stiff penalties and interest – and well before the auctioneers come calling – if they have lost their income. A combination of events such as the loss of a job combined with a mortgaged property in a scenario of spiralling interest rates and growing family needs may necessitate the quick disposal of that property to enable the investor to cope in deteriorating circumstances.

Striking a rapport with a motivated seller is a great way to establish a baseline for negotiation on price and other terms. It is equally important to establish the reasons for the sale as this will also provide you with more insight on how to negotiate the acquisition and possibly give you some more flexibility on the terms and conditions.

#2. Get Your “Ducks in a Row”

Develop and collate your sources of property information to create a list of potential properties that are aligned with your respective objectives. Your sources may include local real estate agents, online property portals, newspapers, real estate magazines, government websites, fliers, local events, your networks including investment clubs and SACCOs. Finding and identifying profitable deals takes a bit of experience, so it is also strongly recommended that you drive around to actually visit the properties and to expand your information sources to include local agents who can identify motivated sellers.

Your local realtor will be able to identify investment opportunities and motivated sellers. They will be an integral source of information on comparable properties, accurate market valuations, providing you with networks to resource persons, undervalued opportunities, and they will be an invaluable resource in helping achieve your objectives.

#3. Study the Market

To follow the money, you have to know where it is headed. You simply have to know where to look; otherwise, your search will fall short. Neighbourhoods with growing populations in proximity to markets, trading centres, educational institutions, shopping centres, hospitals, and transportation hubs are ideal investment property locations for both income generation and capital appreciation.  In these locations, there is high demand for tenant-occupied properties, and because the neighbourhood is developing, there is also increased settlement in the area, which translates into higher demand for housing and therefore a faster rate of capital appreciation even for vacant land. If the location is a low-income neighbourhood, there will be a sustained high demand for rental properties because of the relatively transient nature of low-income earners, translating as well into good returns on investments and relatively higher growth in rents (compared to middle-income and upmarket neighbourhoods).

Understanding the markets is also critical to an awareness of when to invest. Like all markets, the real estate market is not immune to cycles. Markets go soft for a variety of reasons. Importantly though, it places sellers at a great disadvantage because demand becomes highly depressed. In Kenya, the season of political contest invariably causes the market to go soft, leading to an oversupply of particular types of properties. With so many sellers trying to cash out in a market with very few buyers, prices become depressed and great bargains abound.

#4. Leverage Your Networks

More Keys to Find Great Property Deals include leveraging your networks. In addition to your local agent, making connections with bank credit officers and other professionals closely linked to the financial services industry may offer great value in your search for investment properties.

The importance of networking cannot be overstated. To sell, you need to create and hold the trust of your buyers. So your networks become the most important asset you own because they already know you. These include professionals working within the same industry, from realtors to property surveyors, tenants, contractors, lawyers, accountants, other investors like yourself, financial services practitioners and many more.

The effort to build and maintain contact with your network will align with your success as an investor and pay off handsomely in time. The great advantage of networks is also that they give advance information on opportunities even before they hit the market, allowing you to be first to market with the information.

#5. Investment Opportunities Hiding in Plain Sight

It is not always obvious to the undiscerning eye, but there are opportunities that rarely present themselves as such because they are often couched in unpleasant situations. Family disputes are a case in point. They can take many forms from family feuds to disagreements over inheritance, lawsuits and so on. In these circumstances, a property owner may seek to dispose of assets in order to re-establish themselves elsewhere or to settle the dispute at hand. Usually, individuals looking to settle disputes via the sale of assets are highly motivated to get rid of the property.

Another opportunity is dilapidated, incomplete or even unused structures. Properties may fall into disuse for a variety of reasons, for instance, age, ravages of weather, partial destruction by fire and so on. When they become rundown, such properties become opportune bargains which can be collected from the market a mere fraction of their rehabilitated value. Obviously, a seasoned investor would know to assemble a team of professionals who can provide them with costs for rehabilitation before acquiring such property. In this way, they can make a fair estimate of the actual value of the property in its current state and therefore the capital gains they stand to make should they choose to acquire such properties.

Keys to Find Great Property Deals: More Options You Can Explore

There are other approaches to finding great investment opportunities depending on the requirements of the particular investor. These take a less hands-on approach to property investment through structured financial securities such as investment clubs, fractional (commonly referred to as time-shares) and sectional properties (REITs). Off-plan property investing is also a great way to secure property bargains in the market.

Keys to Find Great Property Deals: Conclusion

  • If you fancy yourself a savvy investor, above all else, you will be looking to grow and get paid to do it. That, after all, is the game – untainted by the moral dilemma of taking advantage of the market or other people’s circumstances.
  • Find those perfectly scrupulous, legal and moral ways to strike bargains without distressing others or breaking any laws.
  • The places where bargains are to be found are not invisible; they’re in the marketplace, and if you develop the eyes of a seasoned investor, you’ll notice them staring back at you.
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