When you need to consider investing an apartment building, there are fundamental factors which you need to think about before you invest a single coin. The end result and return thereof which largely have confidence how well you addressed those factors. Being a real estate developer kisumu, it’s our business to assist 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 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 providing assess the market critically.
What will help you make good judgement here is dependent upon these factors;
The demand in the local market for unitsIf there is a huge demand that are available, you will not experience a long vacancy period. This will confirm you start getting returns immediately the property is completed and even when a tenant gets out, the time you need to bring in another tenant will be a short one.
The type of market you are going to invest inThe type of market will dictate the amount you can charge as rent. If you operate outside the expected range, you are sure to miss out on tenants. Therefore the market will impact directly on what you can receive as rental income. There are actually 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 decreased. If you secure financing at an interest of less than 10%, you then stand a chance of creating good return from the investment than if you secure funding at an rate of interest of 13% or more.
The amount of your down paymentThe amount of deposit you commit will reduce the funding required hence the costs of 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 a down payment of 20%, the remaining 80% will surely be financed by debt capital hence more interest expense.
Once you have looked at all these points, after this you need to ask whether you will be making money by investing in the property you have in your mind? If you don’t have a clear answer, try to find a property developer who offers consultancy or financial analyst.
2. Appreciation
You need to try to ask yourself 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 definitely not down over a period of 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 that this 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 the ideal but you prepare for the bad thing. You have to ask yourself what happens if all your assumptions were wrong. If you expected the units to become fully occupied or at least 70% occupied yet now you only attain 35% occupancy? You expected the value of the property to go up enabling you to secure funding but overall the value has dipped?
When you plan well for the potential risk, you might be adequately conditioned for any outcome. Before investing in any property development project, assess the risks involved and figure 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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