How to Start a Real Estate Business in Kenya [Full 2024 Guide]

If you want to learn how to start a real estate business in Kenya, we made this guide just for you.

We have prepared a detailed step-by-step process that you can follow and get your business up and running in no time.

But before we dive into the details, let’s start with the basics.

The Basics of Real Estate Business in Kenya

The real estate business in Kenya is quickly booming as more investors find it to be one of the most profitable passive income investments.

It will require a lot of effort and time on your part, but we believe it is worth it.

So, what exactly is a real estate business?

What is a Real Estate Business in Kenya?

In a broader sense, a real estate business involves the buying, selling, management, investment and operation of buildings and lands. However, real estate may also refer to other assets and natural resources that are either below or above land.

These include crops, water, and minerals.

To narrow this down for you, think of the real estate business as an umbrella term for different types of businesses that work in the real estate industry.

These include:

• Property management
• Construction companies
• Real estate brokers and agents
• Home improvement companies
• Property development companies, etc…

All the businesses mentioned operate in one of two ways: by leasing or selling properties to either individuals or corporations. Depending on the business you choose, you will have to follow a slightly different strategy when setting it up.

For example, property management businesses only lease the properties they manage, while brokers and agents usually get paid when they sell a property.

For the sake of keeping this guide simple, we will be focusing on the rental/selling and land aspects as they are more common in Kenya and easy to set up if you have the right resources.

Renting or leasing a property is simply renting out a house, apartment, office, etc., to a tenant on a contract.

The tenant pays you a monthly fee or rents for the right to live in or use the property until the contract expires or as long as they want.

Is the Real Estate Business Profitable in Kenya?

Yes, the real estate business is profitable in Kenya. One of the reasons why a real estate business has high-profit margins is inflation. This is where the price of your property increases over time.

For instance, if you buy a property now and sell it in two or three years, the price will be much higher.

For example, did you know that the house you live in is likely worth double or even triple what you purchased it for?

That’s because every year, the value of properties goes up. This has to do with inflation and other factors.

This is why it makes a lot of sense to invest in real estate as you can buy a property at one price and sell it for a higher price in a few months.

There is also a higher demand for rental properties in Kenya.

There are several reasons why the demand for rentals in Kenya is so high:

• People Are Moving to Urban Areas – As people continue flocking to urban hubs, they will need somewhere to live. Therefore, the demand for housing is on the rise, especially in major cities like Nairobi.
• The Population Is Rising – Although it’s impossible to tell how many people are moving to urban areas at any given moment, another important factor here is Kenya’s ever-rising population which has now reached over 50 million. This means that there is even less land for people to build houses which forces them to resort to rentals.
• Kenya’s Unemployment Rate – The unemployment rate in Kenya is pretty high at over 7%. This means that there are a lot of people who need somewhere to live but have no income to buy or build a home. This makes renting a sensible option for them as they can pay monthly or weekly instead of upfront in lump sum cash.

So, in a nutshell, you can make money from your real estate business in Kenya in one of three ways:

• Through inflation
• By earning income through renting
• By selling or flipping properties ( a little different from inflation)

What are the Benefits of Starting a Real Estate Business in Kenya?

There are many benefits to starting a real estate business in Kenya.

The most obvious one is that you will be earning good money which makes this business a great way to build wealth and accumulate assets.

However, money is not the only thing you will get by starting a real estate business in Kenya. Here are some other benefits:

• Networking Opportunities – When you have a rental property, you will have tenants coming and going at all times. In fact, since most people rent housing before buying homes, you might even have the same tenant for years on end. This means that you can build relationships with your tenants which will lead to opportunities down the line if they want to buy a house or need other services from you such as insurance, financing etc.
• A Sense of Accomplishment – The real estate business is considered one of the best investments in Kenya. So, when you successfully establish your own business, you feel a great sense of accomplishment which might help you expand your business even more.
• A Safe Investment – As Kenya’s inflation rate is still high, owning property makes for a safer investment than other forms of assets/income which have lower returns over time.
• Tax Advantages – In addition to being a safe investment, investing in real estate also has many tax advantages as depreciation and capital gains can be used as tax deductions by landlords under the Income Tax Act.
• You can Evict/Terminate Tenants Easily – Since you own the building, you have the right to evict tenants if they break their lease and stop paying rent or cause damage to your property which means that you can easily manage losses.

Steps to Starting a Real Estate Business in Kenya

• Decide How You Want to Invest
• Conduct In-Depth Research
• Create a Good Strategy
• Create a Real Estate Business Plan
• Organize Your Finances
• Register Your Business
• Come Up With a Marketing Strategy
• Form An LLC
• Build A Support Network

STEP 1: Decide How You Want to Invest

As we already mentioned, a real estate business comes in different forms. So, the first logical step would be to decide which model you want to go with.

You can:

• Invest in a property (buy or build) and earn rental income (multi-family houses, apartments, single houses etc.)
• Buy a property, hold on it, and sell it later (taking advantage of inflation)
• Buy under-construction or completed homes and sell them for an increased price (real estate flipping)
• Create your own business by buying land and then selling it later on when it increases in value (this is usually called ‘land banking’)

These are basically the most common forms of real estate investments in Kenya.

Let’s quickly go through each method to help you pick one that is the best fit for your investment portfolio.

Note: It is absolutely okay to use different methods if you have the financial muscles to do so.

Method 1: Invest in a Rental Property

This model makes the most sense, especially if you want to earn monthly returns for a long time.

You can do this in one of two ways:

• Build your own rentals from scratch
• Buy ready buildings and rent them out

Renting out a property is fairly straightforward as all you need to do is find a tenant, negotiate the rent amount with them, and sign a lease agreement that outlines the terms of their stay in your building.

In most cases, tenants will find you.

The downside of this method is that there is a huge competition which means that you might have to keep your rates affordable to get many tenants.

Method 2: Real Estate Flipping: Buying and Selling Homes for a Profit

This is probably the easiest way to get into real estate since it takes less time than investing in rental property. The idea here is to buy homes at a low price, do some renovations and then sell them at a higher cost.

As we all know, real estate prices in Kenya are still on the rise. This is why this method has become so popular over the past few years.

There are only a few things you need to do when it comes to real estate flipping in Kenya:

• Find a good property that will sell at a higher price after renovations
• Do all necessary renovations
• Put the property on the market

When it comes to real estate flipping, you need to be very careful and understand the market value of a property before buying. This is because you might buy a property for higher than it is worth only to find out that you cannot flip it for a profit even after renovating.

You will also need to factor in renovation costs when deciding how much to resell it for.

Method 3: Buy and Hold onto A Property

This might sound like real estate flipping but it is not. For once, you don’t necessarily have to renovate the property to boost its value. Also, while you can flip a property in a few days or months, holding means staying with it for several years.

The idea is to wait until the price of a property goes up before reselling. So, basically, this method leverages inflation to make you money.

There are several ways you can hold onto a property:

• Let it just sit there
• Live in it yourself
• Rent it out then sell it later

Whichever method you use, the idea is to sell when the price goes up.

Method 4: Land Banking

This is the riskiest and, at the same time, the most high-reward and popular form of real estate investment.

Here’s how it works:

• Buy as much land as you can afford around an area that has a very solid demand for a specific type of property (apartment buildings, single houses etc.)
• Hold on to that land for a few years and then sell it when the price goes up. The more you hold on to your piece of real estate, the higher your profits will be. That is assuming that the price will also be going up.

You can do this by either buying huge plots or by acquiring parcels of land in a specific area.

The downside of this method is that you need to have deep pockets as well as a lot of patience for your real estate business to grow into something really profitable.

If this sounds too risky, then maybe consider the other options we mentioned above.

In any case, if you do decide to buy land, you need to have a good team of people working for you. This is because holding on to real estate offloads a lot of responsibilities from your shoulders and leaves you with nothing but decisions regarding the overall performance and growth of your company.

Also, there are many scams surrounding land buying in Kenya, so you will need to be careful not to lose your money for nothing. Make sure that you follow the right procedure when buying land and avoid shortcuts at all costs.

STEP 2: Conduct In-Depth Research

Now that you know how you want to invest in real estate, the next step is to do some in-depth research into the market.

This way, you can gauge how much money you need to invest and whether or not it makes sense for your business model.

While a real estate business in Kenya may sound as simple as building properties and waiting for tenants to flock, there is a lot that you need to factor in.

When doing your research, try as much as possible to answer critical questions like:

• What is the available legal documentation?
• How much capital do you need in order to get your business started?
• What are the procedures in acquiring a plot of land in Kenya?
• Do you know how much it costs to start a real estate company in Kenya?
• What fees must I pay when buying a plot of land in Kenya?
• How much does it cost to hire a real estate agent when selling or renting properties?
• Who are my immediate competitors and how can I beat them?

These are just some of the many questions that you will have to answer before getting started in your own business in this market. However, there is a lot more research that you need to do if you are serious about making any real money in this industry.

For instance, if you already don’t know whether you want to invest in rentals, flip properties or buy land, you determine which is more suitable for you while doing your research.

You can also look into the pros and cons of each method and whether you want to focus on just one or several.

Find out how strong the demand is in your area of choice and whether this demand can be met with what you have to offer.

You also need to look into the local competition that’s already available in the market and whether or not they are a direct competitor to your business model.

Investing in real estate in Kenya can be a lucrative business but it requires a lot of research and patience. If you think you can handle both, then this might be the way for you to go.

STEP 3: Create A Solid Real Estate Business Plan in Kenya

Without a business plan, you will not know how much money you need to start your own real estate business or what to expect for your first few months in operation.

The kind of real estate business plan you write will depend on the size of your business and whether you will be seeking outside financing or not. If you will be using your own money, you can simply come up with a detailed roadmap of what you plan to do while building your business.

In a nutshell, a good business plan should include:

• An overview of the Kenyan market and where it stands right now
• Detailed research on the real estate industry in Kenya
• An analysis of your competition and their strengths and weaknesses
• A list of all the possible expenses that you may incur when starting a real estate business
• The fees that you will charge for your services
• Your potential lead sources
• How much money you need to invest

In general, this is how you should look at your business plan, even if you are just beginning to look into real estate in Kenya.

If your plan is weak, it will only be a reflection of your business and its ultimate failure.

And while a business plan is important, you don’t have to dive into too many unnecessary details.

Just give the basics and take off from there.

Once you have all this information in place, the next thing that you need to do is to start putting down your action plan. This is especially true if you just want to build one rental property or buy land as opposed to starting a massive real estate empire.

On the other hand, if you need a business loan or angel investors, you might need to provide details such as financial projections and your investment milestones.

Understand this, it is very common for potential investors to ask for such information and, if you don’t have them ready, you might scare them away.

STEP 4: Organize Your Finances

Having a good business plan is not enough if you don’t have the financial resources available at all times for your real estate business.

Of course, if you have already written a detailed business plan, you know how much you might need.

However, if you haven’t, let’s give you a rough estimate.

How Much Capital Do You Need to Start a Real Estate Business in Kenya?

You will need at least KSh 5 million to start a real estate business in Kenya if you are simply buying plots or properties. Of course, the value will vary greatly depending on a number of factors. This is merely a rough estimate and might be accurate for some people and way off for others.

So, to get a better idea of how much you will need to start a real estate business in Kenya, let’s look at the factors that will determine these costs.

They include:

• The Business Model You Choose
• The Location of Your Business
• The Size of Your Real Estate Business

The Business Model You Choose

One of the main factors that will greatly inform how much you need to get this business going is the business model you go with.

In this case, we mean the three methods we discussed above. These are:

• Building or buying rental properties:
• Flipping properties
• Buying land

The first option is probably the most expensive. If you will be building your own properties, you will likley spend a lot depending on:

• The size of those properties
• Where you source your building materials and prices at the time of buying
• Labor costs
• Local regulations on building and construction
• Whether or not you will need to buy land

On the other hand, if you are buying a rental property, the cost will depend on the newness, demand in your area, and size of the property.

Flipping will be a bit cheaper since you will be buying older properties. But again, the prices will vary depending on the:

• The area you are located
• Property demands
• Size of the property
• Age of the property
• Accompanying resources such as the extra land.

Before buying properties with the intention of flipping, ensure that you are not getting ripped off and that you will be able to turn a profit after renovations.

Buying land is straightforward and the cheapest of these methods. The cost of the land will vary depending on:

• The size of the land – The bigger the land you want the bigger the price
• Demand for the land – The more people want to buy the same piece of land, the higher the price will be.
• The location – You can buy a plot of land for less than 500k in rural areas and up to 5 million in urban areas.
• Surrounding amenities – Land closer to towns or learning institutions might be pricier

The Location of Your Business

Another important factor is where you intend to set up your business.

If you are going to build a real estate empire in Nairobi, it will be much more expensive than if you were to do so in Mt. Elgon or the rural areas of Turkana.

This is because land in Nairobi is probably much more expensive than anywhere else.

The Size of Your Real Estate Business

The size of your business will also determine how much you need in terms of capital. This is because the larger your business, the more money you will need to run it.

If you are just buying a few plots and constructing some rental properties, then the amount that you need to invest might be fairly low when compared with the amount that you need to invest if you were to start a massive real estate empire.

Where to Get Money For Your Real Estate Business in Kenya

Once you have an idea of how much money you need to start a real estate business in Kenya, you will need to start looking for ways to raise the funds.

Of course, this means that there are two options you can work with:

• Take a loan
• Use your savings

If you are going to borrow from a bank, the amount that you need will depend on how much you want to invest. In other words, if you want to build more of an empire, then you might have to take a larger amount.

On the other hand, if you just want something small, you might be able to borrow a smaller amount.

If your goal is to take a loan from a bank or any other financial institution, it might require that you have a good credit history and a solid real estate business plan.

On the other hand, if you are going to use your savings for this business, then there will be no such requirements.

However, you should be careful about how much of your own savings you put into this business.

Again, the amount that you need to invest is also dependent on the model of your business and where you plan to get started.

It will also depend on how long you intend to run this business and if you are planning on expanding it.

Once you have managed to raise enough money, you can now start looking for land and start building or investing in properties depending on what model of business you want to go with.

STEP 5: Register Your Business

Just a while back, the Kenya Revenue Authority (KRA) introduced a geo-mapping system to help them catch landlords who fail to remit taxes.

This means that now more than ever, it is very important to legally register your real estate business to avoid accumulating millions in taxes.

So, how do you do it?

While you might be required to submit some different documents, the process of registering all types of businesses in Kenya is ideally the same.

Let’s show you how…

How to Register a Real Estate Business in Kenya

The procedure of registering your real estate business in Kenya might vary from county to county but it’s mostly the same. If you don’t want to go through the hassle yourself, we recommend that you hire a lawyer who is qualified to do so.

In order to obtain a certificate of registration;

• You must be at least 18 years of age
• You have to register with the lands registry in Kenya
• You have to provide proof of real estate purchase
• You have to provide proof of finance to invest in a Real estate business
• You might have to appoint a Kenyan lawyer to act on your behalf if you are a non-resident

These are just some of the conditions you will have to meet but there might be more.

Now, to register your business name and obtain a certificate, you can check out this in-depth guide on how to do exactly that.

Note that these are general guidelines for registering a business name in Kenya and is not specific to real estate. But don’t worry, the process won’t be much different.

STEP 6: Come Up With a Marketing Strategy

Depending on how you plan to attract clients, you will need to come up with a marketing strategy.

If you are going to look for clients online, you will need to create a website and other online platforms that will allow potential clients to get in touch with you.

If you are going to be working offline, it might not be as expensive because the only cost here would be putting up a few billboards and flyers around your area of interest.

The success of this business will depend entirely on how effective your marketing strategy is and it should be designed in such a way to attract quality clients.

Ways to Promote Your Real Estate Business in Kenya

Here are some ideas on how to get your real estate business in front of the right clients:

• Make sure you are available on all the major social media platforms
• Make sure that you have a good online presence via your website and other platforms.
• If you are interested in marketing on billboards, it will cost some money but it is an effective way of promoting your business.
• You can also promote your business by sponsoring some local events or even offering free services for companies within the same industry as you.
• Invest in a good photographer. A good photographer is crucial for this business because you are going to have clients who are looking to buy or rent a property and they will need some visual aids. This means that photos of the houses, rooms and other properties will be required.
• Make property images on your website easily shareable
• Make sure your real estate images also cover the local area so that prospective clients can clearly see the neighbourhood.
• Make it easy for clients to contact you
• Create videos to provide a virtual tour of your properties. Clients love that.

And so on…

STEP 7: Build A Support Network

A support network is basically a group of people or contacts that you can rely on when things get tough.

This is especially essential for your business when you are just starting out because it will help to take some burden off your shoulders and this, in turn, will allow you to concentrate on expanding your business.

When choosing a support network, make sure that the people you choose are going to be of help. You can choose from your family, friends or even workmates depending on what you feel is most appropriate for you and the business.

The best part about having a support network is that they will always be there to encourage you and provide assistance when things get tough.

You will also have people who will be able to give you advice and mentor you when needed.

Examples of people who can help you with your real estate business include:

• Former schoolmates
• Current or former coworkers
• Family members
• Friends
• Business associates
• Online forums

Once you have chosen your network, make sure to maintain proper relationships with them because it will be beneficial for both parties in the long run.

When you are starting this business, the accounting aspect is very important.

This is because you have to keep track of all your expenses and revenue so that you know whether you are on the right financial track or you are doing something wrong. Keeping tabs on your finances will also help you pay taxes on time and avoid issues with KRA.

Your accountant should be good with numbers so they can help with the proper recording and reporting of all your expenses and revenue.

Your attorney will come in handy when you need to draft contracts, agreements and other legal documents pertaining to this business.

When hiring an attorney, make sure that he or she is licensed to offer these services and has some experience in the real estate business.

The Bottom Line

After reading this article, you should have all the information you need to start your real estate business in Kenya.

If you want to succeed, it is important that you learn more about this business and get as much experience as possible.

The best thing about starting a real estate business is that anyone can do it regardless of their background or experience.

As long as you have the drive and determination to succeed, this business will be a good choice for anyone looking to get into it.