Entrepreneurs share insights into how to successfully invest in real estate

After years of travelling in and out of the country to source for accessories for their mobile businesses, four long-time friends felt that it was time to start a business that would necessitate less travel, enabling them to settle down.

Towards this end, the four friends- Job Kariuki, Joseph Kamau, Shamton Githere and Robert launched Zani properties, a real estate company that would specialise in buying and selling land.

With cases of land fraud particularly amongst first-time buyers on the rise, the business would also offer advisory services around best practices for acquiring property.

In this feature, the four friends share insights into what one needs to consider while acquiring property, what kind of challenges one is likely to face when purchasing property and what one needs to do to avoid falling victim to real estate fraud.

“Due to the increase in appetite for land and the desire for home ownership, there has been an increase in cases of land fraud, and one needs to be vigilant to safeguard their investment,” said Job Kariuki, one of the directors of Zani Properties.

For starters, Kariuki says that buyers should upon identifying a piece of land that is satisfactory in convenience, size, soil or location, enquire whether the land is registered and available for use by conducting a land search using details on the title deed.

Previously, one had to walk into the lands registry offices at the county and national levels to get this kind of information, but this process has been made simpler through the National Land Management System which integrates all land data on one platform.

“Conduct a search to know the true owner of the land, to know whether the land has a restriction such as a caveat, unpaid rates, or a bank charge, to know the exact size of the land as captured in the land records, to know the history of the land, and to know the rent payable to the government, if there is any,” said Kariuki.

Upon ascertaining that the land is available, Joseph Kamau, also a director at Zani Properties, says that it is advisable to instruct the services of a licensed land surveyor to verify dimensions of the land and confirm the availability of boundaries.

Once that is established, the next step would be to instruct the services of a reputable agent to give a market estimate of the value of the land, thereby protecting one from possible exploitation from the seller or brokers. A good agent will also help you get the best deal on the land.

“You should also instruct the services of a conveyancing lawyer in order to receive appropriate legal representation throughout the sales process,” says Kamau.

A lawyer can help one to verify documents such as wills, letters of administration of a deceased estate, and letters of allotment. Getting contracts reviewed by an attorney can help to identify if there are any red flags in the contract.

“Engaging the services of a conveyancing lawyer can help to resolve some of the common issues that come up in real estate transactions such as validity of titles, or legality of contracts,” explained Kamau.

Exchange of monies throughout the land transaction process is also safest when done through lawyers as opposed to directly from the purchaser to the vendor.

“While these services might cost you some money at the beginning, it is a cost worth bearing because it saves you from losing millions of your money to unscrupulous dealers,” posed Shamton Githere, also a director at Zani.

He adds that due diligence on the land in question can be done by asking neighbors questions about the real owner of the land, history of the land ownership to know whether there are disputes involved, and general questions about the issues often overlooked such as drainage.

Once you are certain that the land in question is fit for purchase, you can instruct your advocate to prepare a letter of offer.

“The letter of offer is not a legal document but a binding agreement between the two parties involved that proves commitment,” posed Githere.

Some letters of offer demand that buyers pay a requisite down payment of at least 10 percent of the purchase price immediately on signing it.

Alternatively, the buyer and seller can mutually agree to open an escrow account which their advocates would oversee until completion of the sale.

“You should however avoid paying a booking fee, or deposits that exceed 10 percent of the purchase price of the land,” said Robert Karomo, one of the directors of Zani Properties.

After the letter of offer is signed, the seller’s advocate will draw up a sale agreement indicating the names of the buyer and seller, the agreed-on price, the mode of payment and documents to be supplied by the seller to facilitate registration of the transfer of land to the buyer.

Before signing it, one will need to facilitate the area land control board (LCB) composed of the area elders and the county commissioner with a fee ranging between Sh1000 to Sh5000 to ascertain legality and transparency of the trade.

The consent from the LCB, together with other documents such as land rent certificate, sale agreement, old title deed, KRA pin, land search, rates clearance from county and transfer instrument shall then be forwarded to the National Land Commission (NLC) to get a consent to transfer ownership of the land.

The buyer would then be required to pay for a stamp duty charged at the rate of four percent of the value of land in urban areas and two percent for rural areas to the Commissioner of Domestic Taxes, before now proceeding to settle the balance of the agreed payment in order to finalise the trade and become the legal owner of the property. Once that is done and one has acquired the piece, they can fence it to restrict encroachment.

For first time buyers, working with reputable firms such as Zani Properties can help one to navigate through the land buying process successfully, by avoiding the common pitfalls.

The organization, which mostly targets the middle class and civil servants, has properties in various parts of the country including Thika, Matuu, Rongai and Nakuru.

“In Kenya, it is not many people that can afford property worth more than Sh500, 000. We try to make our properties as affordable as possible, even if that means maintaining small profit margins,” said Karomo.

Through it’s community outreach arm the Zani Foundation, the company also engages in a number of activities such as supporting needy students with school fees and hospital bills, as a way of giving back to the community.