When it comes to investing in real estate, two popular options stand out—Real Estate Investment Trusts (REITs) and outright land ownership. Both can be great for building wealth, but they serve different purposes and come with unique benefits and drawbacks. If you’re a Kenyan in the diaspora or have significant disposable income, how do you decide which route to take? Let’s break it down.
Owning Land Outright: The Pros and Cons
Pros:
- Tangible Asset
There’s something undeniably appealing about owning land. You can touch it, visit it, and develop it however you like. This sense of ownership gives you control over your investment. - Appreciation Potential
Historically, land tends to appreciate over time, especially in high-demand areas like Nanyuki or other parts of Kenya. The longer you hold onto it, the more value it can gain, especially in fast-growing regions. - Diversified Use
With land, you have multiple options—you can develop it, lease it out, or even sell it later at a higher price. This flexibility allows you to adapt depending on market conditions or personal goals. - Legacy Asset
Land is a long-term, legacy-building investment. You can pass it down to future generations, providing lasting value to your family.
Cons:
- Upfront Costs
Purchasing land requires a significant initial investment, including not just the cost of the land but also fees for legal work, land searches, and other due diligence. Additionally, depending on your development plans, further capital might be required. - Maintenance and Management
Owning land comes with the responsibility of maintaining it, securing it, and ensuring it remains a good investment. If you don’t live in Kenya, this could involve hiring someone locally to keep an eye on things. - Non-sale-ready
Land isn’t as easily sold or liquidated compared to other investments. If you need quick cash, selling land may take longer depending on market demand.
REITs: The Pros and Cons
Pros:
- Low Entry Point
REITs allow you to invest in real estate without needing huge amounts of capital upfront. For the cost of a few shares, you can start benefiting from real estate growth and dividends. - Diversification
With REITs, you’re not putting all your eggs in one basket. These trusts typically invest in multiple properties, spreading the risk and exposure across various types of real estate, including commercial, residential, or even industrial properties. - Liquidity
Unlike land, REITs are traded on stock exchanges. This means you can buy or sell shares relatively easily, providing greater liquidity if you need access to your funds. - No Management Hassles
Investing in REITs requires no hands-on management. You’re leaving the day-to-day responsibilities of maintaining and renting properties to professionals, allowing you to focus on other things.
Cons:
- Less Control
With REITs, you own shares in a real estate portfolio but have no say in which properties are bought or how they are managed. You’re trusting the REIT managers to make sound decisions on your behalf. - Market Volatility
Since REITs are traded on the stock market, they are subject to market fluctuations. If there’s a downturn in the market, the value of your REIT shares may drop, even if the underlying properties are still performing well. - No Legacy Factor
Unlike owning land, REIT shares aren’t typically something you pass down as a legacy. They can be a great investment, but they don’t offer the long-term personal ownership or emotional connection that land can provide.
So, Which Should You Choose?
It really depends on your personal goals and circumstances.
- If you prefer hands-off investments: REITs might be a better fit. You won’t need to worry about managing land, maintenance, or hiring people on the ground in Kenya. It’s a way to invest in real estate with minimal hassle while enjoying liquidity and potential dividends.
- If you value control and long-term appreciation: Owning land outright could be the way to go. It’s especially appealing if you’re thinking about legacy, retirement, or simply having a piece of Kenya that’s yours. If you’re abroad but planning to return to Kenya one day, owning land could be a great asset to come home to.
Advice for Kenyans in the Diaspora or with Disposable Income
If you have disposable income, you don’t have to choose between the two options—you can do both. For instance, you could invest a portion of your funds in REITs for their liquidity and dividends, while also purchasing land as a long-term investment. By doing this, you can enjoy the best of both worlds: the passive income from REITs and the lasting value of owning a piece of Kenyan soil.
For land purchases, especially if you’re abroad and want peace of mind, working with trusted platforms like Own Kenya is crucial. We handle the due diligence for you, ensuring that you’re buying verified land without the risk of fraud. And if you’re looking for something specific that’s not on their listings, they can source it for you.
Ultimately, both REITs and land ownership offer different paths to growing your wealth. The right choice depends on your personal goals, risk tolerance, and how involved you want to be in managing your investments.
What’s your next move? Whether it’s buying land or investing in REITs, there’s no better time to make your money work for you.