As Kenya moves forward in its recovery journey following the international economic shocks witnessed during the 2021/2022 financial year, there is a growing interest among Kenyans to explore unconventional entrepreneurial ventures.
The current economic climate has necessitated Kenyans to be creative and to think out of the box particularly due to a high cost of living and high inflation rates.
One of the ways Kenyans are making money is through buying dilapidated houses in the real estate market and transforming them into highly marketable assets.
Traditionally, Kenyans investing in real estate did so by building, selling or renting out houses, which is typically a lengthy and capital-intensive process.
Flipping, which is an emerging trend in the Kenyan real estate ecosystem, is a form of investing where the buyer finds dilapidated houses at below-market rates, transforms them and then resells them for a profit.
Estate Cloud, a property listing company, explains that many Kenyans are turning to flipping due to the low starting capital requirements.
This position is supported by the Africa Real Estate Journal which states “Unlike other forms of real estate investment, flipping houses requires less initial capital, making it an attractive option for first-time investors.”
The reason why flipping requires less initial capital is that dilapidated houses can be sold for less than half the market price. The buyer will then use a modest sum in repairs and within a month resell the house at a profit.
Estate Cloud explains that another reason why flipping houses is gaining popularity is due to the growing demand for housing in Kenya.
According to the World Bank's Urban Population Growth Rate Report for 2023, Kenya's urbanization rate stands at 27 per cent, with an average annual growth rate of 4 per cent.
This means that there is demand for houses in Kenya. Flipping offers real estate agents a golden opportunity to make money at minimum risk.
According to Africa Real Estate Journal, the biggest downside to this is finding a house that has the potential to turn a profit.
Failure to conduct due diligence leads to entrepreneurs buying houses that need lots of repairs. More often than not, most of them end up making less profit than they had anticipated and in some instances, incurring a loss.
“Find undervalued properties, which can lead to high-profit margins,” the report by Africa Real Estate Journal read.
Kenyans.co.ke spoke to real estate agent Jason Katungi to find out how flipping had transformed the industry as well as the impact the trend has had on the sector.
"Kenyans are majorly turning to flipping due to rising costs of land. For example, if a piece of land is worth Ksh10 million and has a dilapidated building, it is easy to get that house as an add-on.
"You end up paying only Ksh10 million and with few repairs, you can sell the property for Ksh15 million or more," he explained.
Katungi warned Kenyans rushing to flip a house to make sure they are accompanied by qualified building contractors during valuation. He explained there were cases when someone could buy a house only to realise later that it was irreparable making it worthless or better still, a loss-making investment.
