In real estate investment your best bet is to invest in authentic penny land. I am refering to investment in real estate not the land you buy to build your residential property. For residential property the location is important so is security. My focus is on investment property,

This is because quite unlike stocks it has enough room to grow. The get it at the cheapest rate you have to position when others are calling it bush or not looking in that direction.

The due diligence you need do is to ascertain and confirm prospects of city expansion in that direction which implies provision of infrastructural facilities in future.

This reminds me of a friend here who bought penny land for 350K (my local currency) in mid 2006. With expansion and population growth and migration of people to suburbs due to high rents in the city the area now is open with a lot of residetial buildings.

He sold one of the plots for a handsome 4.5 Million (local currency).

In Nairobi suburb I know those who bought into Ruiru, Kitenga, Syokimau, Isinya, Athi River, Thika Road and Mombassa road suburbs 4 to 5 years ago should be smiling now. They are the ones selling for the new entrants at exhorbitant prices.

They will use the sales proceed to re-position inwards on penny lands. The X bob they sole for 1/8 plot can fetch them 2 acres in the interior.

Please do not mind my spellings as I am not a Kenyan.


For me however the optimal returns in real estate is achieved when you develop your property to rent or sale. The easiest way is to buy some, sale a few when it reasonably appreciates and use that as seed capital to develop others. It is like using other peoples money (by positioning earlier) to develop your plot. With this you have minimal exposure to mortgage loan.

I do not believe property bubble will affect penny land in the nearest future. People tend to buy land for investment when the party is over , that is when the area is open, has become popular it is getting expensive.

Over time penny lands tend to explode and return multiples.

@Young,thats a good analysis but on the other side,i think speculators are likely to sell off their land coz of the news of property bubble coming soon in Kenya and the prices are likely to drop.This has come at a time when i was in the eve of purchasing 2pieces of land in Kitengela(with borrowed Capital) with an intention of holding one for 1-2Yrs,then selling it off to develope the other.But now am thinking twice.What would you do if you were on my shoes?

@Ngwono.

(i) It is not advisable to buy plot on borrowed money as the land is not yielding anything while holding until you sale. House is better in this sense

(ii) I may not be right, I do not think Kitengela will soon face property bubble as it is not a high end property, it is an emerging suburb.


(iii) At this point in time if you want to invest on land on the long term, you can move further down beyond Kitengela as with time development will reach your chosen vicinity. If Kitengela plots for now for example is going for say Ksh 1 Million, 5 km away it will be circa 300k. In two years time it is easier for your 300K Kitengela suburb (5km away) will appreciate to 900K than the 1 Million Kitengela plot to be 1.8 Million. This is because Kitengela proper is almost fully priced as some years back the same plot going for 1 Million now was under 300K. This is the concept of penny land.


I may ask in Kenya don't you have an option of flexible payment terms (6 to 24 months) when buying plots from estate developers???

I have never paid outright for inventment plot, I always spread payment over several months to avoid borrowing and tying down limited capital. The beauty of it is that any price increase does not affect subscribers that have earlier commenced payment.

For example there is a plot that went for 600K (my local currency) payment spread over 24 months (interst free) at 25K per month in October 2009, For new subscribers the going price for a plot is 1.2 Million but it does not affect us the old subscribers.

I know this flexible payment plan exists here in Nigeria, Ghana and Uganda from my little experience in property investment.

@ young , thats very good advice especially to new investors who always insist on " maji na stima na karibu na rami".........

@Young,thanks a lot for the sound advice.Your opoints are well explained.