Buying or building a house? Key issues to consider

Composite of a modern house during and after construction [File]

When it comes to investing in real estate, the pertinent question is, should you build or buy?

The more developers and experts discuss the option, the more the individuals are spoilt for choice.

How do you know if you should build or buy?

Lawrence Kiarie, development manager Centum Real Estate, says there are key issues to look into whether one is building or buying.

These include location or proximity to amenities depending on your stage of life, affordability, and long-term perspective.

“This (long-term perspective) is something most buyers would not look at. By this I mean; what do you see yourself doing in the house say in two years?” posed Kiarie during a discussion on the issue by NCBA Bank.

“If it is something you want to sell, probably you should buy in a location that you can later resell or yield rental income.”

The size of the house also matters, he says. The bigger the house the more the service charge. One should also understand the zoning regulations of the area. “You do not want to build or buy a house and two or three years later someone puts up an apartment,” he says.

The developers’ track record should also be looked into. Being a major player in the sector that has delivered mega projects such as Two Rivers, Kiarie, in admitting his bias, says buying is better.

But Deputy Director and Head of Personal Banking NCBA Mercy Kagwiria says either of the two decisions is good.

“Do not wait to buy or build real estate. Buy or build real estate and wait and enjoy your investment. After all, this is arguably the most expensive and best investment you can make in life,” she says referencing the projected four to six per cent growth in the sector.

Emma Miloyo, an architect says before even the decision is made to either buy or build, one should evaluate why they want a house in the first place.

“Why do I want to put money in real estate?” she posed. She referenced that while shelter and investment are major reasons, there are some who purchase property for prestige or status.

Once this decision is made, find out if you are building to live in or rent. “Considerations are different when it is owner-occupied or as an investment,” she said.

Reasons to buy or build a home, she says, include having a steady income, wanting to start building equity or just feel ready.

“If you are in debt, probably there is no need to get into more debt,” she said. “Real estate is a sound investment but it requires discipline in saving and making down payments.”

Centum’s Kiarie says buying is better as you avoid the hiccups that come with managing a project, which may be emotionally and financially straining. “Studies show that about 70 per cent of projects are within 10 per cent of initial budget and timeline,” he says.

“This is a sample that includes experienced developers who would have a big team managing projects. If you purchase, you are not taking this risk but passing it to the developer who is better placed to deal with it.”

He notes that buying is convenient and less time-consuming. One is also guaranteed better finishing of houses and access to amenities will be easier. “If you think about a pool it is probably cheaper to build and run one within an estate,” says Kiarie.

He, however, warns of the pitfalls to avoid when buying a house. “Most buyers focus on commercial terms, price and rental yields. It should be important for buyers to familiarise themselves with options within the documentation,” he says.

One should also familiarise himself with the terminologies used in the paperwork. For example, the size of the house - is it carpet size or built upsize? One should familiarise with the square feet and square metres.

“Sometimes it is good to just visit a show house as two units of the same size could still have different design efficiencies,” he said.