When looking to buy properties in Somalia, Somaliland and Djibouti (this applies to most of East Africa), there are a few things you need to understand. One of the first things to understand is WHY you are buying it?
People buy land for multiple reasons; to build a house or a hotel, to farm, to build a business complex, and to invest, etc. In this short article, we will discuss the importance of buying property as an investment in this region.
Once you decide you want to invest, there are a few things you need to know about yourself, the seller of the property, and about the property itself. Then you need to figure out how you are going to sell it for the best price.
When looking to buy properties in Somalia, Somaliland and Djibouti (this applies to most of East Africa), there are a few things you need to understand. One of the first things to understand is WHY you are buying it?
People buy land for multiple reasons; to build a house or a hotel, to farm, to build a business complex, and to invest, etc. In this short article, we will discuss the importance of buying property as an investment.
When buying and selling property in the Somali regions and East Africa in general, there are a few things you need to know about yourself, the seller of the property, and about the property itself.
Know Yourself
If you are interested in buying land, especially for the first time, then you need to know your goals, your strengths, what you have in abundance and what is scarce or hard for you. You then need to put this together and create a plan to make money from this property.
There are various methods to make money from buying and selling land, the one you choose needs to match your current/future goals and the resources you have. The following are some of the methods to make money in the Somali regions:
Using time to work for you:
In the last 10 years or so, property values in certain regions of Somaliland has been increasing 15-20%, which means $10,000 invested in land in 2003 could be worth between $40,000 and $60,000 today (2013). If you spent $50K, you would have an average of $250k now, which is a nice amount. (This data comes from past property performance in Hargeisa and Burco, Somaliland)
I have personally bought a piece of land in Hargeisa Somaliland (with the help of my aunt who I love very much) when I was younger and before you know it, it was worth THREE times its value. I was making money while I went on with my life. You can simply save up; buy a piece of land just outside the city of your choice. You can then continue to do whatever it is you are currently doing, and sell it later on for a higher profit.
The drawback to this method is that you actually require time. If you are 75 years old and you are buying land outside the city just to hold on to it, you might not see the fruits of your work (unless you know some inside information, like oil and mineral deposits) in your lifetime (good investment for your kids though). If on the other hand you are a teenager and you have $5000 burning in your pocket, then it is not a bad idea to buy that same piece of land, because time is on your side (God willing).
Using Capital and leg work:
Another method is to buy land in bulk, develop it and then sell it in small pieces for a bigger profit. A piece of land that is 80by80feet could go for $5000 just outside Hargeisa (a little bit more or a little bit less in other Somali cities like Burco, Berbera, Bosaso, Mugadishu, Galkacyo), but if you buy a large enough piece of land, the cost per piece can come down to $3500 a piece, which is more money for you.
This method requires you to have some nice amounts of money. But you actually have to put the work and effort in it, instead of waiting around for your land to be worth something a decade later. In this method, you need to know what you are going to do to the land to make it worth more, for example, will you be willing to clean it up, work at it, refurbish and remodel?
Buying and selling properties while using this method requires a substantial amount of money. Not to mention the time and effort that is needed as well. The more you put in the more you get back. The other upside of this method is that you can have your money back quicker, which is great in conflict areas, because you are more liquid and can run for the hills if you hear bullets.
Hybrid method:
Some people use a hybrid method, this mean you buy a piece of property, develop it, and then wait a bit until markets are more favorable, so they can sell it for a better profit. There are various ways of making money; you just have to find what works for you and your situation.
Build on it:
A friend of mine’s mom has a great method. She buys large amounts of land in Nairobi Kenya, develops it, and cuts it into smaller portions, then builds 30 homes or so, and then sells it for around $50,000 each. Do the math, this Somali woman is doing very well for herself. The more you enhance the value of the property, the more you make, it just requires more property development skills, effort and liquid cash.
A brother of a friend of mine currently buys houses in Mugadishu, lives in it for a while until he finds a buyer then sells it while still living in it, and moves on. His last property he bought for $70,000 and sold it $160,000 or so. Mugadishu is the new Manhattan they say, and with high risks comes high returns.
Good advice: If you have a bit of money in your account, say multiples of $10,000 that you do not see yourself needing for the next 3 or 4 years, then you should definitely consider investing in land. You could double your money in 5 years or so, and have $20,000 cash. If you don’t have the 10K, then consider saving a small amount per month and investing at the end of the year. I mean this 10k is money you probably would waste on things you don’t really need, so why not use it to make another 10k effort free. You could continue to stay in your field of work and still make money on the side.
Know the Property
Once you know yourself and you come to terms with the level of cash, skills and free time you have at your disposal, then you can worry about finding a property.
There are many qualities in a property that makes it desirable, and the following are some of the important things to watch out for:
Great Location: If you want to build, then it should be in a great neighborhood that fits your needs. If you want to invest for the long run, then it should be in the direction that the city is moving to. In Hargeisa, where I am the most familiar with, you can simply check Google map of the city for the past couple of years and see for yourself where the most growth is.
You also need to know what people want, and buy a property that has those characteristics; Great mosques (masjids), shopping centres (suuq), schools/universities, etc can only help the value of your property. Speaking to locals in that city is the best way to find out I believe.
Great price: When it comes to property, they say you make your money when you buy the property, not when you sell it, and that is the truth. If you don’t get a great property, for a great price, then you won’t make much when it’s time to sell it. If you are buying a property for the long run, you might be able to make up for the fact that you overpaid, but why take that gamble.
Land quality: The property should not be soft and damp if you plan on building on it or selling it to someone who will, but if you are into farming, then it is a plus. There should not be large rocks or other obstacles that could stop you or your future buyers from utilizing the property to the fullest.
Water, roads, electricity: If you buy a property just outside the city (say Hargeisa, Burco, Mogadishu, etc), its value will increase once the water, roads and electricity has reached the area. If the idea is to buy a piece of land and hold on to it for a while, you want to buy a piece of land where the water, electricity and main roads have not reached yet but are close. The minute these reach your property, the prices in the area will go north.
You can still make a bit more money as long as the bus route has not reached your property yet.
In Hargeisa, I went to a place called “lug iyo lacag” which means “leg and money”. The bus route has not completely reached the area, so you have to take a bus, get off and then walk to the area. I found it funny.
Good advice: Don’t just buy land/property for the sake of buying; it has to make sense. Even if you are buying land to be able to sell it later on and you don’t plan on living on it, you should still make sure it has all the features you would want, because the person buying from you would want them. In the end, you should always have your client’s best interest at heart when you buy land because the more desirable the land is, the more you will gain from it in the future. Do not just buy because it happens to be cheap, or else you will also have to sell it cheap.
Know the seller
Once you know what you want and have a game plan and found a great property, then you need to get to know the owner of the property (I don’t mean go on a date with him/her). In places like Somalia, Somaliland and Djibouti, this is one of the most important things you need to know.
Ownership: Most of us have heard of someone buying a piece of land, just to get into a scuffle with someone else. The person who is selling you the land MUST be the owner of the property on official papers or they must have the consent of the owner.
Joint ownership: If the property belongs to a group of people, say a family, then you need to have their full consent or one of them can come after you and claim his relative had no right to sell it to you.
Why are they selling? You need to know why the property is being sold because there could be problems with the land or disputes. The last thing you need is to buy land today just to be sitting in a court room with no air conditioning in Hargeisa or Mogadishu, trying to prove that you own this land the very next day.
Good advice; Avoid the headache and the unnecessary trips to the East Africa and get it right the first time. Only buy land (property), from an individual who is trust worthy, who has the documents and references that he/she is the rightful owner or representative.
Sending/Receiving money:
So you have the money and you found the right property with a trust worthy seller, now how do you get your money from Canada, USA, UK, France etc to the Somali regions?
Send it, of course!
You can use Dahabshiil to send your money, just make sure you are paying 2% and not the typical 5%. The average rate for anything less than $3000US is 5%, but if it is more than that, then you pay 2%. Once you do it once or twice, you can strike a deal with them to get it for a bit cheaper.
Just create an account with them and you can get an account book when you get there, and have full access to your money at all times. The last you want to do is send $£€¥ to your “relative” who you barely know and to never see him/her again. It has happened and I am sure you have heard stories yourself.
Great advice; Do not give your hard earned cash to someone you barely know. Send it using the safest and most cost effective method.
Selling property online:
This is when it all counts. Getting back your money and then some.
Once you are in a position to sell the land/property, you need to find the highest bidder. There are many ways of finding a buyer, but I believe using the internet is the future.
We have created an online real estate platform for Somalia, Somaliland, Djibouti, Kenya, Ethiopia and Tanzania.
www.Somestate.com
Somestate allows you to:
1) Find and Post your property for Free
2) Have buyers contact you direct
3) Access to worldwide buyers/sellers from the comfort of your home
4) Social media integration
Your property is worth the price someone is willing to pay for, so list it online and see what people are willing to pay for it. Somestate allows you to create a personal account with an email and password. You can change your asking price anytime, upload pictures, property details and your contact information as you see fit. Your property can be viewed 24/7, anywhere in the world, using various devices including our latest Smartphone and tablets friendly features.
You can also share your property on Facebook through Somestate and have social media do the trick for you.
The best part is that you can sell whenever you find the right buyer and work out a deal between the two of you, without a third party taking a cut.
Conclusion: I hope you have enjoyed this post on buying and selling land in Somalia, Somaliland, Djibouti and the rest of East Africa in general. Save up, learn a thing or two about real-estate, make some money and have FUN.
Remember to KIH (Keep It Halal)
If you feel there is something I have missed, or something you would like to add or share, feel free to contact me.
Faysal A, MASc
Somestate Founder
Faysal@somestate.com
