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Two roads diverged in a wood and I – I took the one less traveled by, and that has made all the difference. ~Robert Frost
Once you choose to construct a home back home, the next immediate step is to identify how to start. Most people rely on relatives or friends living within Kenya to select a site (location) , obtain designs and construct the home. In order to ensure that the building commences and progresses smoothly they periodically send money home. This arrangement has worked for some but an increasing group of diaspora get conned by their own family members because of poor workmanship or non-existent projects. Family ties prevent them from taking legal action against them. Today we advice you on how to avoid these problems.
1. Let Professionals Handle your Project:
Building professionals ensure a number of things. First, by appointing a team of professional contractors, you benefit from expert advice in design, construction, costs and all other aspects of the project including legal standing.Building professionals also ensure that the quality of workmanship in construction is upheld. They become your eyes and ears on the ground.
Letting professionals handle your project also enables you to easily acquire mortgage if need be, from lending institutions In Kenya, a registered architect and some instances, a registered engineer is required for all projects.
2. Don’t Send down all the Money at Once:
For construction projects, it is smart to remit funds gradually as opposed to in lump sums. The reasoning is this: the risk of loss of funds in unscrupulous deals is reduced.
3. Conduct due diligence
Always make an effort to verify all project details. These details include:the validity of issued certificates, the evidence of the construction site, the status of the project and the reputation of the contractors.
4. Stay connected with your local team
Keep constant communication with your local contractors. Make an effort to visit the site at least once a year, to assess the situation on the ground. Keep your eyes on your investment!
5. Retain all relevant documents
Your property documents are what you need and will stand proof of ownership in case of legal tussle or private incursions. Examples may include the title deed/settlement agreement or share certificate for the land, the architectural & structural documents and significant agreements.
You may find the paper below particularly useful.
The Cost of building works paper can be downloaded below
There are three essential requirements of any contract.
- Incentive: The prime aim is to provide an adequate incentive for efficient performance from the contractor. This must be reflected by an incentive for the client to provide appropriate information and support in a timely manner
- Flexibility: the prime aim is to provide the client with sufficient flexibility to introduce change which can be anticipated but not defined at the tender stage. An important requirement is that the contract should provide for systematic and equitable evaluation of such changes.
- Risk sharing: the prime aim is to allocate all risk between Client and Contractor. This must take into account the management and control of risk which materialize.
Types of Construction Contracts
There are various types of contract strategies in construction industry. Some of the main choices available are:
- Traditional Contracts
A consultant (or team of consultants) undertakes the process of feasibility, detailed
design, and contract preparation. A tender process follows and thereafter construction
installation and commissioning by the appointed contractor. The consultants who
developed and designed the project supervise these.
- Design and Build
A consultant undertakes the process of feasibility, establishing the client’s basic needs
and contract preparation. A tender process follows and thereafter the appointed
contractor undertakes detailed design, construction, installation and commissioning.
This type of contract is also known as turn key or prime contracts
- Management contracts
The client initially appoints consultants to undertake feasibility and costing and
perhaps outline design.A management contractor is appointed early in the project life and has considerable design input.
The management contractor’s responsibility is to prepare and appoints trade contracts or supply packages. Separate contracts are drawn up for independent parts of the construction project. A large amount of work is divided amongst several contractors.
- Build Own Operate Transfer (BOOT)
In its many forms a BOOT contract not only includes the initial design and
construction of the facility but a continuing maintenance and perhaps refurbishment
of over a number of years until final transfer to the client. Finance is often provided
by the contractor who recovers his cost through the life of the project. Other terms are
PFI, PPP etc
The concession agreement is the structured contract between the client and contractor.
It identifies and allocates risk.
Modes of Payments
The two main payment systems used in construction contracts are:
- Price Based: this system consists of lump sum and admeasurements. Prices or rates are submitted by the Contractor in his tender
- Cost Based: This payment system consists of cost-reimbursable and target cost. The actual costs are incurred by the contractor and reimbursed, together with a fee for overheads and profits.
- Price Based Payment System
A prime function of the contract is to allocate risk. The identification and
consideration of risk is a logical way to develop the organisational and contractual
policies for any project. Some of these uncertainties will remain whatever type of
contract is adopted and the contractor must then include a contingency sum for them
in his tender.
Different levels of risk contingencies can explain the wide range of bid prices
frequently received for admeasurements contracts. Another consequence of risk is that
fewer contractors are prepared to respond to or submit unqualified bids.
All parties to a project are at risk to some extent whatever the contract between them,
for instance that work may be frustrated by the forces beyond their control. If so, the
time lost and all or some of their consequent const may not be recoverable. The
choice of type of contract can motivate (or fail to motivate)
Any enterprise is built by wise planning, becomes strong though common sense, and profits wonderfully by keeping abreast of the facts. (Proverb)
Today we highlight the top construction trends for 2013. We also go a step further to examine the potential threats that are anticipated in Kenya.
For construction, some of the top trends are:
- Create large space by removing walls and eliminating obstructions
- Construct buildings that can be easily converted to commercial office space or residential homes. For example, when building a residential home, make sure the wall elements are non-structural to enable future demolitions. The same applies to other elements such as windows.
- Move to hardwood and/or bamboo floors instead of traditional carpet flooring. They are sustainable, affordable and easy to maintain.
- Transform areas into multi-function areas, for example open plan kitchen tops can be converted into dining/bar areas
- Use deeper sinks instead of double bowl sinks
- Add living spaces to accommodate elderly family that are not able to afford a single unit
- Install solar tiles or energy generating thin glas
- Use sustainable concrete
- Apply paper-based insulation
- Install super-efficient triple glazed windows
Location, Location, Location….
In terms of location for development, these are our top locations:
- Thika road and surrounding areas
- Ruai and Utawala areas
- Naivasha and Nakuru (For secure neighborhoods)
- Mlolongo/Syokimau area
Threats to Future Performance
Potential hazards in 2013 lie on various factors. These factors are socio-economic and political/Legal ones.
The socio-economic threats are various and are both local and international economic conditions. These may affect the interest rates and therefore the cost of construction among other factors. The political threats are largely due to the upcoming general elections in Kenya which may slow down business in general. Legal matters pertain to the approval and implementation of the new Built environment regulations (2012) which may affect general construction operations.
Worth noting, many contractors have experienced positive growth in 2012. This has been boosted in part by the reduced interest rates, influx of Foreign Direct Investments and general economic stability. These conditions lead to an increase in the number of residential units under construction. The margins may begin to shrink in anticipation of the general elections (IMF report, 2012).
Anecdotal evidence suggests contractors have been passing along a larger share of materials cost increases to project owners, a symptom of economic rebound. But if backlog begins to shrink again, pricing power would be compromised as decreasingly busy contractors begin to chase work more aggressively. The reverse may also hold true for the construction sector in 2013.
We are your thoughts on this?
It’s always nice to introduce yourself…and since we are nice people, we would like to introduce Stroika to you.
We are a Kenyan organization primarily interested in the construction sector. We provide customized contracting services to individual home-builders.
Check out the short video and let us know what we can do for you.
It’s sounds unbelievable but every entrepreneur knows that it does not take money to make money.
Today we are sharing ideas on how to buy property ( Real Estate) with no money down.
Many real estate investors think that money will make or break a real estate deal. A lack of funds can stop a potential purchaser from bidding on a property. However, it is possible to purchase real estate with no money from the buyer’s pockets. If the deal is right, the funding can easily fall into place.
Although there are many ways an investor can purchase real estate without handing over a down payment at settlement, it’s important to understand the pros and cons of each type of agreement before signing on the dotted line. Here are some examples of no-money-down real estate deals:
BORROW THE MONEY
Probably the easiest way to purchase a property with no money down is by borrowing the down payment. Either find a lender offering a low interest rate, or use a home equity or other line of credit loan (friends, family, other network) or you can also borrow from your real estate broker – arrange to borrow the broker’s commission for a short time and use those funds for the down payment.
In Kenya, banks are the typical lenders but there also exists hard money lenders. You may be limited by the amount or the interest rates may be too high. The key however, is to to determine beforehand whether the income from the property can be able to equal or exceed the monthly (or annual) loan repayments.
ASSUME THE EXISTING MORTGAGE
Some purchasers can use a “subject to” contract, where the buyer uses the seller’s existing financing for part of the purchase price. Using the seller’s existing financing is especially successful if the current loan has a low interest rate. The buyer receives the title to a property in return for making payments on the seller’s mortgage.
LEASE WITH OPTION TO BUY
Many purchasers do not realize that they may be able to rent a property from the owner with an option to buy. Under the terms of the lease/option agreement, the buyer and seller negotiate a sum to be paid at regular intervals for use of the property. This agreement allows the lessor to purchase the property at a predetermined price during the term of the lease. Usually, a portion, and sometimes all, of the rental payments will be credited toward the purchase price.
NEGOTIATE THE DOWN PAYMENT
Along with everything else in a real estate contract, the amount of the down payment and who pays it is almost always negotiable. A buyer may elect that the seller pay the down payment, or give credit at closing for the buyer’s down payment. A buyer could also request to pay the down payment in installments, whether in monthly installments or as a balloon payment at the end of the year.
Real estate transactions, like all other business transactions, can be customized
SWAP PERSONAL PROPERTY
Anything you own may be useful as a cash substitute for a no-money-down deal. For example, if the seller is planning to retire, your unused motor home would probably be much more valuable than a cash down payment. Cars, furniture and appliances are all acceptable replacements for a cash down payment.
EXCHANGE YOUR SKILLS
A buyer may be able to offer skills instead of cash. Accountants, contractors, mechanics, plumbers, doctors, lawyers, and so on, all have tradable skills that would be useful in lieu of a cash down payment.
TAKE ON A PARTNER
Finding other cash buyers is another way to purchase a property with no money down. However, this could get messy as other hands get into the deal. To simplify this process, you can organize the deal on a smaller scale by bringing in one or two more people at the most. In return for their financing, you can promise to take on the responsibilities of putting together the deal and managing the real estate investment.
OFFER A HIGHER PRICE OR BETTER TERMS
Again, Real estate transactions, like all other business transactions, can be customized. Some owners may be willing to accept a higher price for the property, even if it comes in installments, in lieu of accepting a down payment.
If you already own property, you may want to exchange it for another property. You could either exchange the property with a buyer, or use it in combination with a small amount of cash to obtain the property you want.
it does not take money to make money
The key to getting these kind of deals is research and actively searching for such opportunities. You must also think outside the box and remember, NEVER make the first offer.
Email us at firstname.lastname@example.org for consultation.