REAL ESTATE TIPS YOU SHOULD KNOW BEFORE INVESTING IN REAL ESTATE
The challenge of building ‘affordable’ housing in Uganda is the high cost of land. The land is overpriced in Uganda. The cheaper one is again far from the city so leaving you with no option but to buy around the city.
The best real estate strategy: personal developments are for rental, business developments are for sale.
Always follow the 1% rule in real estate purchase or development. The monthly return of a development or acquisition ( a structure or building) should be, at the very least, 1% of the cost of development or acquisition. However When a rental property has more than 2 bedrooms, the 1% rule for real estate investing stops working.
Take note, when building commercial properties for sale, you are not building your own house. So, tamper down on exquisite, posh, or high-quality finishings, just build what is functional. Build and include the major amenities of course not substandard but avoid the overly exotic and expensive. This might make the price of the property shoot up and scare the potential buyers.
Acquaint yourself on the new taxes that now apply to real estate.
A good real estate strategy is a 30-year strategy. Don’t be quick to sell, Buy to hold.
Get your financing right, you won’t have pressure to sell. Ensure you have other streams that bring in cash. This way you will only sell when the price is right but if you have a low cash flow stream circumstances will force you to sell in order to survive.
It is difficult to make money within the 10km (from the Kampala Post Office) area. The property prices are high, and the returns might not justify the investment. Aim for beyond 15km, there are good deals in this area.
When building rentals, consider your market and their needs, e.g., road access, parking slots, access to public transport, Security etc.
Be hyper-focused in one area. Supervision and maintenance can be a challenge if your developments are in many locations. It’s wise to erect one structure at a time unless you have strong systems that will help you supervise the estates.
My Favourite ‘sweet spot’ is 12 units of 2 bedrooms, in this ‘zone, you can take advantage of construction economies of scale. Another favourite ‘sweet spot’ is, 1 bedroom, 1sitting room joined with a small kitchen, shower at Ugx.400,000 monthly rent.
Extracted from a speech by Livingstone Mukasa