Why Rentals Are A Great Way To Invest Money In Uganda

By Livingstone Mukasa

If you are still trying to multiply your money, stay away from rentals. But if you’re starting to generate excess cash flow, I want you to seriously consider investing in rentals.

Here are the 5 key areas to consider before investing in Mizigo:

1. Location, Location, Location. A good rental investment starts with a good investment in land. Buy land near a solid economic base and near a taxi stage, if you are targeting the lower end of the market or a good road network at the upper end of the market. Buy land that is likely to appreciate in the future and near social services like hospitals and schools.

2. The next step is to manage your design and construction costs. Inclusive of land, target to spend no more than 100X of your targeted monthly rental income. Also, remember, because of Uganda’s low wages the best target monthly rental is between UGX 200K to 600K per month.

3. The rental business is a People Management Business. Recruit your tenants like an HR department and manage them as you would Hotel Guests.

4. Just like any other business, rentals get better with scale. Anything less than 5 units is harder to manage.

5. Build contingencies. Do calculations based on 10, not 12 months. The remaining two months are for repairs, taxes, and vacancies. Managing your expectations in any business is a great way to avoid disappointments.

Now that we have established the basis of our assumptions let’s look at the numbers.

UGX 100M can get you 5 rentals of UGX 250K per month, 1M per month, and 10M per year. Giving you a return of 10% per year (cash on cash). If you maintain your property well, it will appreciate at a minimum rate of 10% per year. Your effective rate return is 20% from cash receipts and appreciation.

Remember, you also have the power to increase rents and you also receive your money in advance which money can be invested as it aggregates to build another set of rentals.

So, we can safely say, your investment returns are well beyond 20% per year. A located and well-designed rental property can easily cash flow for 30 years and can compound wealth like no other asset class.

Trying to compare Rental (real estate) returns to those from cash equivalents like T/Bonds or unit trusts that also suffer from inflation, meaning that their effective returns are well below 5%, is for amateurs and those still struggling to make ends meet. Those with money to invest choose real estate 70% of the time and don’t think for a moment that they don’t know what they are doing.

About the Author: Livingstone Mukasa, a real estate investor, Financial Advisor, Entrepreneur, People’s Professor of Streetnomics and the Author of “The Great Financial Rebuild” & “Investing for the Future” Contact +256772459167 email: livinbusiness@gmail.com