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:
- Location, Location, Location. A good rental investment starts with a good investment in land. Buy land near a solid economic base & good transport infrastructure and social services. Buy land that is likely to appreciate in the future. Goof up on this & nothing will save you.
- . The next step is to manage your design & 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 rent is btn UGX 200K to 600K per unit, per month.
- The property rental business is a People Management Business. Recruit your tenants like an HR department and manage them as you would Hotel Guests.
- Just like any other business, rentals get better with scale. Anything less than 5 units is harder to manage.
- 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, & 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 & 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.
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.
Livingstone Mukasa is 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
