Subletting rent at profit

Tuesday April 9 2019

Business women in a shop at Horizon City

Business women in a shop at Horizon City commercial building in Kampala. Many traders cannot afford to pay the high rent bills for these shops which range between Shs3 million and Shs4 million, opting for the subletting arrangement. Photo by RACHEL MABALA 

By Dorothy Nakaweesi

Have you ever asked yourself why some shops in Kampala’s downtown arcades are occupied by many people dealing in different items?
These are usually people selling a variety of items ranging from clothes, jewelry, mobile phone accessories, kitchen appliances, shoes, mobile money agents and sometimes soft drinks and snacks all crammed in one particular shop.

Some arcades such as Gazaland and Galiraya especially in the basement shops are shared by different salon and hair stylists each deals in their own items. They only communally share light and chairs.
Yet, there are those shops dealing in a particular item say clothes and not shared.

High rent charges
The reality is that many people cannot afford to pay the high rent bills for these shops which range between Shs3 million and Shs4 million.

But to co-exist and carry out their transactions, they sign up for a subletting arrangement and pay a particular fee from those who rented the shops from the landlord.

Ideally, if you are a tenant in a commercial property, you may be able to sublet part of your property to a third party. This can be a good idea if your business is downsizing and you have more space, as it allows extra cash flow to help with the rent.

The hustle is real, especially for those who sublet (third party). But for those who own the shops, it is a source of income.

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Mr Jjemba Mulondo, the Secretary for mediation of Kampala City Traders Association (Kacita) admits that there are so many traders who are involved in subletting.
“It is a profitable venture especially if one pays up the monthly rent to the landlord in and on time,” he shared.

Start
You too can rent shops in the different mushrooming arcades, sublet them out and earn a profit.
According to Mr Ismail Musisi, a tenant on Royal Complex shopping arcade, running two shops remits Shs8m monthly to the landlord.
“I remit Shs4m for each shop according to my arrangement with the landlord. Electricity and garbage is paid separately,” Musisi shares.

In each shop, Musisi sublets space to 10 people where each pays Shs500,000 inclusive of power and garbage collection fees.
At the end of the month, Musisi bags Shs5m, earning him an extra Shs1 million, after remitting the Shs4m rent to the landlord.

Of this Shs1 million, Shs300,000 caters for electricity and garbage and the remaining Shs700,000 is his profit. This means for the two shops on average Musisi bags a monthly Shs1.4m.

This means the more shops you have, the more money you will make every month.
Musisis shares: “I have been a tenant for the last 10 years. In a way, it sometimes saves me from rent bills during tough times. It also leaves me a profit to put food on my table or reinvest.”

The beauty with this arcade is that it is strategically located to foot traffic. As a result, this has kept his shops fully occupied as customers keep flocking in.
Through his savings from subletting, he plans to rent other shops in the newer malls because they attract the customers.

Advice
Experts advise that before you start this, it would be wise to get permission from the landlord.
When choosing third party tenants, look for people you know well such as friends and family.
Sign agreements with those you are subletting. This will help you to refer to the rules and commitments you agreed upon when some break them.

Challenges
Just like any other investment, sometimes people who sublet (third party) default on payment while others disappear to other arcades without remitting money to him.
Sometimes when there are strikes, in other instances where landlords delay to pay up the relevant authorities’ taxes such as KCCA and URA, the arcades are sealed off for days.

The other challenge is sometime tenants are victimized by those whom they sublet (third party) especially when some are charged differing rates.
This causes many landlords to hike the rent.

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