Are investment clubs the future of real estate?

Real estate is one of the most risk-evasive investment plans. But with structuring, a lucrative real estate plan continues to be a hard nut to crack for many middle income and low class earners. The price of land in prime development areas has skyrocketed, and with it, the cost of setting up anything. 

For three years, Phillip Wafula dreamt of acquiring a piece of land and building his dream house in any one of the fast-developing suburbs around Kampala and Wakiso. The high school teacher also planned to build rentals from which he would earn an extra income.

“It became very difficult for me to realise this dream because of the meagre salary I earned as a teacher,” he says. 

His wife, who haboured the same dreams, advised him to consider investment club oriented property acquisition.
He says his wife had heard that members of a local investment club had come together and pooled their resources with plans of acquiring land in Bujjuko off Mityana Road and other properties in Kira and Bulindo. 

Although skeptical, he approached some of the members who assured him that his dream would be more valid if he joined. 

“I was told they often meet to learn from each other the basics of real estate. For as low as Shs15m, some had already amassed large chunks of land outside of Kampala,” he says. 

Others had bought rentals that had started yielding returns. 
According to Hassan Kitenda, an equity and fixed income analyst, real estate investment is a popular investment option.

“It is an easy way to get passive income and stable cash flows. The number of ways club members can engage in property business include homemaking, flipping houses, owning and renting property,” Kitenda opines. 

How it works
Yassin Mulondo, a director at Future Homes Realty Partners, says investment clubs are changing people’s lives.  He says for as little as Shs15m, one can own property. 

“We meet different people who share similar real estate development estates, establish that they are in the same income flow capacity, and set categories for them. Using their financial capacities as parameters for segmentation and property prospecting, we then inform them about the different deals available. After establishing what their real estate interests are, they are then advised on the best money pooling plans and guided on due diligence,” explains Mulondo.

If the property is rentals, a firm can be hired to collect the rent, which is then distributed to the investors monthly, or reinvested. 

Success  story 
Jordan Buwembo, an accountant and his investment club, comprising 20 members bought a hotel in Entebbe.

“Our investment club had for long grappled with investment plans. We had tried a few businesses in the city centre. We tried wholesale phones, fashion, and merchandise, among other businesses that hit a dead end. Until we were tipped off of a good deal to renovate a hotel in Entebbe. We met with a good investment advisor, who held our hands through the process and we have never looked back,” recounts Buwembo.

After establishing profitability, the investment club then, after being advised, bought land on the shores of the River Nile where they are setting up cottages and a resort. 
The experience taught Buwembo that one can achieve a lot more in a group than as an individual. 
All you need to know about investment clubs
• Anyone can join an investment club as long as they can invest their own money. Clubs are diverse, ranging from clubs for students to retired men and women. 
• These clubs typically comprise five to 10 people with similar investment goals–there are no legal limits to the number of members, or the minimum investment amount.
• Investment clubs, as informal groups, are often organised as partnerships.
•  Real estate investment groups focus only on investing in real estate. Other investment clubs have different objectives, such as value investing.
• Members form a legal entity, ensuring each member is a joint owner. The name of the group goes on the deed if they buy or sell.