Investing in rental property can fast track your financial freedom

Buy an old property and flip it. Even small changes such as replacing iron sheets with tiles or repainting can dramatically increase the value of a property. PHOTO | TONY MUSHOBOROZI

What you need to know:

  • Real estate is one of the most lucrative ventures one can get into with average capital. To make profit this way requires one to have vision, and keep abreast of the market trends. Bringing something new to the market, for instance will give you an edge over the rest. 

It is an established fact that true financial freedom is more likely to come from running a business rather than from a salaried job. While everyone yearns for financial freedom, not everyone has the time or heart to run a business in the classic sense of the word. 
For instance, teachers spend all their time teaching and therefore, have no time left to run a business. The question then is, what is the option for such people to achieve true financial freedom? Investing in real estate.
Real estate is a very profitable business and can be fairly hands-free, giving you all the time you need to focus on your career while you run it on the side. The good news is that the property industry in Uganda is projected to remain very lucrative for many decades to come because Uganda’s population is overwhelmingly young. This of course translates into an endless demand for housing for the foreseeable future. 
The nature of the industry is such that almost anyone can invest in real estate. For instance, there are places in a 50km radius from Kampala where you can still buy an acre of land at less than $1000 (Shs3.7m). There are locations in a 20km radius from Kampala where one can buy a titled plot of land at as little as Shs5m.  
The nature of Uganda’s friendly land policies make it easier, cheaper and perfectly rational to buy land and build as opposed to being forced by circumstances or laws to buy a finished house like is the case in some countries. 
We have an abundance of land open for real estate developments because of the friendly land laws. The Land Act for example, specifies that the holder of freehold land has the full power of ownership, and full rights to use it for any lawful purpose like sell, rent, lease, dispose of it by will.
That makes investing in the real estate industry easier and less stressful compared to other markets around the world. Instead of forking out millions to buy a finished house, one can spend a fraction of that to buy an empty plot and then give themselves as much time as they need to make enough money to start construction. This kind of thing is not possible in some neighboring countries.
In the Democratic Republic of Congo, for instance, no one is allowed to hold an empty plot of land for more than a year in an urban area. You must build on it or sell it to those that are ready to build. Clearly, people of a certain income bracket are pushed out of business which is not the case for Uganda, where investing in real estate is possible for all income brackets. It may come at huge amounts of sacrifice and patience, but it is possible. And if it is done right, a property business is the surest way to financial freedom for most people. 
Here are the different ways you can invest in the real estate sector and tap into the goldmine that is the property business:
Land trading
Land is always appreciating. There is barely any scenario in this country where if you buy land today and keep it for two years, you will be forced to resell it at the purchase price. On the contrary, depending on the location, you will more likely be able make 10 to 50 percent according to industry experts. 
“It all depends on where,” says James Kato, a broker that operates in Kasangye, Wakiso District. “Some land dealers that will literally put their land up for sale as soon as they complete their purchase process and if it is a competitive neighborhood, the land will be sold within a month and the dealer will make 10 percent or more profit.”
The trick is to buy low and sell high. While this seems the most obvious way to make money from property, it can be extremely difficult to find underpriced gems in a competitive arena such as buying and selling land, but that does not mean BMV (below market value) property sales no longer exist. 
Usually, low-capital traders buy plots that range from Shs5m to Shs12m. Such plots are usually located between 20 and 40 km away from Kampala, off the road, where there is minimal development and land is still cheap. While some put the plot up for sale immediately, others tend to wait for the value to go really up. 
“Some even plant some trees on the plot because they know they have about five years to resale the plot. Others plant food on it so that they are forced to come visit the plot as much as possible, in order to stave off land grabbers as they wait for the value to go up,” Henry Tebusweeke a land delear in Bujjuko says. 
This type of real estate investment keeps your money working for you while you focus on your day job. For people who feel that money in the bank is not protected from temptations to spend, they decide to hide it away in such ventures. 
Many people have been able to start their journey to financial freedom this way so that in a few years have the option to retire if they choose. 
Rental properties
The first thing you need to consider before procuring rental properties is how hectic it can be. As a landlord, you are not just eating ‘clean money’. You are responsible for paying the taxes, looking for tenants, maintaining the property and you will also be the customer-care professional for the property, solving problems that arise. All these responsibilities are doable. However, if you are extremely busy at your salaried job or you live far away from where the property is located, it becomes a whole other animal. 
Being a landlord is a hands-on business. As all service businesses, being a landlord means that you must deal with people all the time which implies that it can get stressful. 
If you are looking to pursue your day career without stress, you should consider hiring a property manager to free up your time and take up the mental burden of dealing with tenants.
“Rental properties for residence are always highly sought after. If you deal with the security concern, you are half way to full occupancy. Even if you buy an old property that tenants are starting to shun (old properties are frowned upon), redoing the toilets and the floors can bring tenants back fast,” Paul Mubiita, a landlord in Lubowa and Kitende on Entebbe Road says.
Determining the rates that are just right is one of the best cards you can play. Other than the location of the property, the most important determinant for rent rates is the age of the building. 
According to experts, the newer the property, the higher the rent tenants are willing to pay. If the rent is too high, you will struggle to get tenants or keep the ones that you already have, hence losing money. If it is too low, you will still lose money. 
To get the rates that are just right, use the knowledge of the property brokers. Speaking to several of them should be able to reveal to you the rate that is just right for your property. This will make your tenants content and make your job easier. 
Flipping properties
Flipping is term used to describe the type of property trading where you buy a property with a goal of increasing its value before you resell it for profit. While it is mostly done with old houses that need major transformations, flipping can work on almost any property. 
For instance, changing the roof from iron sheets to tiles can increase the value of a residential house overnight even if nothing else has been touched. 
That is one way of increasing the value of a house called repair and update. And there is no better place to do property flipping than in the old suburbs and slums of Kampala, Jinja and such other places. 
“For starters, old suburbs like Makindye, Nsambya and others are a stone’s throw away from the city center. Some of the original owners of the old properties in these areas are retired and probably no longer able to keep them in perfect shape. They know that their houses are valuable because of their proximity to the city and yet they aren’t earning as much as they could from them. So they sell for several reasons,” Cissy Namaganda, a property expert says. 
Some are looking to move to quieter areas away from the city to retire in peace. Others want to take advantage of the booming property industry to sell there city properties at a hefty sum and buy a farm house at a fraction and live their latter years in financial comfort.
Experts advise that house flipping in older parts of the city is more lucrative because there is always market for properties inside the city. 
A major renovation or remodeling could change one’s fortunes forever. But of course house flipping is doable anywhere so long as you make sure to buy at the right price.