What you should know before you invest in real estate

The finance and investment manager, National Housing, Derrick Mutegyeki, defines real estate as an industry that involves economy (land), buildings, rentals, sales, where by the commonest form in Uganda is owning land and rentals. A number of people buy land and develop it depending on the niche. Some develop and own while others develop and sell.

Mutegyeki says real estate developers are people or entrepreneurs, who buy land, develop it and manage construction. They could be either for commercial or residential purposes.

He adds, “The developers purchase real estate, make improvements to the buildings on it or construct new ones and sell the estate again. Many developers find it easier to work in residential real estate where a number of them own rentals but it’s worth noting that commercial real estate involves large chunks of money and this is where the money is”.

Mutegyeki further explains that real estate development is a lucrative business or industry whereby the developers have to use every minute of their time consciously. “For big real estate companies, a day out of business is equivalent to Shs3.5m lost,” he cautions.
To become a real estate developer, you ought to exercise a number of disciplines and consider a number of factors as discussed below by experts.

Acquire knowledge
Ideally, most people believe that you do not need to go to school to become a real estate developer. Acquisition of knowledge and basics of the business is paramount. Many developers come from various education backgrounds and still meet the required skills. “It could be through individuals or experts and valuation firms but you need to get as much knowledge as possible because the business is complex. Besides, it requires one to exercise patience. Do research, do the searches to get true ownership of the land before starting business,” advises Mutegyeki.

Andrew Mukiibi, president, Association of Real Estate Agents (AREA), also adds: “you should enroll in school and get an education connected to real estate development. A degree in courses such as Finance, Construction Management, Urban Development and Business Administration will make you an informed developer.” He adds that besides, one has to go through the necessary assessments to get the licence for operation.

Alternatively, find employment in real estate business. This will give you the opportunity to deal in the buying, developing or selling real estate. This exposure will certainly give you the insight about the industry. It will then be easy for you to start up your own real estate business with your savings.
Additionally, you can make it a point to attend seminars, workshops, join associations and share knowledge on the industry.
Superb decision making
The real estate industry involves a great deal of decision making. Any wrong decisions made will cost you a fortune. There is a saying in the business that you should always measure your cloth nine times before you cut it.
“Think through a project over and over before breaking ground. Think, consult, sleep, think again, consult until you are very sure you want to start the project,” says Munyaneza.
Also, think about your target market and not what you want. Experts in the industry are crucial because they know that the market needs. Recognising potential opportunities and predicting market trends is the way to go in the business.

Research market trends
“Buy when prices are low and sell when they are high. You will need to be vigilant about the market trends so as to make right decisions. Also, utilise specialised tools and platforms to get information regarding real estates prices. This is why joining associations is vital,” highlights Mathias Katamba, managing director, Housing Finance.

Exercise financial discipline
Financial discipline is a key factor in grooming ones’ self into a real estate developer. Avoid debt as much as you can.
“To succeed in real estate, avoid debt as much as possible. Only and only go into borrowing if you have acquired enough expert advice. Borrowing retards business and should only come in as a last resort,” notes Mr Munyaneza.
Mutegyeki says after careful thinking and consultation, you can borrow.
“However, borrow only, if the margins are not going to be swept off by costs of borrowing, plus you need to be sure of repayment sources. Meanwhile, if you cannot afford to start as an individual, try to join a club. Investment clubs will save you from the curse of borrowing.
Additionally, it is important to build relationships with money lenders to finance your projects. You will realise that the more they get to trust you; you will be given swift loans at lower and competitive rates.

Start small
There is a misconception that to join the industry, one requires large amounts of money. This is wrong.
“Yes, the business involves large amounts of money. But this does not mean that you need a fortune to start. Use what you have to buy land and develop slowly. All you need is money that can get you started. Start small with small projects until they develop into bigger projects. When you work hard and focus, buying and selling land will become part of you and a highly paying venture. Developing it will be a plus,” advises Munyaneza.

Deal with professionals
It is advisable to work with professional firms and contractors for construction of buildings and renovations. Establish strong bonds or relationships with such companies that do tremendous work so that you can count on them at any time. The real estate industry basically has no space for mediocrity because any mistake results into heavy losses.
Kiwanuka further adds, “Get in touch with professional architects. A single mistake made during construction or renovation will cost you a fortune. You can get on the platform of architects and research about their performance. Only those recommended as good and professional performers should be considered when putting up any project”.

Invest and re-invest
The industry has no room for laxity. You need to invest and re-invest at all times. Whatever gains you get shouldn’t be wasted or spent on personal issues. Re-invest them into the business for growth. “Growth or development of real estate stops where investment stops. I believe that investment is a continuous process that should never stop if development is to be achieved,” Kiwanuka advises.

Personal experiences

Derrick Mutegyeki, finance and investment manager, National Housing
It is believed that people who get involved in real estate business come from well to do families. This is a wrong perception.
I come from an average family and my father is not so educated and had no formal employment but he was a survivor who achieved lot of land.
We were 22 children and all of us had to be educated and be given every basic need. That alone instilled in me the spirit of hard work and ensuring that I am the best in everything I do.
I had acquired knowledge of the business while studying an investment course.
I picked interest in the business. The nature of my work at the time could not allow me to go into commodities because they needed ready income. The option I had was real estate.
There is a saying that if you have money, buy land because they do not manufacture land.
While I was working with National Water and Sewerage Corporation, I requested for a salary advance and topped up my savings to buy land with the notion that land appreciates. I bought my first piece of land on Entebbe road, which was about 25 decimals.
I did not sell it immediately; I had to wait till the returns were doubled. You can only sell land if the returns are more paying or doubled.
I now boast of a number of plots of land in different areas, most of which are being developed.
I have diversified into other investments such as, Agriculture, forestry and academics.

David Kiwanuka, retired civil servant
The word ‘real estate’ was enormous for me to perceive. The real estate business is a complex venture that I had always abstained from. The time I was given two acres of land in Seeta in 2000 by my father, I did not know what to do with it. He had also left me a fully furnished family house and I was comfortable.
After lots of consultation, friends advised me to construct rentals. I was hesitant because the thought came with lots of money involved and going through the hustle of getting tenants when they got complete plus the possibility of them not paying in time. However, I decided to get all my savings as a civil servant and put up the first rentals (six rooms) which went for Shs200,000 at that time.
All the rent that was realised from that house was used to build the second house. That house’s rent contributed to the construction of the third. At the moment,
I have expanded the land by buying off all neighbours and have 10 houses in the same area each going for Shs400,000 per month. I also have a number of residential houses in Luzira at Shs800,000 each, apartments and commercial buildings and the business is still growing.

Richard Munyaneza, managing director, South Gate Properties
I thought it proper to invest in land. In 2002, I gathered all my savings and ensured that each penny was used to buy land which I later on sold.
Each piece of land that I bought at that time, I sold when it gained value. In 2005, as a group of five who thought we would make a go at real estate, we incorporated a company which we call ‘South Gate’. As an investment club, we brought our savings together.
The real estates business is a very expensive venture, so we needed to get enough money to buy land. Our first property (land) was a five acre plot in Kiira.

As years went by, a number of housing projects came up. At the moment, we are working on one in Namugongo.
This will consist of 98 units of apartments and bungalows, ranging from Shs190m to Shs370m. We are also looking forward to be one of the biggest provisional properties for low cost and affordable housing.

‘The business involves large amounts of money. But this does not mean that you need a fortune to start. Use what you have to buy land and develop slowly. ’ All you need is money that can get you started. Start with small projects till they develop into bigger projects,’ Munyaneza.