Mizigo: The big venture for the small-time investors
Jan 09, 2009
Tenements, locally known as mizigo, are often overlooked as investment options by the average middle class, yet they are fast proving the biggest investment for small investors.
By Alex Balimwikungu
Tenements, locally known as mizigo, are often overlooked as investment options by the average middle class, yet they are fast proving the biggest investment for small investors.
Though the practice of investing in tenements is as old as the practice of land ownership, they have largely been ignored as an investment option. People prefer to buy land and let it lie idle. For those who have since realised their worth and invested, it has proved an ideal investment.
The tenements are picking up in major Ugandan towns and suburbs as the housing costs continue to rise and people move closer into the city centre (or downtown) to save money on transportation and other amenities. Popular places to build the tenements in Kampala include Bwaise, Kawempe, Mpererwe, Nansana, Namasuba and Ntinda, which are densely-populated with the majority of low-income earners dwelling there.
Jamada Sewali of Mpererwe on Gayaza road, who has invested in a number of tenements, assures that there are plenty of opportunities for making big gains and in his case, it has turned out more profitable than investing in shares or depositing the money in banks.
“Mizigo are popular and are not bad as an investment option. Contrary to what many people think, it is not a precinct for big real estate agents alone. With as little as sh5m, one can successfully start off construction, assuming they have acquired land,†he says.
Sewali explains that he started by purchasing a 50 X 100 feet land in Kasangati township at sh3.5m in 2004. Rather than let the land value appreciate like many do, he put up the simple rental properties ‘as a gamble.’ He has since bought and built in five other places on Gayaza road using proceeds from his other investments.
Sewali notes that the demand for the simple rental properties is inelastic for the simple reason that an ever increasing number of Ugandans cannot afford to rent a full house.
Rent for the cheapest two-bedroom self-contained house, probably nestled in a fence in Kampala, irrespective of location, is not less than sh250,000. However, the units attached together under one roof and divided by walls to give each family or occupant his or her own space and privacy, cost anywhere from sh50,000 to sh200,000, depending on the location and amenities like electricity or whether they are self-contained.
Jimmy Opoka, a mason, explains that two small rooms, say of 3 by 3 feet will set one back by about sh4m to the roofing level. However, he notes that with tenants demanding for more space, especially in the peri-urban areas, most landlords now insist on building a bigger bedroom, complete with toilet and overhead shower, while making the sitting room smaller. These self-contained houses normally cost anywhere from sh100,000 although some landlords tend to over-charge tenants.
Deus Wairagala, a business development and management consultant in Wandegeya, explains that for one to fully realise the fruits, it is advisable to take a mortgage with a bank because the chances are that property tends to appreciate in value over the course of the mortgage.
“There are, of course, blemishes on the face of what seems like an ideal investment. You can end up with a bad tenant who damages the property or, worse still, end up having no tenant at all. This leaves you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments.â€
With the current housing crisis in Uganda, such cases are rare. People make bookings on houses when they are not yet at wall plate level.
Wairagala notes that the biggest difference between a rental property and other investments is the amount of time and work one has to devote to maintain the investment. This is opposed to buying shares where one sits and prays they (shares) increase in value.
Besides, he says the responsibilities that come along with being a landlord only buoy one on.
He cautions that investing in rentals is more than just buying a place in a good area, finding tenants and letting the cash roll in. For instance, he says the property should meet all government requirements lest some wily tenants sue in cases of injuries or deaths due to faulty wiring or bad foundations, which leaves the landlord at a loss.
“One of the best ways to make profit out of rentals is to have the property inspected before occupancy and more importantly, it would not hurt if one made friends with the three most important people as regards the business – a lawyer, a banker and a tax professional. That way they can rest assured they will increase their profits.â€
Wairagala notes that investing in rentals is tangible, solid, beautiful and artistic only if one goes into it well-informed.
Tenements, locally known as mizigo, are often overlooked as investment options by the average middle class, yet they are fast proving the biggest investment for small investors.
Though the practice of investing in tenements is as old as the practice of land ownership, they have largely been ignored as an investment option. People prefer to buy land and let it lie idle. For those who have since realised their worth and invested, it has proved an ideal investment.
The tenements are picking up in major Ugandan towns and suburbs as the housing costs continue to rise and people move closer into the city centre (or downtown) to save money on transportation and other amenities. Popular places to build the tenements in Kampala include Bwaise, Kawempe, Mpererwe, Nansana, Namasuba and Ntinda, which are densely-populated with the majority of low-income earners dwelling there.
Jamada Sewali of Mpererwe on Gayaza road, who has invested in a number of tenements, assures that there are plenty of opportunities for making big gains and in his case, it has turned out more profitable than investing in shares or depositing the money in banks.
“Mizigo are popular and are not bad as an investment option. Contrary to what many people think, it is not a precinct for big real estate agents alone. With as little as sh5m, one can successfully start off construction, assuming they have acquired land,†he says.
Sewali explains that he started by purchasing a 50 X 100 feet land in Kasangati township at sh3.5m in 2004. Rather than let the land value appreciate like many do, he put up the simple rental properties ‘as a gamble.’ He has since bought and built in five other places on Gayaza road using proceeds from his other investments.
Sewali notes that the demand for the simple rental properties is inelastic for the simple reason that an ever increasing number of Ugandans cannot afford to rent a full house.
Rent for the cheapest two-bedroom self-contained house, probably nestled in a fence in Kampala, irrespective of location, is not less than sh250,000. However, the units attached together under one roof and divided by walls to give each family or occupant his or her own space and privacy, cost anywhere from sh50,000 to sh200,000, depending on the location and amenities like electricity or whether they are self-contained.
Jimmy Opoka, a mason, explains that two small rooms, say of 3 by 3 feet will set one back by about sh4m to the roofing level. However, he notes that with tenants demanding for more space, especially in the peri-urban areas, most landlords now insist on building a bigger bedroom, complete with toilet and overhead shower, while making the sitting room smaller. These self-contained houses normally cost anywhere from sh100,000 although some landlords tend to over-charge tenants.
Deus Wairagala, a business development and management consultant in Wandegeya, explains that for one to fully realise the fruits, it is advisable to take a mortgage with a bank because the chances are that property tends to appreciate in value over the course of the mortgage.
“There are, of course, blemishes on the face of what seems like an ideal investment. You can end up with a bad tenant who damages the property or, worse still, end up having no tenant at all. This leaves you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments.â€
With the current housing crisis in Uganda, such cases are rare. People make bookings on houses when they are not yet at wall plate level.
Wairagala notes that the biggest difference between a rental property and other investments is the amount of time and work one has to devote to maintain the investment. This is opposed to buying shares where one sits and prays they (shares) increase in value.
Besides, he says the responsibilities that come along with being a landlord only buoy one on.
He cautions that investing in rentals is more than just buying a place in a good area, finding tenants and letting the cash roll in. For instance, he says the property should meet all government requirements lest some wily tenants sue in cases of injuries or deaths due to faulty wiring or bad foundations, which leaves the landlord at a loss.
“One of the best ways to make profit out of rentals is to have the property inspected before occupancy and more importantly, it would not hurt if one made friends with the three most important people as regards the business – a lawyer, a banker and a tax professional. That way they can rest assured they will increase their profits.â€
Wairagala notes that investing in rentals is tangible, solid, beautiful and artistic only if one goes into it well-informed.