What to consider before you invest in rentals

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While some people hesitate to invest in rentals fearing that they have a low return on investment, those who have ventured and succeeded share insights on how to benefit from this business.

Kenneth Kamya proprietor of Sky Financial Services, a microfinance company, finds rentals a viable business but only if you master it well. He believes in building in stages while paying attention to class and quality.

He owns an apartment block with six units in Namugongo, a suburb of Kampala but he started construction when his firstborn was in primary four and is now at university. Kamya expects to complete the project this year and each unit would have cost him about sh100million.

“I will either rent them out at sh1million monthly or sell each unit at sh200million,” he says.

For those with good jobs or businesses, Kamya advises investing in rentals not for quick profit but for wealth accumulation. Say, you can use those rentals as collateral for a big loan. You can also sell them at a good profit but they should be of a high class.

“Don’t build in a rush and avoid taking loans. Use part of your savings or business profits,” he advises.

Do they make business sense?

However, to Alosius Gonza, president of the Institution of Surveyors (ISU), instead of pumping millions into a venture with low return on investment, he would rather put that money in insurance, buy shares in a telecom company or go for bonds and treasury bills.

“Rentals are expensive to build and you will wait for years to get some profit,” he says adding; “Some people invest in them to hide stolen money otherwise they are not good for one who wants to grow their hard-earned money.”

Gonza says, real estate dealers benefit because they buy and sell properties. He is quick to add that the high cost of land in urban areas has also made rentals unaffordable. 

Richard Mwebesa a business development consultant weighs in saying, if you opt for rentals, go in for the long haul. It might take you 20-30 years to get a return on investment depending on location.

“First ask yourself why you want this business. Is it for commercial or domestic purposes?” he says adding; “Commercial can be shops or offices. Domestic could be for residential purposes.” Regardless, ensure the rentals are accessible and in a secure place with amenities like electricity, water and garbage disposal services.

But also, the structure matters in some places. There are tenants who prefer storied or studio apartments.