UGANDA, Kampala | Real Muloodi News | Real estate expert Douglas Mukwaya outlines common mistakes to avoid when investing in real estate in Uganda.
Mukwaya emphasises the importance of planning and research for successful real estate investing, whether one aims to generate passive income or engage in development projects.
Lack of Effective Planning and Research
Investing in real estate requires a comprehensive understanding of the current market, as well as careful planning and research.
Buyers should familiarise themselves with the process of acquiring a mortgage and the needs of potential renters.
Absence of a Solid Exit Strategy
Investors must develop an exit strategy to avoid potential financial loss. If a clear plan for exiting an investment property is not apparent, the purchase may not be advisable.
Neglecting Tenants’ Needs
Consideration of potential renters’ needs is crucial when investing in residential or commercial property. Matching property attributes to desired tenants can result in a more successful investment.
Not Identifying Goals Before Property Search
Investors should clarify their objectives before searching for properties. This involves deciding whether to manage the property personally or hire a manager, how long to keep the property and what return on investment is desired.
Treating Real Estate Investing as a Hobby
Real estate investing should be approached as a business to maximize returns. Proper goal-setting, record-keeping, and understanding of potential tax benefits are essential.
Getting the Wrong Financing
Uganda offers mortgage options on registered land, but potential investors should be mindful of interest rates and available special mortgage options.
On March 1, 2023, the Bank of Uganda implemented changes to base lending rates, affecting interest rates on real estate financing and mortgages.
Failing to Negotiate
Overpaying for a property can lead to smaller returns on investment. Investors should remain patient and negotiate to ensure they get the best possible deal.
Ignoring Opportunities Near Primary Residence
Investing in properties close to home can allow for easier hands-on management and quicker response to any issues.
Underestimating Additional Costs
Property owners should set aside at least 2% of the property’s value annually for maintenance costs. These expenses can quickly add up and impact overall profitability.
Neglecting to Build a Team of Trusted Experts
Building a team of experts, such as tax strategists, real estate attorneys, and professional agents, is crucial for successful real estate investing.
Although Uganda’s real estate sector faces challenges due to being unregulated and lacking a dedicated real estate law, efforts are underway to address these issues and improve governance and accountability in the sector.
Mukwaya highlights the importance of consulting with experts before, during, and after every transaction to ensure successful real estate investments.
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