UGANDA, Kampala | Real Muloodi News | As the demand for residential real estate rises with the increasing population in Uganda, the debate among the investors is whether they should invest in single-family or multi-family rentals.
A single-family rental is a detached property, usually with a yard and a garage designed to accommodate a single-family.
Whereas multi-family rentals are apartment buildings, condo communities, or a single building designed to accommodate more than one family living separately, each having its unit or space.
Not sure whether to try your luck at single-family or multi-family rentals? Here’s what you should understand about each one.
Advantages of Investing in Single-family Rental
Financing
It is a more affordable option for beginners and easier to finance.
Management
A single-family property requires less upkeep and maintenance than one with dozens of rental units and tenants.
According to Peter Mawanda, a property investor in Budo, since most investments in rental housing are small scale, most landlords prefer to manage the business themselves.
“And when given a choice, most people would rather have one tenant rather than six. It is easier to manage the repairs, the rent collections, cleanliness (where necessary), and even evictions in a gate with one family than in a fence with multiple families,” Mawanda says.
“This is one reason people give in, preferring a single-family rental as opposed to several semi-detached rentals. The other is that most people do not have the luxury of staying near their investment to keep a keen eye on the property and the needs of the tenants. The more tenants you have in one gate, the more demands on the landlord,” Mawanda says.
Greater Resale Opportunities
Another flipside to single-family rentals is that they are easier to sell. They have a much larger buyer pool than multiple family rentals since both real estate investors, and traditional home buyers are potential buyers.
Advantages of Investing in Multi-family Rental
Yields Better Profits
According to Alex Muhwezi, a property owner and broker in Kasangati, Kampala, the more units one can fit in a plot, the better.
“More people are looking for the cheapest possible housing than those looking for luxury. Those are the tenants that will give you a quick profit on your investment. Several single rooms on one plot (up to 12 if there is parking space) are the best use of your money,” Muhwezi argues.
Muhwezi adds: “A single room with a toilet and bathroom ranges between USh150,000 and USh200,000. If you fit 12 of them in your plot, you are assured of a constant USh1.8m in rental income on the low side. Most standalone houses will not give you that much,” Muhwezi says.
Demand is high
With multi-family rentals, there is always a tenant moving in or moving out. However, with single-family rentals, you only have a single tenant to worry about, and the tenants usually stay for 12 months at the least. Investing in multi-family rentals means less time spent finding new tenants and less work turning over the property.
The tenants usually think of the rental property as their own home, encouraging them to stay longer, behave right, and take better care of the property.
Cissy Namaganda of Cinam Investments says multiple units in one space make more commercial sense.
“It is possible to earn three times more income from four small units than from one big bungalow. It is possible to fit four two-roomed rentals in a 50ft x 100ft and leave enough parking space for four cars. So why would you build one instead of four?” Namaganda adds, “Maybe if the cost of construction is a big factor.”
High Cash Flow
Cash flow is not as strong in single-family rentals as it is in multiple-family rentals. Fewer units mean less cash. You only get a handful of rent payments monthly with single-family rentals. However, multi-family rentals have a lot more money flowing in.
According to Muhwezi, multiple-family rentals are the way to go if you want a steady cash flow.
“Some people have their reasons for choosing a single-family rental over several smaller units, but I strongly prefer the latter. If you do not get a well-to-do expatriate to live in that house, you will mostly get frustrated by looking for the right tenant. Very few Ugandans in this economy want to pay USh2m a month in rent. I have seen cases where someone offers USh400,000 for a three-bedroom house, whose starting price is USh1.5m,” Muhwezi says.
Low Tenant Turnover
Tenant turnover costs time and money. Every time someone moves out, you coordinate cleaning, repair damages, and general wear and tear, market the units, and screen the applicants. And, of course, there is always the loss of rental income while the unit sits vacant.
The Approach to Adopt
Judy Rugasira Kyanda, the managing director at Knight Frank Uganda, advises new real estate developers to take the time to study and understand the business.
According to Judy, if you want to build single-unit family rentals or apartments, consider the location of the land, the size, and how many units can fit on it. Judy says you should consult an architect for guidance.
She also advises that before investing, look at the target market to determine if there is a demand for that type of property.
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