UGANDA, Kampala | Real Muloodi News | According to Spectrum Real Estate Solutions, Uganda offers exciting Buy-to-Let investment opportunities with excellent income and future capital growth.
Buy-to-Let investment refers to investing in property with the prospect of earning rental income from tenants that will contribute towards the mortgage costs and any other related costs. Capital growth refers to an increase in the value of your property over time.
Although Uganda offers exciting opportunities, it is essential to consider the gross returns from Buy-to-Let properties, i.e., the rent received minus your costs/expenses. Expenses include things like maintenance, service charges, taxes, etc.
In addition, Spectrum explains that “Investors need to take a view on the likelihood of capital appreciation exceeding inflation.”
There are several factors that investors should consider before availing of Buy-to-Let opportunities. Investors should:
- Think of their investments as a medium to long term;
- Research the local market;
- Look into high-quality renovations to attract better quality, higher-paying tenants;
- Ensure you have sound tenancy agreements and other legal documents in place;
- Avoid properties that require a lot of expensive maintenance;
- Consider employing the services of a professional property management company instead of having family or friends look after the property;
- Know that investing in Buy-to-Let property differs from buying your own house; You should look for features that will help you let the property faster.
It is also imperative that you are informed of:
Tenancy agreements
- The law states that landlords and tenants must sign tenancy agreements for rent transactions of over USh 500,000 with clear terms and conditions. Regardless, a tenancy agreement is always a good idea. This important document will ensure that the legal position between you and your tenant is clear.
Tax expectations
When buying to let, the following taxation aspects must be considered:
- Ground Rent: This is rent you pay on leased land in Kampala. Every person leasing land from Kampala Capital City Authority (KCCA) is required to pay an annual ground fee, whether the land is developed or not.
- Property Rates: If A tax on the value of your property. Your property value is a percentage of your property’s estimated rental value (whether it is rented or not). It applies to any property or building commercially managed, like rented houses, rented shops, factories, or any part used for business, even if it is owner-occupied. This tax is also payable to KCCA.
Income tax payable on the rental income received
- From July 1st 2021, all persons (individuals, companies, partnerships) deriving rental income will be taxed at a rate of 30% on the income earned.
- Allowable expenses as a deduction to offset rental income will be capped at 75%. Currently allowable expenses include mortgage interest, repairs, agent’s letting fees, and an allowance for furnishings.
- Rental income tax is payable to the Uganda Revenue Authority (URA).
The Importance of Buy-to-Let Legal Agents
Letting property can be very time-consuming and inconvenient. Buy-to-Let Legal Agents acting on your behalf will help you:
- Find investors the right property;
- Research the real estate market well;
- Advice on excellent quality furnishing and décor that will help attract tenants faster;
- Advertise the property;
- Orient prospective tenants;
- And come to the rescue for day-to-day problems like plumbing emergencies.
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