Uganda, Kampala | Real Muloodi News | In Part 1 of this series, we explored how to get started in real estate investment with a limited amount of capital.
Part 2 of the series covered short and long term residential rentals, and home renovation flips as ways you can invest in real estate.
In this next instalment, we will continue to explore different kinds of real estate investments to turn a profit.
Types of Real Estate Investments
Contract Flipping / Wholesaling
Instead of flipping houses, contract flipping, also referred to as wholesaling, involves transferring the rights of a purchase contract to another buyer. The idea is to locate a distressed home at a discounted price, and a motivated buyer who wants to purchase quickly, and bring them together to make a profit.
The appeal of flipping a contract is that you are putting little to no money into actually securing the house. In fact, a contract flipper might only own it for a few minutes or hours before selling it.
The wholesalers’ job is to find properties for sale at heavily discounted prices, put them under contract, and then find subsequent buyers. The wholesaler might, for example, sign a contract that gives them 30 days to close on the property. At that closing, the wholesaler will then immediately assign the contract to the buyer they have found.
To pull this off, you’ll need to find properties for sale at heavily discounted prices. That is the tricky part; you’re looking for troubled sellers. Houses that are currently unoccupied are ideal for this type of opportunity.
Raw Land Development
Raw land development involves purchasing untouched land, intending to develop and build on it. The zoning of land is very important because it dictates how the land can be used for future development.
According to Spectrum Realestate, land can produce passive income or large profits depending on how the land is purchased and sold. Development could include commercial or residential real estate, or for farmland, ranches, or natural resources such as mineral, water, or air rights.
The land value will vary depending on the location, type of land, and its size. The price can range between just a few thousand dollars to millions of dollars. But for most people, land can be a low-cost investment that doesn’t require a bank loan to get started.
Subdivision
Subdividing the land into smaller plots and selling them individually for a bigger profit can yield excellent returns if done properly.
A common subdivided plot measurement is 50ft 100 ft for an estate with roads network, title, water and electricity extended.
Robert Sekalala, a land broker in Nsasa cell in Kira Municipality, says, “If you buy land and there’s no water, electricity, or a good road network, people are not likely to buy your plots of land. It means every person who will buy your land has to extend power or water which will create chaos,” he adds.
Land Banking
Land banking involves holding onto vacant land for long-term appreciation, and later selling it. This kind of land can be most profitable in upcoming areas on the fringes of urban centres ahead of development. Land banking offers 5 to 10-year returns on investment for busy urban centres, claims Sekalala.
Sekalala says those who invested in land in such areas like Wakiso are now reaping profits. “There were no schools, the roads were narrow and murram especially in early 2000; but most of the suburbs around Wakiso have changed!”
Commercial Real Estate
Commercial Real Estate includes shopping centres, office spaces, retail, malls, hotels, medical and education facilities, constructed to generate income from rent or through sales.
According to Ali Safavid, the founder of 5209 Investments, when you invest in commercial real estate it may be one of the most lucrative passive income sources.
While investing in commercial real estate, a key factor to consider is the business area. Phillip Muhooja, a real estate agent at Spectrum Real Estate Investments, says: “Proximity to the main road or any highway is important for a commercial property. That will determine the value of commercial real estate.”
Commercial real estate developers are also interested in developing and adding value to them. They earn more money through repairs and improvements. They also advise on initiatives that may require more experienced real estate investors to follow through to completion.
While entering the real estate industry may seem daunting at first, with minimal capital, proper knowledge, a can-do spirit, many can succeed in the industry.
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