Category Real Estate

Studios (Mizigo) offer better investment returns than bigger houses


Studios (Mizigo) offer better investment returns than bigger houses

By Denis Jjuuko

One of my former landlords used to brag that she builds her houses like she would live in them. That if she didn’t fancy the house herself, she wouldn’t rent it out. Her houses are very spacious and although she doesn’t do as much as she promises, at least she tries. I have also met many people with similar views. They build houses for rent as if they will ever live in them. They spend on a lot of stuff that those who rent won’t really treasure like expensive chandeliers and polished porcelain.

A lot of times, rent is determined by the number of bedrooms and of course the location. A two bedroom house that is so spacious may not be rented at a much more rate than one that isn’t so extravagant. When I lived in my landlord’s so spacious houses, I was paying the same amount others were charging in that part of Kampala. So technically, the other guys were making more money than my landlord because in Kampala, residential houses aren’t charged per square feet. Actually, there is much more money in smaller houses than big ones. This is because unless your house is in one of those top suburbs, you will get very low returns. Even in the top suburbs, apartments are coming up.

It is cheaper to live in an apartment than a stand alone house in its own perimeter wall as that comes with extra costs such as security and garden maintenance. On an apartment block, there are many tenants that it may not be easy for thieves to break in like it is in a house in its own perimeter wall that you lock and go away.

The other issue with big houses that may not be in Kampala’s exclusive suburbs is that those who occupy them have more financial needs than people who live in small apartments. If you rent a big house, you most likely have a big family. And nobody will pay rent ahead of school fees for the kids. So the landlord becomes secondary. People who live in apartments especially the smaller ones don’t have as much financial needs or don’t consider themselves to have them.

So rentals that are meant for one person (studios) and one bedroom ones have much more returns than those that are three bedrooms or stand alone houses. This is because they attract bachelors who recently got their first or second job and eager to leave their parents or guardians’ homes. Their money is for them to enjoy and once in a while contribute to social causes. They have no problem paying six months rent in advance. In some parts of Kampala, a one bedroom apartment is charged a small percentage lower than a two bedroom flat. Studios charge as much as one bedroom apartments.

Such people also keep houses in better conditions as they have no kids to spoil the walls and plumbing. If it is a girl, she may even spend weeks without sleeping there as she may be having a boyfriend where she spends more time. Such people don’t usually use charcoal to cook. So houses are kept in good conditions as opposed to those that attract families.

In fact, there is more money in single rooms commonly referred to as Mizigo than the fancy apartments people like to build. They cost less to put up and aren’t kept empty for months if one tenant left. The people who can afford them are many and they don’t make outrageous demands like Kampala’s ‘corporate class’! Of course owning them may not make you become the most admired guy at your social club but as a business, they offer good returns. The only challenge with them could sometimes be management as a tenant may leave at anytime. So a lot of times a manager is necessary to put them in line.

So this may not be an option really for established real estate owners as they may be building for other reasons such as prestige and self actualization. If you are starting out and you want to make a quick return on investment, the Mzigos or at worst studios offer better alternatives. And the beauty with studios is that if the location is accessible, you can quickly turn them into lodges and/or list them on AirBnB for those interested in short term stays.

The writer is a communication and visibility consultant. djjuuko@gmail.com

Advertisements

Uganda Embassies Are in a worse State after surviving being sold off


Uganda embassy in washington,DC

If all Uganda’s properties abroad are rented out on a public market, Uganda can get enough money to pay its entire medical structures. Unlike many African countries we have some of the most lucrative properties in the most lucrative areas of very expensive cities for leaders like AMO and Iddil Amin bought these properties that they paid in cash. I think and I stand corrected that Nairobi property was bought during Obote2 government.

As far as I know we do not have a single property with a mortgage debt, and all of them from embassy offices to ambassador residences to Coffee marketing board offices to coffee marketing board manager residences. It is not easy to get a property today on Trafalgar square but Uganda owns one.

I encourage Ugandans to go to Cuba and visit the Uganda property we own, it is a full city block, I was amazed when I toured this property for it was simply too huge to be a Uganda property. If this government moved all these properties and waived the diplomatic immunity off all of them, it is a shocker to those of us that have heads Kasansula wants to check.

You see as time goes by these properties have accumulated high money into assets worth and taking them today one would become a millionaire in a split of a second. When I was in Japan there was an argument for someone in Uganda wanted to sell off our embassy property one wonders if it was sold or if we still own it. London has been threatened too, these people in NRM are out to sell anything they can and before they are done we will be left naked. I fear too on who owns the Washington property today, is it Uganda government or The Rwandese government?

The sell of ’86 was that sell not made during the Tito Okello government? I had a similar war with them when they wanted to sell off Uganda house in Washington, and Olara Otunu was very influential into that sell for he was the minister of Foreign affairs at a time, and his plan was to sell the entire property we own as a minister. You see the Washington Uganda house was built specifically in Uganda materials, all furniture and all doors all wood work was flown into Washington directly from Uganda. It is that building why Amin bought an air craft that was interchangeable from passengers’ flights to cargo, so that he would bring the required materials for it.

Let me add that most of the furniture in that building was made in a carpentry shop opposite Jinja Road Police station at a time. The Olara Otunus wanted to sell it before Museveni came to power, and we had to get a lawyer who registered a claim on the property. If you register a claim on a property it cannot be sold until when it is decided either in a court of law or through lawyers. We never had a claim but we created a delay tactic that worked so well. The building was saved. Unfortunately today it benefits Rwandese better than Ugandans but Uganda still owned it to the time I stopped to follow it.

Let me add that the price of that building is way higher than what Amin spent on it. At a time of building it we had a standard so high that it was the head Quarters of the UN till when we stopped to maintain it, and the UN built its current head Quarters which is near our property.

We need to wake up and use these properties to the goodness of our country, I wonder too why we don’t combine all of them and put them under a strict ministry to know exactly how to maintain them. I was in Ottawa and the residence of our ambassador is an eye sore in the Kololo of Ottawa. But so is the embassy building its self, I arrived at that office early morning one time, and a staff was living into it so you open a door and see cooking pots of burnt food on office tables, man I was so disappointed and I stopped to go to Ottawa building. It is just too un presentable.

I encourage Ugandans to go to Havana and see this marvellous building we have man I looked at it and I had a glee on my face but that is how much business we had with Cuba at a time, so it was yes very justified.

Edward Mulindwa
Toronto

—————————————————————————————————————

Uganda embassy in London

My friend Edward Mulindwa,

Some people in the Ugandan Embassy and the Foreign office in Kampala tried to sell off Trafalgar Square and other Ugandan properties in London. Remember, before Museveni came to power in 1986, Uganda owned not only the Trafalgar Square embassy, which is a very prime business area of London, but also about other 15 residences in the most expensive areas of London like Golder’s Green etc. The Ugandan government owned these properties outright with no mortgages attached.

But in 1992, corrupt officials in Museveni’s government tried to sell off these properties. They talked to some property developers, who told them if they sold off the Trafalgar Square Embassy, they would build Uganda another embassy complex, but outside of central London, because the developers wanted to demolish the building and put in its place a modern office complex of about 15 storey . They even signed a contract, which totally undervalued these buildings and land, so that Trafalgar Square embassy would be sold at less than a half of its then going price, which was £350 million, but they were going to sell it for only £100 million. In return, these corrupt officials in the embassy and the Foreign Office in Kampala would receive a bribe of £10 million to share among themselves.

The Brirish authorities learnt about this deal, because many embassies are located in Trafalgar Square, including the American, South African, and French embassies. The developers applied for planning permission to demolish the building and erect their modern office complex, that is how the British authorities found out, and so they contacted Museveni’s government.

As usual, Museveni cancelled the contract of sale but Uganda had to pay the developers almost £50 million for breach of contract. It is the same story that has been repeating itself again and again, with Museveni cancelling corrupt contracts and then paying millions in compensation. In this case, The Permanent Secretary was made the scapegoat and was sacked by Museveni, so Trafalgar Square embassy still remains the property of Uganda.

Unfortunately, Trafalgar Square embassy is in a very sorry state and sometimes they don’t even have heating, but it is still there. They even rented part of it out to the Rwandan embassy at some point and to other organizations. Rwanda have since bought their own property and moved out instead the current tenants are the Ecuador as we speak.

This is the Museveni’s Uganda that we live in today. I also visited the Ugandan embassy in Havana, Cuba, and it is a very impressive building.

George Okello
London

Kajjansi Trading centre; what needs to be fixed













Makerere to Invest in real estate and stock exchange : good but caution required


People:

Makerere University ‘s plan to venture into real estate sounds good.  However, I am not sure about venturing into the stock exchange-bourse really. Why? Because the Ugandan bourse is not well diversified since it most likely has less than 25 listed stocks which make it very risky.

They also seem to be doing things in reverse. They should hire a professional firm to advise them on an investment plan. For instance how much risk is the University willing to take?  That will determine the composition of their investment portfolio in terms of weighting -real estate, bonds, and stocks and near cash items.

That said Makerere should take a very hard and sober look at the massive looses suffered by University Foundations in North America during the meltdown.  It was in billions of dollars-yap-which forced Harvard with the largest endowment and Yale with the second largest to cut down on a lot of things including student funding and even food services for students.

Actually many University Foundations were forced to exit the stock exchange in order to safeguard their capital from further decline.

The good place for the University to start would be to take over its staff pension now being misused in National Insurance or the former NIC.  That should form the seed capital for real estate.

You need a minimum of 25 stocks to have a balanced portfolio. This has been empirically proven in finance. Anything less cannot give you a balanced portfolio to diversify the risk.

True you can lose or make money on the stock exchange. Overall people make more money depending on their time frame. If you invest for the long term and you have a well balanced portfolio, you will make money over time.

That is why I said Makerere seems to be doing things in reverse. The University needs a  short term to cover the next 10 years and a long term plan to cover 25 years plus. For example, the University may plan that in 10 years, it will offer scholarships to poor but bright kids extend generous research grants to its faculty and offer better pensions to its retiring staff.

And by staff I do not just mean faculty, but all the folks who work for Makerere from professors, secretaries, cooks to janitors. What is more equitable: sponsoring the kid whose father is an MP or tycoon or offering a scholarship to the son/daughter of the university cook?

Then the university has to weight its investment portfolio accordingly to ensure than in 10 years time, it will be generating enough money to do what the university wants while also growing the principal.

The VC also talked about bonds. But bonds are sensitive to interest rates in an inverse relationship and thus sensitive to inflation. What is the real interest rate in Uganda today (nominal rate minus inflation rate) because that is what bonds would be earning? Bonds are the safest investment but they also pay out very low returns.

Certainly the proposal is good but the VC and the University need to be careful. Political risk is a real possibility in Uganda which means that most foreign investment is actually speculative and looking for short term gains and out.Real estate is the best option. But who would manage their real estate portfolio since the University has failed to maintain Halls of residence.

Also the laws on foundation need to be changed in favour of investments. For example, what channel does the University plan to use to do what the VC promised to do?  Through a foundation? But how are foundations treated by tax authorities in Uganda and so on?

The good thing is that what Makerere is promising to do other entities too can do it for money and fund their productive activities. There are surely entities with larger and prime land holding than Makerere.

WBK

%d bloggers like this: