What makes a good property investment in Uganda?

The things I look for in any investment (including property) are:

• strong, stable rates of capital appreciation;
• steady cash flow;
• liquidity – the ability to take my money out by either selling or borrowing against my investment;
• easy management;
• a hedge against inflation; and
• good tax benefits.

So how do you make money from a property investment in Uganda?

Well…property investors make their money in four ways:

• Capital growth – as the property appreciates in value over time
• Rental returns – the cash flow you get from your tenant
• Accelerated or forced growth – this is capital growth you “manufacture” by adding value through renovations or development, and
• Tax benefits – things like negative gearing or depreciation allowances

But not all returns are created equal.
Capital growth is not taxed while rental returns are, and as your property increases in value, the rent increase also generating more cash flow.

Capital growth is a much more important driver of your wealth creation  than cash flow.

Clearly you need cash flow to allow you to hold your portfolio for long enough so that the power of compounding of capital growth kicks into gear, meaning you must have a financial buffer to see you through the lean times.

This means you need to be careful about your cash flow and your ability to service your debts.

Too many investors don’t recognise that property investment is a game of finance with some houses thrown in the middle and leave themselves open to financial woes by not having rainy day money that they can draw on when needed, which often results in them selling at a bad time.