HOW TO MAKE MONEY THROUGH COMMERCIAL REAL ESTATE IN UGANDA

When it comes to creating wealth, the few who have understood how money works will always be a step ahead of the pack. The simple concept of “Money follows Value” seems to be one of the world’s most hidden secrets, even though it is buried in plain sight, for anyone conscious enough to find. In Uganda, people struggle to know how to create more value with their investments.

What is value?

The Cambridge Dictionary defines value as the importance or worth of something to someone. Value, therefore, is a matter of perception held by the individuals involved in a particular transaction.

Investors create value by making capital accessible to businesses for operation.

Businesses create value by combining different resources to develop a new product that customers perceive as valuable. Once someone perceives your product as valuable to the tune of a certain amount of money, they are willing to exchange that amount of cash for the benefit of owning or using that product. In that way, the person who created the value receives money. That is how wealth is accumulated.

In the case of real estate, the value created is accumulated in the final product, which is the physical property. These property types include single-family homes, apartment blocks, office buildings, retail shopping centers, and industrial warehouses.

What influences value in commercial real estate?

Several factors including political, social, environmental, and economic conditions determine the value of a real estate product.

In a war-torn area, the value of real estate will dramatically drop, because potential buyers do not view this as an appealing place to buy. Similarly, changes in social trends can influence people’s perception of a building’s value. For example, during the pandemic, a shift to working from home for most businesses led to a drop in demand for office space. This trend led to a decline in the value of office blocks.

Environmental factors like flooding and the threat of landslides can also impact the value of real estate properties. Properties in geographically risky areas are valued less than those in geographically secure environments. During times of high unemployment, high-end apartments might decline in value because the market may not perceive them as a necessary expense at the moment.

How can one create value in Uganda’s commercial real estate sector?

With that background knowledge of the factors that influence the value of a property, investors in Uganda have an opportunity to create real estate products that will be perceived as highly valuable, and in turn channel a significant amount of money to themselves. They can also explore value-add opportunities in existing structures that require some modifications. This knowledge helps investors to make the right decisions at the different stages of value creation in the real estate development process. These stages include;

1.   Idea/ concept generation.

This is a critical component of value creation in real estate development. The quality of decisions made at this stage has a long-lasting effect on the property’s valuation. Adequate research, imagination, and professional engagement are required at this phase. Consider reaching out to professional real estate investment managers like Baros Group Limited if you are new to real estate investment. Their ideas and industry insight will provide you with much-needed guidance on mistakes to avoid. They will help you make the right calls to maximize future returns on investment.

2.   Land acquisition.

As mentioned above, the location of the property will greatly determine how people perceive it. A poor location will attract a low valuation, no matter how well the structure is built. An investor needs to consider all the geographical, political, and social factors surrounding an area before they commit their capital to a project. A good neighborhood will fetch a high valuation even though the structure is not in the best condition. Consider investing in areas that promise to develop into great neighborhoods. Amenities like good schools, road networks, hospitals, and recreation centers are all indicators of a great neighborhood.   

3.   Construction.

A beautifully constructed property commands a higher valuation than one in which evidence of poor workmanship is visible. Great construction doesn’t necessarily mean spending huge sums of money, although money is a contributing factor. How the project is managed, from the planning phase to execution and supervision will all contribute to how the final structure turns out.

Hiring professionals during this stage is important because they have the experience to do a good job. An investor or developer needs to consider this as they go about their investment. Another reason one should be very careful at this stage is to prevent major defects that could manifest later on in the investment life cycle. Some of these defects such as major structural cracks could ruin the entire valuation of the property. It cannot be overstated how important quality is during the construction phase.

4.   Marketing and sales.

In Uganda, this component of value creation is often overlooked until it’s too late. Many developers will put up a property to completion before even considering reaching out to potential clients. Remember value is about perception by the two individuals involved in a transaction.

It is upon the developer to advertise their property to make sure potential clients perceive it as a great purchase. The most significant chunk of value in a property can be created just by using an excellent marketing strategy. The difference between properties that sell quickly and those that take long on the market is sometimes down to the difference in marketing strategy.

You can make use of software to sell the vision even before the building is physically constructed. By attracting attention to the project, the investor increases their chance of getting back their money in a short period.

What should an investor do?

Whereas there are several ways an investor can create value in commercial real estate, making the right decisions at each of the steps in the real estate development process is key to developing a highly valuable asset. Investors need to factor all these aspects into their plans for the success of their strategy.

That is why working with a real estate investment management company like Baros Group Limited is an excellent way to protect your capital and maximize potential returns. Their experience in the industry will guide you on how to navigate the pitfalls and make the best possible decisions on your investment journey. If you are wondering how to make money through commercial real estate in Uganda, reach out to them to get started.

To learn more about investing in Uganda’s Real Estate industry, visit https://www.barosgroupltd.com/

About the author;

Benard Sonko is a real estate investment manager and founder of Baros Group Limited. For comments and inquiries, you can reach him on +256742140251 or info@barosgroupltd.com