I always also keep asking myself how do they make it indeed they should share with us their secret like it doesn't make sense for me to pay 8 million ugx per month on a 3 bedroom apartment. As an investor how can you rent and how much should I charge as rent on 3 bedroom apartment that takes 8 million ugx in debt service a month.
I have spent hours and hours analyzing and underwriting Ugandan properties but they almost not make sense for me even if a property makes 2% rent ratio of it's price it still don't generate cashflow.
Because look, debt service takes 70-80% of the properties income then what about taxes, maintenance and whatsoever, taxes alone takes 7-12% of the properties annual income.
So if 70% of properties income goes to debt service, 35-40% goes to property maintenance, it's already a negative cash flow.
Oh you are so spot on from the perspective of Income/cashflow these properties can generate.
Barely any apartment in Kampala can pay for it's self with the ridiculous mortgage rates coupled with the lowest rental rates they do generate.
You are very lucky if an apartment can bring in even 90% of monthly mortgage repayments, it's always getting money from other sources to top up and pay for this dead weight asset for years just to one day say I have an asset, or you have to inject in signficant Equity to balance it out.
I always also keep asking myself how do they make it indeed they should share with us their secret like it doesn't make sense for me to pay 8 million ugx per month on a 3 bedroom apartment. As an investor how can you rent and how much should I charge as rent on 3 bedroom apartment that takes 8 million ugx in debt service a month.
I have spent hours and hours analyzing and underwriting Ugandan properties but they almost not make sense for me even if a property makes 2% rent ratio of it's price it still don't generate cashflow.
Because look, debt service takes 70-80% of the properties income then what about taxes, maintenance and whatsoever, taxes alone takes 7-12% of the properties annual income.
So if 70% of properties income goes to debt service, 35-40% goes to property maintenance, it's already a negative cash flow.
Wait! Am I missing something here?
Oh you are so spot on from the perspective of Income/cashflow these properties can generate.
Barely any apartment in Kampala can pay for it's self with the ridiculous mortgage rates coupled with the lowest rental rates they do generate.
You are very lucky if an apartment can bring in even 90% of monthly mortgage repayments, it's always getting money from other sources to top up and pay for this dead weight asset for years just to one day say I have an asset, or you have to inject in signficant Equity to balance it out.
Hooo I don't love that, I don't want to invest in liabilities that will put my heart into prison of stress.
I've always searching for the value behind this because that isn't part of my investing strategy, it's not worth it then.