Owning an asset is the greatest achievement for most income earners especially the youth who have just started working and are trying to establish themselves. However, we should always ask ourselves what do we benefit from owning such? Recently, a friend was crying about not having enough money to cater for rent and loans. He earns just Uganda shillings one million (Ugx1m). As he narrated to me how the times had been bad for more than five months, I discovered that he owns more than one piece of land in one of the most well-established residential areas in Kampala.
Having no place to call your own at bedtime and then suffering from more monthly fixed payments in loans is more stressful than not having what to eat. Being comfortable in your own home is the best satisfying experience an individual can have. So, what would you do given if you found yourself in the same position?
Firstly, estate dealers always want to sell what they are selling, and especially when it lands, they are even more aggressive. They will convince you to purchase as big or as many as possible. They will even encourage you to take a loan or mortgage for it. Remember, the dealers themselves do not give the loans. They connect you to the bank and for them, they are paid in full. Their risk is usually minimal or no risk at all. If you are lucky, the estate will have access to water and electricity. For many, the dealers usually convince the clients by telling them that the utilities are within the vicinity.
Buying a big plot is not bad but not having money to develop it is very frustrating. If you acquired part of it as a loan, the pressure will be high on you. Having a small plot paid in full by the little savings is better.
If you have more than one plot and you are like my friend, selling off one and using the income to develop the other is even the best option. This will leave you with only one fixed monthly payment to pay on the loan.
Properties will always be in abundance for those who have the resources to purchase them, but with a simple calculation, living in a small comfortable place and saving the rent income per month can help you acquire those resources to purchase an even better property than the one you were holding too.
Do not be comfortable in a house that does not belong to you because circumstances may change anytime like the current global financial crisis where you would find yourself without any income to cater to the basic needs. Planning your future also involves planning your shelter after which everything would be reachable. Yes, Europeans, Americans, and other countries live in rented houses as part of easing their cash flows. This model works for the majority of them because the structure and systems support it. As you attain high levels of personal growth and self-actualization, owning a home is a priority. Better start planning for it now than later.
So why hold onto the properties?
Even the resale price after a year of holding it may not give you profits equivalent to the total rent paid to somebody else (the landlord). As for my friend, one of the plots (25 decimals) was purchased around June 2013 at shs.24 million, it is currently selling at Ugx.35 million (book value) giving a decent profit margin of about Ugx. 11 million. He has been renting at a fee of 400,000 per month for the first 2 and half years. At the end of 2018, the landlord increased the rent to 500,000 due to the post-election period. All this makes renting expensive.
Before holding on to assets, be strategic and tactical as well. There is no reason in saving if you are starving. However, if you have enough to survive, you could hold on as long it gives net wealth growth.
Hint: sell a fixed asset when it is not productive or when keeping it makes it lose more value than it creates or appreciates. If you are not using your savings, someone is using them to become richer. Better wake up and be smarter.
Copyright Mustapha B Mugisa, Mr. Strategy 2021. All rights reserved.