{UAH} MANY PEOPLE BUILD RESIDENTIAL HOUSES FOR EMOTIONAL NOT FINANCIAL REASONS

Page 175: MANY PEOPLE BUILD RESIDENTIAL HOUSES FOR EMOTIONAL NOT FINANCIAL REASONS

This is something that can be debated, but my view is that generally speaking, many people own residential houses for emotional, not financial reasons just like personal cars. Do you buy a car because transport fare is high? Do you save on the fare by buying a car? You buy a car mainly for comfort, convenience and swiftness.

Likewise, the main ways in which a residential house or a car can help you financially is if you sell it, if you use it as collateral to obtain a loan or if you rent it out. You don't save on rent by building a residential house because to acquire a house you need to have more than 15 years' rent up-front.

If you are renting a house in Kampala at 500,000 shillings a month, building such a house will cost you not less than 70 million shillings. And the plot will have cost you let's say 20 million. That means you would have to save or borrow 90 million to acquire/build that house. Divide 90 million by the monthly rent. You will find that the money you use to build the house would have paid the same rent for 180 months (15 years).

If you are a retiring person or a pure salary earner with that 90 million shillings cash, you can go for a residential house. But as an entrepreneur, I would rather save 12 million shillings to cover rent for 2 full years and risk the remaining 78 million shillings in business and investment because there is a big likelihood of doubling or even tripling that money in those 3-5 years and then I buy that same residential house, yet remaining with enough capital to continue the business/investment. That is how we think as entrepreneurs.

Another factor that makes many residential houses owned by Ugandans liabilities is that many people borrow to build them. While they rest from paying rent, they begin paying back the loan. Some people get huge salary loans to use to acquire a residential house and then about 15 years of your working time are spent on a house to just sleep in, with no commercial value.

I've also seen people who have spent all their retirement packages (terminal benefits) on building residential houses. Then they live for 20 more years totally broke, depending on their children. To make matters worse, some of these houses are built in the countryside where the person visits for 3 days a year, during the festive season...

Get your copy of #4WaysOfMakingMoney today written by Robert Bake Tumuhaise aka #MrInspiration,

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"When a man is stung by a bee, he doesn't set off to destroy all beehives"

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