Starting a furnished apartment rental business while renting the property can be a viable and profitable venture, especially in Uganda’s growing rental market. However, success depends on strategic planning, cost management, and understanding the financial dynamics. Below, we analyze the feasibility of this model, including the potential profits and challenges.

Understanding the Rental Model

In this approach, you rent a property from a landlord and sublet it as a furnished apartment. The key is to ensure that the rent you pay to the landlord and your operating expenses are lower than the income you generate from tenants.

Initial Investment

Even when renting a property, there are upfront costs to consider:

1. Rent and Deposit:

• Monthly Rent: For a one-bedroom apartment in Kampala, monthly rent ranges from UGX 800,000 to UGX 1,500,000.
• Security Deposit: Landlords typically require a deposit equal to 1-3 months of rent. For example, if rent is UGX 1,000,000, the deposit may be UGX 2,000,000.
• Upfront Cost: Assuming 3 months’ rent upfront, the initial cost is UGX 3,000,000 to UGX 4,500,000.

2. Furnishing Costs:

To transform the rental property into a furnished apartment:

• Furniture (bed, sofa, dining set): UGX 5,000,000 to UGX 8,000,000.
• Appliances (fridge, microwave, TV): UGX 3,000,000 to UGX 5,000,000.
• Décor and essentials (curtains, rugs, bedding): UGX 2,000,000 to UGX 3,000,000. Total Furnishing Cost: UGX 10,000,000 to UGX 16,000,000.

3. Operational Setup:

• Utilities setup (water, electricity, internet): UGX 500,000 to UGX 1,000,000.
• Marketing (photoshoots, listing fees): UGX 500,000 to UGX 1,000,000.

Total Initial Investment: UGX 13,500,000 to UGX 21,500,000.

Monthly Expenses

Running the business comes with recurring costs:

• Rent: UGX 800,000 to UGX 1,500,000.
• Utilities (water, electricity, internet): UGX 200,000 to UGX 300,000.
• Cleaning Services: UGX 100,000 to UGX 150,000.
• Maintenance and Repairs: UGX 100,000 to UGX 200,000.
• Marketing and Miscellaneous: UGX 50,000 to UGX 100,000. Total Monthly Expenses: UGX 1,250,000 to UGX 2,250,000.

Earnings Potential

1. Average Rental Income:

• A one-bedroom furnished apartment in a prime area can be rented out at UGX 2,000,000 to UGX 3,500,000 per month.

2. Occupancy Rates:

• Assuming a 75% occupancy rate (23 days per month), expected monthly income ranges from UGX 1,500,000 to UGX 2,625,000.

3. Net Monthly Income:

After deducting monthly expenses:

• At a rental income of UGX 2,000,000, net income is UGX 750,000.
• At a rental income of UGX 3,500,000, net income is UGX 1,250,000.

Profitability Over Time

Assuming an initial investment of UGX 15,000,000 and an average net income of UGX 1,000,000 per month, the breakeven point would be approximately 15 months. After this, the business generates profit.

Key Considerations

1. Landlord Approval:

Ensure the landlord is aware of and agrees to the subletting arrangement. Include this agreement in your contract to avoid legal issues.

2. Market Research:

Select a location with high demand for furnished apartments, such as urban areas near business centers, universities, or tourist attractions.

3. Quality of Service:

Provide excellent customer service, maintain cleanliness, and ensure prompt responses to tenant inquiries. Happy tenants are more likely to leave positive reviews, increasing your bookings.

4. Risk Management:

• Seasonal fluctuations may affect occupancy rates.
• Unexpected maintenance costs can reduce profitability. Set aside a contingency fund.

Conclusion

Starting a furnished apartment rental business while renting the property is possible and can be profitable with the right approach. By carefully managing costs, maintaining high occupancy rates, and delivering excellent tenant experiences, you can generate a steady income and grow your business over t