September 12, 2021
Six Strategies for successful real estate investing offers you guidelines on how to maximize your profits.
Dubai is one of the most popular cities in the world for tourism and lucrative real estate investments. It stands on a lot of opportunities and a solid property market that is growing at a fast pace. Dubai is paving the way for a very promising, successful future, a profitable economy, and a significant real estate portfolio. The property market has generated more profit than many other industries in UAE, in spite of the pandemic slowdown. With Expo 2020 just days away from the grand opening, we can expect a return to pre-pandemic levels for the property sector.
The city is thriving on endless ambitions, offering a great platform for worldwide investors and first-time buyers. Some might think you need substantial capital to enter the market. However, the assets are very accessible. For example, you can join the investment pool for as little as 400,000 dirhams. Furthermore, the highly regulated industry has strong legislation in place to protect investors’ interests.
Before you get carried away expecting a high return on investment, get to know the current market and pick the most suitable property for yourself. There are many strategies you can apply that can lead to great success. But, at the same time, there are no guarantees. It all depends on the market demand and your choice of property. You must have a clear understanding on how some properties perform in some locations, as opposed to others. Is the demand high or not in your area of interest? Similarly, are you monitoring the rate of ROI in that particular zone? Furthermore, research and analyze price performance for the last three or four years, and talk to qualified professionals who have strong expertise in the area.
Moving on, are you financially stable enough to buy or finance the property? Are you prepared to make a cash down payment, secure a loan or dip into your savings to invest in real estate? Also, how long are you prepared to wait for the asset to gain capital value over the course of years?
It is best to start small rather than go big and keep it simple by minimizing your expenses. Once you establish yourself on the market with some great passive income, then you can start building your real estate portfolio into an empire.
A simple, basic, traditional investment in real estate starts with buying your own property for rentals. When you become an owner and subsequently a landlord, you need to make sure that the rental payment will cover your mortgage and maintenance costs, which as a landlord you are liable to cover.
Whether you decide to lease out long term or short term, make sure that once you reach the resale stage, you get maximum returns. Rental investment is safe because demand for affordable housing is a constant reality and the flow of visitors and expats relocating to the UAE is on the increase. Owners will always benefit from that.
When you enter into a long-term rental agreement, both parties need to sign a contract committing to their obligations and contract clauses. Usually, the contract duration concludes after a year and both parties can renew. The contract protects the interest of both owner and landlord. For instance, if the tenant vacates the property before the end of the contract, they will be liable to fines. In addition, the landlord can evict the tenant for failure to pay rent or for other illegal activities on the premises.
In the case of holiday or short-term rentals, the owner needs to obtain a license from DTCM – Department of Tourism and Commerce Marketing, in exchange for AED 1,500 fee.
Such type of investment is very popular as it generates up to 13% profit but does not come without certain issues. To avoid complications and property damage, the owner needs to consider registering with a reliable management company. They will oversee the smooth process of all operations from check-in to check out and cleaning the premises. Companies usually charge 20% of the total profit for their services.
Some investors buy distressed properties and hold them for a short while, with the intention to sell them for a profit soon after. This can be a short-term cash investment but it does not come without risks. However, it comes in handy with undervalued assets which do not require ample fixing or renovating. Otherwise, your profit margins could be compromised, if you are stuck with the property in a bad market and cannot resell it.
Retail space and offices will always be in demand in UAE, as more investors come to these shores to open their own businesses. If you can afford to buy commercial properties, you can benefit from leasing the space to other companies who tend to remain longer in one location as opposed to individual tenants.
Part of the six strategies for successful real estate investing is the off-plan resells. This strategy is very common with investors in Dubai. Buying property under construction and selling it for a higher price once the project is completed means more money in investors’ wallets. Furthermore, off-plan buyers only pay a 10% deposit upfront. This is a good platform for starting with small capital. Later, you enjoy the benefits when the market price increases and the property is ready for resale.
This model does not involve any hands-on management, since it takes place on an online platform. Buying into REIT allows investors to buy into a liquid real estate portfolio through shares. The investment trust then distributes the profits to all shareholders. You do not have to fully buy or manage any of the properties, since you will buy and sell the shares on an open market. REIT is a group of companies that own and manage real estate assets. Investing in shares allows you to make a profit based on the performance of these assets.
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