Top tips for first time investors in Dubai real estate
With more than 1 trillion USD expected to enter the global real estate market in 2016 alone, as reported by the CBRE Global Investor Intentions Survey 2016, you’ve got to admit – real estate seems like an attractive option for investors. However, for first time investors, navigating the real estate market can pose an overwhelming challenge. To help you get a head start on finding a viable and profitable investment, here are a few things to keep in mind:
#1 Identify the objective of your investment
A recent Forbes report showed real estate as the 3rd biggest billionaire-producing industry across the globe, accounting for over 9% of the world’s 1,810 billionaires. If you want to follow in the footsteps of the world’s wealthiest, real estate easily offers a way to earn significant rewards. But unfortunately, it doesn’t come with a one-size-fits-all rulebook.
The first step towards investing in real estate is to know what you want. Are you looking for a retirement home or a rental opportunity to make some extra income? Set your investment goals straight, keep a deadline in mind, track your progress, and define your strategy. For example, if you’re approaching real estate as a purely brick and mortar purchase that will draw you revenue, you must realise that your investment doesn’t need to be close to home. The overseas market has much to offer with the likes of in-demand hotel apartment complexes such as AYKON City on the famous Sheikh Zayed Road in Dubai, affording friendly returns and rentals, thanks to the prosperity of Dubai’s hospitality industry.
[Related: Advantages of investing in a hotel apartment]
#2 Understand the market dynamics of where you’re investing
Do your homework and learn as much as you can about real estate markets across the globe to pick a property that fits your bill. Look at historical investment evidence, current trends, and projected future outlooks.
Niche markets in growing economies are creating new property investment opportunities. This can be perfect for first time investors, as cities with growth potential, still in their early stages of boom offer lower rates and friendly payment plans. For example, investing in Dubai real estate is touted as a growing international destination, with new properties which meets the demands of the international investor and first time buyers in terms of architecture and amenities.
#3 Do the math
Real estate investment is a game of numbers, and you’ve got to play it like your money depends on it –because it does.
The math comes in especially handy if you’re looking at a property with rental value. For starters, your expected rent (income) minus costs for maintenance, taxes, insurance, repairs, etc. (expenditure) is your cash flow. You want a steady, positive cash flow.
Beyond that, one of the most important metrics used is capitalization rate. It is the ratio of your net cash flow (income minus expenditure, per year) to the purchase price of your property. This ratio represents your return on investment and the higher the return, the happier your pocket. International up-and-coming markets like Dubai offer higher ROI compared to others and could be a viable option with annual tax free returns reaching up to 10%.
#4 Find a good real estate agent
While the stock market, for example, demands an in-depth knowledge prior to investing, the real estate market is anyone’s game. If you’ve got a trustworthy and experienced real estate agent on board, it’s safe to say you’re in good hands. Once you’ve locked down a property, especially if it’s overseas, a dependable property manager can ensure smooth upkeep of your property.
Making the most of your real estate investment is all about expertise, experience, and most of all –patience. Take your time to make an informed decision, and you’ll be reaping the benefits for years to come!