Dubai’s real estate market has lucrative investment opportunities to offer. Investing in properties is a good way to generate passive income and a predictable cash flow. Therefore, it is viewed as one of the best gains in the long-term. However, like every other investment scheme, you may encounter certain risks, challenges and areas of concern, especially if you are a first-time investor.
For instance, there are some legal steps of buying property in Dubai that one has to consider. Besides, if you are interested in investing in an off-plan property in Dubai, then you should be aware of the entire process.
Today, we are going to take a look at some ways to minimise real estate investment risk and get the best deal for your money.
MINIMISE REAL ESTATE INVESTMENT RISK IN DUBAI
Here are some of the ways in which you can minimise risk in real estate investment, if you are planning to buy a villa or an apartment in Dubai:
It is mandatory to do your research prior to investing in real estate. From the location, economy, market to the interest rates. To avoid property investment risk, you have to top up your knowledge.
DO YOUR RESEARCH
Extensive research should be your first step to reduce risk in real estate investment. Given the in-numerous resources available in hand, make sure you learn the inside out of the property from property experts via different social media platforms. Additionally, you must speak to real estate brokers in Dubai to gain an insight of the property you are interested in buying.
GAIN AN INSIGHT OF THE REAL ESTATE MARKET IN DIFFERENT AREAS OF DUBAI
To minimise the risks involved in Dubai’s real estate market, it is recommended that you learn about the real estate market in multiple areas. It is helpful because Dubai’s property market is sub-divided into various small markets based on their own trends and ecosystems. For instance, the property market of Al Barsha will be different from Jumeirah Village Circle (JVC) and the property market of Deira will be different from both. There are 1,2,3 and 4+ bed villas for sale in Jumeirah Village Circle meant for residents/families.
STRATEGISE AHEAD
Investing in property is more or less in vain if you do not plan ahead. Before proceeding, think about where you want your finances to be within the end of the next decade. If there isn’t a clear picture of that scenario, you might have to recheck your plan.
Therefore, another important method to minimise risk in real estate investment is to understand your goals and plan accordingly, before you jump to buy a home in Dubai. Without a proper strategy, you are at the risk of small growth due to a lack of focus on incentive alerts or other lucrative opportunities that may come with the property in the future. For this purpose, contact a financial adviser, even before you start looking for a residential or commercial unit.
TYPE OF PROPERTY
In order to reduce risk in real estate investment, it is essential to decide what type of property you should invest in. You have two choices: either go for an off-plan property or a ready-made property. Both property types have their pros and cons, but you need to know where you should invest to gain high returns. To better minimise investment risks involved in Dubai’s real estate market, you need to check the current trends. This will help you decide that either ready-to-sale or off-plan property will prove lucrative in the long run.
HIRE A REAL ESTATE AGENT
When you are investing in a property, it is highly recommended that you take assistance from an experienced real estate agent in Dubai. Hire a property broker registered with the Real Estate Regulatory Authority (RERA) so that his expertise and knowledge may assist you in choosing the best investment opportunity. Property agents know how to browse through the market, dig out the best property for purchase, and help you with real estate investment risk analysis.
OPT FOR A PROPERTY TO INVEST BASED ON FUNCTIONAL ELEMENTS
In order to minimise property investment risks, investors should select a property based on its functional attributes. Especially, if you are investing in a residential property in Dubai, make sure that the project offers quality build and design with superior floor plans and that there is a good number of amenities in the surrounding.
The rental income of a property is affected if your property does not meet the standard of quality of the buildings in the neighbourhood. Also, if the property has low quality or poorly installed fittings and fixtures, tenants will complain and ultimately look for better options. Similarly, if your property is located at a distance from the city’s centre and there are no public commute options in the vicinity along with other basic amenities, most of the potential tenants might clearly steer away.
PAYING INTEREST RATES
It is obvious that interest rates on properties tend to increase over time. In that case, it is essential to know how the RBA interest rates would drive the rate of your mortgage. The interrelation impacts the availability and nature of loans to the investors, which is another key part of the research. An investor must be able to afford any increase in the interest rates without being involved in prominent financial distress.
PICK IN-DEMAND PROPERTY OR AREA
Enjoying a consistent cash flow in the form of rents is the most profitable and never-ending advantage of property investment. Therefore, make sure your intended property is coveted, in demand, and sought-after by people of all age brackets and walks of life. To ensure this, research the neighbourhood or ask the real estate agent to find out whether similar properties are quickly occupied or remain vacant for a long time.
Your next part of the research must include figuring out the target audience. If any area is popularly inhabited by youngsters or students, you would be able to select the property that complies with their requirements. Also, it is suggested to invest in properties located in the family friendly areas in Dubai, because properties in such areas are occupied quickly by tenants. Hence, choosing a popular property or area is another key tactic to minimise risk in investing in Dubai’s property.
Once you have secured a safe spot, learn how to screen potential tenants before signing a rental contract.
CONSIDER THE MAINTENANCE COST
Another risk every real estate owner must know is that structured properties come along with potential maintenance costs of not being checked before time. Therefore, make sure you keep a sharp eye for any maintenance issues you might come across. When investing in a property to rent out, check for wet patches, missing tiles, or poor seals and other structural issues that may need repair or maintenance. Observing the probable costs for maintenance would help you gauge your net profit margin and minimise real estate investment risk. You can separate an amount dedicated to repairs and fixes to help you plan your finances before buying an apartment or villa for sale in Dubai.
INVEST IN REAL ESTATE PROPERTIES IN DIFFERENT AREAS/PROJECTS
If you are investing in a property to yield rental income, then owning properties in different areas with different rental rates is one of the efficient ways to reduce risk in real estate investment.
Diversifying your property investment portfolio, not only in Dubai but across the globe, helps in mitigating property investment risk. For instance, if one tenant defaults on their rent, you will still have rental income coming from another property. Also, if the prices in an area are declining but the price of your property in another area is increasing, you will still have the opportunity to get high rental rates or selling prices in future. However, owning multiple properties in Dubai could be expensive. On the other hand, if an investor has the buying power he can diversify his property portfolio and reap the benefit.
DON’T INVEST YOUR ENTIRE BUDGET
It is healthy for your financial plan. Whether you are buying a property for personal use or as a passive source of income, always try to strike a deal below your budget. This would help you save for additional costs.
Real estate investment is complicated and it can take weeks to understand the basics and months to analyse Dubai’s real estate market trends. However, if you take essential steps to minimise real estate investment risk, you tend to enjoy maximum long-term and short-term benefits. The above discussed ways to minimise property investment risks may compel you to buy a property in Dubai. Choose wisely whether you are going for a commercial or residential unit for investment. Moreover, as per the UAE investor visa program, property buyers in Dubai get a residence permit, only if the property is complete and has a value of AED 1 million or more.
Stay tuned to the UAE’s top property blog for more tips and guides on property investment across the UAE, buying and selling of property and a lot more.
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