A risk-free investment doesn’t exist, but there are strategies to reduce risk factors. Investing in real estate carries a significant level of risk, and if you don’t do your research, you run the chance of losing your money.
In part because of its ability to generate returns and in part due to its apparent simplicity, real estate is the world’s oldest and largest asset class. Everyone has lived in a house and paid rent to a landlord or bought and sold their homes while relocating, even if they don’t own stocks or bonds. Renters in the UAE may believe they are real estate experts because real estate is a significant part of the UAE economy. However, this is far from the case. As with any other asset class, real estate also comes with some level of risk factors.
The real estate investing process is complex, and many first-time investors rush into the market without fully understanding the dangers of investing in Dubai. Let’s look at six strategies for investing in Dubai real estate that reduce risk factors while increasing return.
Getting Information About Real Estate
Multiple micro-markets exist within the Dubai real estate market, each with its eco-systems and prevailing trends. If you compare the property market in Dubai Marina to that in Jumeirah Village Circle, you’ll see a huge difference (JVC). The Marina will be predominantly made up of bachelor and tourist-friendly studio, 1, and 2-bedroom apartments. Instead, JVC will have a wide range of family-friendly villas with 1, 2, 3, and 4+ bedrooms. Because the Marina is a more established neighbourhood than JVC, future supplies may be different. There’s a reason the adage “location, location, location” is so popular.
Ready to Sale Property
It’s critical to have a clear idea of the type of home you’re interested in purchasing. Are you planning on starting from scratch, or are you interested in buying a pre-existing property? Choosing between the two has advantages and disadvantages. It is possible to create a property off-plan. Still, you will have to pay a significant amount of money upfront to cover the costs of constructing it from the ground up location, unit variety, unit sizes, stories, and so on.
You can’t do much with ready-to-sell homes, but you don’t have to spend a lot of money to see it through to completion because it’s already built. For another thing, if you look at trends in the Dubai property market, you’ll see that off-plan properties have sunk since the pandemic, with investors preferring to buy ready sales properties instead, as shown in the graph below, which compares residential transactions between off-plan and ready sale properties. More than 70% of all transactions in the Dubai market are now for ready-to-sell houses.
Select a Property Based on its Functional Attributes
Your rental income will suffer if your Marina property does not match the same high-quality requirements as the adjacent buildings. Because of this, it’s more likely to have safety issues like fires or be subject to regulatory inspection and fines if the quality of the structure is subpar or mediocre. Renters will protest and afterwards hunt for alternative options if the fixtures and fittings are old or badly placed. Potential tenants will go elsewhere if the property lacks parking and is far from conveniences like supermarkets or restaurants.
Even in a city like Dubai, where development is swift, properties located in areas no longer near the city centre in two years runs the risk of becoming out-of-date. As a result, investors must consider the functional components of a project’s design before investing to minimize the chance that the property would become dated in the future. In the residential real estate market, criteria such as quality of construction, layout, the density of amenities, and design are critical when making a purchase decision.
The Real Estate Time Cycle
Like any other long-term asset class or trend, real estate passes through periods of boom and bust that last for several years. Real estate cycles are complex, and investors can profit from these nuances by making sound investment decisions at various points in the process. As an illustration, while real estate values in Dubai decreased overall from 2014 to 2016, other neighbourhoods, such as Dubai Marina/JBR, did better than the overall city. Everyone who wants to be successful in real estate investing needs to grasp the real estate cycle. To take advantage of real estate market shifts in recovery, growth, hyper supply, and recession, investors must keep their fingers on the pulse and their eyes peeled for new investment opportunities at each stage of the cycle.
Understand the Time Horizon of Your Investments
Real estate is a large-ticket purchase with limited liquidity compared to other asset types like equities and bonds. So investors need to be aware of their financial status and make plans for the long term. Property investing is a long-term endeavour, not a quick fix. Instead of gambling on making a huge return (or loss) on your investment overnight as you would with bitcoin, you get a steady stream of income that you know is safe and predictable.
You can’t do much with prepared to-sell homes. However, you don’t need to burn through a huge load of cash to own it to the end since it’s now constructed. For something else, assuming you take a gander at patterns in the Dubai property market, you’ll see that off-plan properties have sunk since the pandemic, with financial backers liking to purchase prepared deals properties all things being equal, as displayed in the diagram beneath, which thinks about private exchanges between off-plan and prepared deal properties.
Real Estate Diversity
The best method to reduce risk factors is to diversify one’s portfolio. This general investing principle applies to all asset classes, including stocks, cryptocurrencies, and real estate in particular. Having a diverse portfolio of rental properties in different areas and at other rental price points reduces your risk exposure. Renters in Downtown Dubai will continue to pay you even if one in Marina fails on their rent. Even if property values in JVC plummet, your property on Palm Jumeirah will continue to appreciate. Moreover, it brings in better rents or future sales prices. Real estate is a capital-intensive but high-reward financial sector, so owning numerous homes may get pricey.
Property investing is more difficult than it appears. Becoming a successful real estate investor can take weeks or months. It is to grasp the fundamentals, years or even a lifetime to examine market data and patterns. By reducing your exposure to risk, you’ll be able to reap greater rewards in the short or long run. We at SmartCrowd help our clients mitigate the risks associated with investing in Dubai real estate to the absolute minimum.
When evaluating properties, we use up-to-the-minute market data. Our team has accumulated decades of knowledge in Dubai’s property industry. Due to our particular screening procedure, we only offer the greatest investment properties to our clients. To ensure a well-diversified portfolio, we use a crowdsourcing concept. It allows our clients to invest in several properties throughout the city.
Leaseholders will dissent and thereafter chase after elective choices assuming the installations and fittings are old or gravely positioned. Potential inhabitants will go somewhere else assuming the property needs stopping. It is a long way from accommodations like general stores or eateries.