Dubai attracts savvy entrepreneurs looking to diversify their portfolio with elite complexes with increasing profitability levels, such as Royal Atlantis Resort & Residences in Dubai in the Palm Jumeirah. First-time investors wishing to take their first step into this lucrative industry should get acquainted with the following rules, that guarantee to bring them to success.
Learn all aspects of the investment process
Knowledge is the main currency that an entrepreneur needs. Any goal is doomed to failure without it. So the first thing to do is to learn about all aspects of the investment process, including investment types, trends in the Dubai real estate market, and competitors’ offers. For example, there are a lot of available resources to help you understand these issues, such as books, websites, podcasts, and other verified sources of information. The investor should choose a method of study that suits him best and devote himself entirely to broadening new knowledge.
Set investment goals
First of all, the investor should understand what he wants to achieve by investing in a property in Dubai. Perhaps he is interested in generating sufficient revenue, portfolio diversification, or does he have any other motives? The investor’s goals influence which investment type he should prefer. For instance, if he is interested in the production of passive income, he can invest in rental properties. If he wants to increase his capital, he can buy a second-hand housing unit, get everything fixed with renovation or major repair, and sell it for a higher price. From the very beginning, you need to clearly define your investment goals and make sure that they meet your overall financial goals.
There are many different strategies that can be used for investments in real estate in Dubai. It is important to find one that matches the buyer’s goals and his risk tolerance. There is no one-size-fits-all approach when it comes to investments, as what works for one person may not work for another. Among the most common strategies, we can distinguish the following options:
- Buying property and then renting it out.
- “Fix and flip” – the purchase of second hand housing, renovation or major repairs, the subsequent resale for an amount exceeding the original cost, capital gains.
- Wholesale – receiving a sales contract from a seller and transferring it to another investor.
- Commercial real estate – investing in office buildings, retail spaces, and industrial facilities.
Give up speculation
Dubai real estate industry experts recommend to invest with a long-term perspective. No one can know when the market will peak or fall. So, instead of unreliable forecasts, you should focus on setting up a portfolio with quality assets that will stand the test of time.
Diversification is key when it comes to investing. An investor spreads risk and increases his chances of success by diversifying his portfolio.
Never make decisions based on assumptions. This is one of the fastest ways to lose money. As an illustration, an investor assumes that a certain neighborhood will become more developed in the future, resulting in the price increase of local real estate. However, if there is no information and market trends to support this assumption, an investment made on this basis will result in a loss.
Successful investors never speculate on information. When buying properties, they stick only to facts and confirmed information that help them make smart and informed decisions.
Use a top-to-bottom approach
An investor should always start by choosing a market that suits his goals. After that, he can start searching for specific units. Many people make the mistake of taking a bottom-to-top approach, selecting properties they like first, and then trying to find a market that will support it.
A top-to-bottom approach is much more efficient. Start by selecting the best markets and then look for properties that meet certain criteria. This approach helps to avoid overpayment for a residential or commercial site and increases the chances of success.
When selecting markets, you should favor those that exhibit considerable development and low unemployment. They are the most resistant to economic slowdowns and offer more space for growth. The best approach is to select a city and neighborhood (e.g. Dubai, Akoya Oxygen) first and then search for a specific property in that location.
Diversify your portfolio among markets
Another rule of successful real estate investments is portfolio diversification among multiple markets. This approach helps to reduce risks and protect investments from fluctuations.
Despite the fact that the Dubai market is constantly developing and growing, it is very risky to invest only in properties in this emirate. If a recession begins, the entire investor’s portfolio may suffer. But assets’ diversification between markets will help to survive any storm. The best solution is to invest in domestic and international markets.
Use your investment capital
Only real estate investment allows an investor to borrow money against their assets. This is called leverage, and it is a key tool for successful entrepreneurs.
An investor can buy more properties at lower prices with leverage. He increases his profit and capital faster this way. For example, if a person has $100,000 to invest, he can purchase two properties for $200,000 each. Or he can buy four properties for $100,000 each. This is how leverage works.
The more properties an investor owns, the more income he will receive from rent. And the greater his capital grows over time.
But the use of leverage must be approached with the maximum level of responsibility. If an investor borrows too much and the market goes down, he can face financial problems. This is why he needs to make sure that he has enough cash to cover any unexpected expenses in the first place. So the investor will protect himself from financial collapse in the event of negative market trends.
Use the services of a real estate agency
An investor should not take over the property management if he does not have his own management company. Real estate management is a full-time job that requires a lot of time and relevant qualifications. A property management agency can help a homeowner find good tenants, collect the rent, and take care of repairs and maintenance. This will save the investor’s time and allow him to focus on finding additional buy-to-invest units.
Ax Capital is the most trusted agency in the Dubai real estate market. This agency accompanies investors in the process of buying, selling, renting out, managing, and maintaining a property. It provides a wide range of luxurious residential and commercial properties and professional services in the real estate market in the emirate. Go visit the official AX Capital website to choose the most attractive buy-to-invest unit and get closer to a high level of income now.