Investing… Keeping it simple

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I believe that success in property investment is attained only when the objectives of the investor have been realized. It‘s as simple as that.

A vital component of a property portfolio investment strategy is the careful setting of financial objectives.

These must include total return, capital appreciation, revenue streams, net results and eventual investment values all wrapped up in a time frame deemed strategically optimal for the investor. If these have been met, then the investment, can be considered a success.

However, many investors suffer from the “should have, could have, would have” syndrome. This occurs when the investor feels that his investment did not outperform the market, leading him to depart from the initial strategy, revert to short term thinking horizons and make poor decisions regarding his portfolio.

Those who have had the greatest success possess the ability to think long term, make rational, well researched and carefully thought out decisions with the end objectives in mind and understand that every real estate industry globally will go through cycles of growth and contraction.

They don’t panic. They do not get duped into making short term decisions based on inevitable market fluctuations, and they treat headlines such as oil price deflation as the catalyst for gaining a greater understanding of the underlying events that are shaping the industry and if any opportunities may conceivably arise.

“You need to be able to communicate knowledgeably with the experts. The investor fraternity is getting more knowledgeable.”

This is proactive investing. Investing in property is all about recognizing and capitalizing on opportunities that are consistent and supportive to your wealth accumulation objectives.

To do this, you must have some knowledge about the industry.

The old adage of “Don’t invest in anything you don’t know” applies. You need to be able to communicate knowledgeably with the experts. The investor fraternity is getting more knowledgeable.

More attention is being paid to location, quality of product and maintenance services, and the extent of completion and quality of infrastructure is now playing a big part in investor consideration.

With so much supply available, astute investors could demand, seek out and purchase the best of what was on offer, and the realization of the importance of these factors has remained a key learning for most of them.

In the post-recession era, things changed. The chase for yield along with an increase in the level of critical assessment of true values has meant that properties that offer more in way of physical product and potential rental returns are attracting the greatest attention. Investors have learnt.

The fundamental drivers of market values remain: location, product features and benefits, product quality, and demand and supply to be successful, you must have a clear understanding of what you are trying to achieve and what role your property portfolio will play. What proportion of your total investment portfolio is allocated towards property? What is your source of finance?

The more skillful you are at conceptualizing your wealth generation schematic, the greater is your likelihood of generating successful strategies to grow your wealth.

You need to identify, engage and work with a professional in the industry. As astute, skillful and knowledgeable as you may be, a reputable, experienced and client focused full service agency will greatly enhance your level of success.

Select wisely. Do not fall into the trap that the cheapest will be good enough as this is rarely the case.

Ask The Agent

Gulf News

I am currently dealing with a real estate broker who also wants to be my property manager. Can a broker be a property manager?

The best property managers I have encountered all cut their teeth as successful broker. To be an effective property manager, you need to be able to provide your clients with a complete and realistic property assessment, and strategy and activity plan design to harness the true financial potential of your property. If you expect to provide the services expected of a property manager, such as vetting tenants, executing rental agreements, handling maintenance issues, conducting inspections and provide regular financial statements, then the “on the ground” knowledge accumulated by being a broker will be beneficial, Brokerage is an important learning platform to become a professional property manager, which is not to say that a property manager will necessarily make a good broker.

 

There has been a lot written about the lack of affordable properties in Dubai and the increased demand for such type of property. This sounds like a good investment opportunity to me. Would you agree?

We are encouraging everyone to invest in this segment as there are some great opportunities. An excellent example of a high-performing yet affordable development is Skycourts whose apartments. Have seen excellent capital growth.

Another is Queue Point, where you can invest in an apartment and retain ownership for at least five years to benefit from superior capital growth.

Aside from the two Dubailand projects, Dubai Silicon Oasis also offers a wide range of residential options, from villas to apartments.

Dubai investments Park has a variety of residential offerings such as apartments and townhouse, and even staff housing.

Of course, International City and Discovery Gardens always figure in the “affordable” list.

 

Should I invest in commercial real estate in Dubai?

Things are looking very promising for new business in Dubai and opportunities exist for commercial real estate investors to benefit accordingly. As Dubai seeks to grow economically, readily available office Space is one of the important factors that new enterprises will consider.

The amount of infrastructural, development and economic initiatives, culminating in the hosting of the World Expo in 2020, is indicative of the government’s commitment to economic progression. Office rental returns are staging a strong recovery. Already, there is a relative shortage of Grade A large floor-plate, single owner space favored by multinational companies.

Nevertheless, there is still a considerable albeit shrinking vacancy of around 23% which represents good opportunities for value it purchases providing strong cash flows.

 

I am new to Dubai and looking to settle for the medium term. While I have an extensive investment portfolio, I am new to investing in property. What advice can you give?

Investing in property is all about recognizing and capitalizing on opportunities that are supportive to your overall wealth accumulation objectives. You must have a clear understanding of what you are trying to achieve and what role your portfolio will play within a larger diversified portfolio.

You must have some knowledge about the investment you are getting. You may not be an expert, but you need to be able to communicate intelligently and knowledgeably with the experts.

What is your source of finance and where do the greatest risks lie in the event of an economic downturn? How liquid might you need to be? All these need to be addressed.

You also need to identify and work with a professional in the industry. Selection of the right agency is a skill in itself. Choose wisely. Remember, cheapest is not always the best.

 

Question of the Week

 

I am considering entering into a lease-to-own contract with a developer for my first apartment. Do you have any advice?

In today’s market, lease-to-own schemes make a lot of sense as the help manage any uncertainty that the potential purchaser may be experiencing. Buy an apartment or villa is a big commitment, and lease-to-own schemes can make it a lot easier from not only a financial point of the view but also from an emotional or peace of mind point of view.

By entering into such an agreement, you are effectively allowing yourself to “buy some time” before committing to the final purchase. The Major advantage of this scheme is that during your leasing period, you are effectively building some equity which can be utilized. In essence, if you choose to eventually purchase the unit, the money which would have been lost forever as a rental expense is being utilized as capital towards your new home which, if you are taking out a mortgage, will also provide savings on interest charges.

In our opinion, this scheme, which essentially makes buying a new home easier, has been massively underutilized.

Projects which have offered this scheme include the Greens, the Andalusia Collection at The Villa project and Sulafa Tower at Dubai Marina. All of them have done extremely well because of this scheme.

The Dubai expatriate’s dilemma

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To buy or to rent? Find out how to use your money to increase your wealth

 

It’s not hard to see why expats choose Dubai. It has a lot of attractions: beaches, restaurants, shopping, outdoor activities… even snow skiing! Dubai boasts a modern infrastructure and is regarded by many as one “of the safest places for families to live in the world and is located advantageously for excursions to Europe, Asia and Africa.

As the emirate has grown and matured, the average tenure of expats living here has been on the increase. This is due to a number of reasons, principal among them is the recognition of employers that three year employee tenures are inefficient and the recognition by expats that Dubai is actually a very good place to live.

If you cannot find a property immediately that will satisfy your requirements, do not settle for less. Be persistent and patient in your approach.

With many expats now considering living in Dubai for longer, an increasing number are contemplating on purchasing a home instead of renting. For many, making this commitment can be a daunting respect and decision making will often become clouded. There are many things for the uninitiated to consider such as budgeting and finance, asset type, area, fair values and timings.

So, as an expat, why buy your home instead of renting it? Buying your home is a positive step towards establishing your financial security by building your equity or “net worth.” Owning property allows you to change the application of your hard earned dirhams from covering an expense which offers you no financial return to investing in an asset which does. In a way, it’s a forced form of saving which will reap benefits.

Conversely, paying rent actually detracts from your ability to build net worth because not only are you paying out money for no financial gain, you are also at the mercy of rental inflation. This is a problem because you are consistently being asked to pay more while your salary increases are lagging behind, eroding your ability to build wealth. By owning your home, inflation is working in your favor because, in all likelihood, your property is increasing in value. This allows you to build your net worth through capital appreciation.

The fundamentals of buying real estate in Dubai are no different from those elsewhere in the world.

First of all, be clear as to why you are investing in real estate. Whether it’s to provide the family with a home, generate a steady stream of income or build equity, make sure you are clear about your expectations and quantify them wherever possible. Plan for the long term as the industry is cyclical yet very rewarding.

Also ensure that you know what you can afford. If you have the cash, pay for it out right; however, don’t be afraid to take out a mortgage. At least your repayments are building equity, not being lost forever on rent.

Then it’s as case of finding .the right property. A reputable real estate brokerage can assist you in doing this, but make sure that you conduct your own research. It’s a big decision you are making. You need to make sure you take the responsibility.

As always, stick to the basics. Think carefully about location, building quality, developer reputation, completion status and quality of infrastructure and building amenities Properties close to the beach, with a golf course view or are part of an iconic development are a good place to start. If you can also have close access to the Metro, even better. These locations are likely to provide a superior appreciation in capital value.

“Also consider the effectivity of the owners association, service charges and the quality of maintenance services. Facility management is more important in determining the value of buildings and it will have an effect on the long term value of your investment.

Finally, think clearly and rationally. If you cannot find a property immediately that will satisfy your requirements, do not settle for less. Be purposeful, persistent, patient and pragmatic in your approach and you are well on the way to making a very sound decision. “