A residential rental property can help bolster your investment portfolio. In fact, these investment properties provide an exciting and rewarding experience. That is, of course, if you choose the right property to invest in.
Still, you must understand that becoming a property investor is not a walk in the park – at least, not for first-time investors. Real estate is a daunting business to be in and has plenty of land mines that may end up obliterating the return on your investment.
This is why you must conduct thorough research before diving into the investment to make sure you fully understand what you’re getting into. Lucky for you, this article will show you the four well-kept secrets to become a successful rental property investor:
1. Know a Profitable Property When You See One
The first – and, arguably, the most important – thing you must learn the characteristics of a profitable property. After all, how can you get one foot in the door of success if you have no clue what a good property looks like even if it’s already staring you in the face?
To make sure you don’t miss out on a great opportunity, here are some features you should look out for when investing in a rental property in Dubai:
Location is crucial when it comes to rental investment. The neighborhood where you buy your income property is the most significant factor determining the kind of tenant you will attract and the vacancy rate of your rental property.
For instance, a place near universities and colleges will most likely let you attract students as potential tenants. In this scenario, you could also expect your property to have higher vacancies during summer breaks.
As one of the most promising real estate investment venues, Dubai has a sizeable collection of properties up for sale, so you shouldn’t limit yourself to the first property you visit. Consider your market first, then narrow down your options based on the other factors listed below.
Low crime rate
Crime rate will always be an important subject for tenants as no one wants to live near a hotbed of criminal activity. So make sure to avoid such places, although this may not be an enormous concern for you in Dubai as crime rates in the UAE are on the lower side.
It would also be best to check the rate of both serious and petty crimes and take note of any rise or fall of criminal activity. You should also ask about police presence in the neighborhood.
Make sure to tour the community to see what amenities are nearby. Identify restaurants, movie theaters, public transportation, and other perks that can help attract potential renters to your income property.
In the UAE, some places also provide luxury amenities inside the building itself, like the Princess Tower in Dubai. Aside from being the first and tallest residential building in the city, the place also offers plenty of amenities ranging from an exclusive mosque to a bird’s-eye view of the city’s impressive concrete jungle.
Good average rents
For income properties, the monthly rent serves as your bread-and-butter, so you have to make sure that the area you’re buying into has a good average rent. It should cover your mortgage payment, upkeep, taxes, and other expenses.
2. Consider the Costs from the Get-Go
Another important thing you should consider before buying a property to turn into a rental investment is the costs. Not just the price of the real estate, though; you should also consider other expenditures such as realtor and property commissions, taxes, and repairs that need to be done, if any.
You might need to spend on addressing electrical, plumbing, and infestation issues, too. Remember that you may not be able to deal with all of this on your own, so you will need to enlist the help of professionals to ensure all problems are properly sorted out.
3. Determine Your Comfort Level as a Landlord
As a landlord, you will carry a lot of responsibility in property management and upkeep. As mentioned earlier, fixes may require experts to look into it unless you’re licensed to do them yourself. The only downside to asking other people to do these tasks for you is the cost.
You see, spending too much on repairs that you cannot perform yourself may eat away at your profits. Sometimes, taking on such tasks yourself is equivalent to higher profit.
However, this only applies if you’re handy with tools and such. DIY-ing repairs and upgrades is not recommended for new investors.
If, after you buy a property, you realize that you’re not quite the hands-on landlord you ought to be, you can get the assistance of property management services in Dubai. They can make managing a rental property a breeze.
4. Pick the Kind of Rental Property You Want
Rental properties come in various shapes and sizes, but there’s so much more about these that you need to learn about. Besides the features of real estate, you also need to consider the rental property you plan to establish.
There are three basic types of rentals beginners can try, namely:
● Traditional Rentals
Also called “buy-and-hold” properties, traditional rentals are rented out to tenants for longer than one year. These income properties usually provide long-term income and usually cover most real estate types, be it apartment buildings, condos, or townhouses.
● Vacation Rentals
As the name implies, vacation rentals are only rented out to people on vacation. This type of rental has become quite popular for new real estate investors because of the short-term lease that yields a significant ROI.
Often, these properties are listed in platforms like Airbnb and may come in the form of private rooms, houses, condos, or apartments. They cater to transient tenants and become more profitable than traditional rentals when situated in tourist spots, business centers, and other areas that people from other places typically visit.
● Turnkey Rentals
Like its traditional counterpart, turnkey rentals also cater to long-term tenants. The only difference is that these properties are acquired from companies instead of individual sellers.
Companies selling turnkey rental properties also take over the management and marketing of the rental property. This means that they are responsible for putting the place up for rent and everything else necessary to manage the property.
This makes turnkey rentals ideal for newbie investors with no experience in property management.
Property investment is a sound choice for people who want to build their wealth. To achieve that, a real estate investor must first learn the trade’s inner workings, especially the secrets to success listed in this article.
Mark Tolland is the Founder and Managing Director at Abode Property, a boutique real estate brokerage ﬁrm providing top-notch, personalized services to discerning landlords looking to sell or let out their premises in prime locations of Dubai like Marina, Downtown and The Palm. The firm also advises global HNIs looking to rent or buy a prized asset in Dubai, and prides itself in upholding high service standards, ethics and accurate advice.