When we look at growing our property portfolio, it’s easy to simply ‘follow the crowd’ or the latest online trends, buying in the current hotspots or where it has been widely reported there will be future growth.
But a wise investor will take a few additional steps before committing to a new property, which I’d like to share here based on my own knowledge and experience of the real estate sector.
Speak to several agents
It’s all too easy to skip this step, especially when you think you’ve found the perfect property. But why deny yourself insight from people with a strong interest in the local property market? Most realtors become experts in their areas and can offer in-depth knowledge that isn’t readily available elsewhere (such as online). They will also have first-hand experience of market trends and may well have key facts about new developments, work in the area or issues in a specific location. They’ll know all about the current prices, the rental brackets and the future sales potential of any asset, so use this to your advantage.
Eye the local market
Doing your due diligence is a given. Sizeable investments such as real estate require a firm understanding of what you are putting money into. When looking at a potential property, take your time in examining the broader market and, wherever possible, compare similar assets. If you’re thinking about that seven-bedroom villa on the Palm, it’s good practice to examine the price trends, but it’s also worth considering how long they take to sell, how many are currently on the market (and why) and cast your net further afield to see what your investment might bring if you were to buy in another area. In my experience, getting more ‘bang for your buck’ now will only help to secure more generous returns in the future.
Learn about law and taxation
International property investment can be fraught with tax and residency laws. While Dubai has a well-established regulatory framework and world-renowned tax and residency advantages, not everywhere is so forward-thinking.
For instance, some property purchases come with occupancy or residency rules and regulations, tax implications and short-term leasehold or freehold arrangements. Over and above these factors, do some research into local build quality, rental prices and the state of the market’s real estate sector.
The old adage that if it seems too good to be true, it probably is, has never been more pertinent than in the case of property investment. Make sure that you visit the property, tour the area and speak with the locals. Look at the wider economy, tourist figures and future government plans too. A good investment today could turn sour tomorrow if you buy somewhere with lax regulations, poorly thought-out laws or the potential for political turmoil.
Fix your finances
Check the payment schedule for the property you are interested in and take advantage of any scheme that allows you to spread your costs. Country by country, pre-purchase costs can vary wildly, and it’s worth ensuring that you have legal and accounting advice before diving into another asset for your portfolio. If you are investing in a rental property, secure a local manager and allow for ongoing fees and unexpected costs when you consider your budget. Things can (and do) go wrong, so take care.
There are a lot of things to consider when buying a property, especially when investing to enhance a growing portfolio. However, the benefits far outweigh the disadvantages.
Wherever and however you invest, I hope your experience is both stress-free and smooth.