Property investment can be one of the most rewarding forms of financial investment, offering a tangible asset with a functional purpose, whilst simultaneously offering opportunity for strong growth. With the correct advice, property is a strong inflation hedge and will complement other asset classes.
However, problems can arise when people get emotionally attached to
their properties, or get caught out by foreign legal and financial
systems and the potential to lose money can be just as great. To help
avoid likely pitfalls, I have put together a ‘Top Ten’ guide on top tips
to remember when embarking on a property purchase:
1. Understand the legalities
First and foremost, don’t get into something if you don’t fully
understand the legal ramifications. Expats who snap up property in boom
times under the assumption that the law would protect them, or the law
was similar to that of their home country are often the ones that face
the biggest challenges.
2. Do your due diligence
In many developed markets, you can get a complete transaction history
online which will help you ascertain whether the property has a re-sale
value. Remember, you’re not purchasing this property to live in
yourself, it’s a financial investment purchased for the specific purpose
of creating a long-term financial return.
3. Make sure you have access to funds
You must understand the leverage system; verbal approval for mortgage
finance isn’t the same as a firm commitment. If you’ve already put down a
deposit, Make sure you get an offer in principle from your bank and
negotiate the best finance rate possible. Get your calculations right
and weigh up what you’ll be paying in interest over the lifetime of the
loan against the long term return or rental yield of the property.
4. Make sure you’re diversified
You wouldn’t invest all your money in one asset class, and it doesn’t
make sense to invest all your property eggs in one basket, but to spread
the risk globally.
5. The liquidity question – can you exit easily?
If you’re looking at a property investment, your number one question
must be ‘who will buy this from me when I sell?’ If the answer to that
question is another investor, you probably shouldn’t buy. You’ve got to
buy the stock that locals want to buy, sell and rent.
6. Understand tenancy and yield
What are you going to get in terms of a real tenant and what is your
yield going to be? Do some thorough research and year on year
comparisons for a realistic forecast of potential rental yield.
7. Get a handle on taxation and fees
People often get into international property purchases without
understanding the taxation implications. Some countries may be seen as
attractive destinations because they are tax free, but legal issues
surrounding ownership by foreign nationals must be explored very
carefully.
8. Look for high quality buildings backed by quality developers
When you’re investing, make sure that your bricks and mortar are quite
literally safe as houses. As a rule of thumb, well-built properties will
maintain their value longer and will therefore be safer bets for a
quick rental or sale.
9. Invest for the medium term
The principles of sound property investment are aimed at offering a
medium to long-term return on investment. However, you will need
patience; those who expect to flip properties in a matter of months are
playing a risky game, and it is likely that they could come unstuck.
10. Work with partners you can trust
Don’t try and go it alone; you must work with people that you feel
comfortable with, and who have a proven track record, whether
consultants, property managers or tax experts.
James Thomas is the regional director at Acuma Independent Financial
Advice, Dubai. Views expressed here are his own and do not necessarily
reflect that of Gulf News.
Article Source: http://gulfnews.com/business/property/uae/top-tips-for-real-estate-investment-success-1.1213814
Article Source: http://gulfnews.com/business/property/uae/top-tips-for-real-estate-investment-success-1.1213814
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