Investing in real estate is a great way to generate additional income, by adding it to your investment portfolio, making a business out of it through rental platforms, or simply by buying and selling properties.
Potentially great returns
Compared to other investment classes such as stocks or digital currencies, real estate investments can potentially deliver greater returns. When the market appreciates, the value of your property rises, thus building your equity. In addition, investing in real estate gives you more control over your investment because you have a tangible asset.
High asset value
No matter what happens, investing in real estate allows you to acquire assets that will always have a value, higher than most other assets. Other investment vehicles can leave you with little to no tangible assets. Moreover, you can protect your real estate investment with insurance.
Increasing value
Ideally, the longer you hold on to real estate, the more money you make. The real estate market has always recovered despite the bubbles that caused properties to depreciate. Though there are no guarantees, real estate has historically shown its potential to increase in value over time.
Diversification strategy
Any financial expert will advise you to diversify your portfolio. In investment parlance, it is not always wise to put all your eggs in one basket. When you diversify your portfolio, you spread the risks. Investing in real estate is a great way to mitigate your risks.
Tax benefits
In the UAE, investing in real estate is still exempt from corporate tax if the income generated is not tied to licensed business activity. That should ideally give you higher returns, thanks to this exemption. In other markets where you may have real estate investments, you may be eligible for tax deductions related to operating and maintaining your property.
Read: GCC real estate growth to pick up pace in 2023
How do you invest in real estate?
There are various ways to start investing in real estate. Here are the usual methods people use to get started:
Buy Real Estate Investment Trusts
Real Estate Investment Trusts (REITs) allow you to invest in real estate without the physical asset. REITs are similar to mutual funds, wherein you receive dividends from your investment. New investors should generally stick to publicly traded REITs, which can be purchased through brokerage firms. Have a look at the Dubai Financial Market which has an extensive portfolio of REITs that are not only publicly traded but also Sharia’a-compliant.
Investing in real estate platforms
Real estate investment platforms connect developers to investors who want to finance their projects. Investors receive monthly or quarterly returns in exchange for an investment amount and pay the platform a certain fee. You would need a sizable amount to invest through this method.
Invest in rental properties
If you do not intend on living in a property you purchase, you can have it rented out to other people. This method allows you to earn additional monthly income. You do not even have to rent out the entire property. Legitimate rental platforms like Airbnb and Lavanda allow leasing or subleasing a room and not the entire villa or apartment, depending on your specific needs or requirements.
Flip investment properties
You can invest in an underpriced property and renovate it as inexpensively as possible. Once the property is renovated, you can resell it at a higher value. Flipping real estate assets can be expensive because of the cost of materials and labor. However, if you partner with an experienced contractor, you can minimize expenses and maximize your returns.
Buy and hold properties
This investment method involves owning a property for an extended period. It may take years or even decades to see the value of your property appreciate, but this is a strategy guaranteed to make you money in the long run.
Investing in real estate has its risks
Getting started in real estate investment can be a challenging process. There is no right or wrong way to start your journey as a real estate investor. Just a caveat, every investment has its risks, and the tips given here are not intended to be investment advice. You will have to do your own due diligence in making your real estate investment decisions by doing a lot of research. And invest only within your means.
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