The prospect of excellent capital returns has generated much of investor interest in off plan properties in Dubai. The success of this endeavor will always depend on a slew of factors, the most important of which is strategy. Real estate has always been an inherently risky investment as the promise of great returns is not always guaranteed. This is particularly true for off-plan properties. However, the associated risks and uncertainty can be tempered by a carefully considered investment strategy. This guide will get you started on creating solid off-plan investment strategies that will best serve your financial goals.
Identify your objectives
It is essential to identify your objectives as they will drive all your investment decisions. If the main goal of off-plan property investment is capital preservation (i.e. avoiding the risk of losses as much as possible), then perhaps a more conservative approach is the best way to go. On the other hand, if your primary objective is capital appreciation then you should understand that this would entail a good amount of risk on your part. Capital growth does not happen overnight. Always be wary of over-the-top projections. With off-plan properties, the actual market value actually remains to be seen. If it sounds too good to be true, then it probably is.
Calculate the risk
In order to calculate potential risks, identifying and analyzing them would be one of the first steps that need to be undertaken. There are various risks associated with off-plan property investment, one of which is developer risk. Expert advice has always placed great emphasis on eliminating developer risk by choosing those with well-established reputations of timely project deliveries and uncompromised quality. The risk of property value losses can also be minimized by thoroughly studying the area you plan to invest in. One of the best ways to do this is to look into current market valuations of adjacent projects that have already been completed. This will give a good picture of the property’s potential market value and projected capital appreciation upon handover, which in turn will help you assess the amount of risk that may be involved.
Set and manage your expectations
Investing is all about expectations. Having them at the outset allows you to assess whether or not your investment’s performance is actually congruent to your expectations. If by some unfortunate circumstance this does not happen, you need to have a contingency plan in place, whether it’s formulating a possible exit strategy or preparing the financial safety nets necessary in case you want to ride out fluctuations until such time that market conditions improve.
Develop a strategy
When formulating your off-plan investment strategy consider asking yourself these questions. Do you see it as a short-term investment? Are you planning to sell the property as soon as it is completed and take advantage of capital growth during the construction process? If so, what factors do you need to consider if you plan on pursuing this type of exit strategy? Are you willing to be in it for the long haul to allow for more sustainable capital growth? The answer to some of these questions will essentially determine the kind of strategy that you will be utilizing. Generally speaking, medium to long-term investment strategies are said to be the most ideal for off-plan properties as return on investment will be dependent on future growth.
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