Investment Strategy for Real Estate
INVESTMENT STRATEGY
In a real estate investment package, we present our clients investment properties that match their individual risk-return profile. This is based on our extensive market knowledge, particularly of developers and neighbourhoods, and an investment calculation based on a multi-factor model. We identify properties that have the potential to exhibit above-average growth in value and/or rental yield. We identify properties that have the potential for above-average growth in value and/or rental income. First, we work with our clients to define their investment objectives and develop a strategy that takes into account their individual preferences. This is essentially based on a mixture of the following basic property investment strategies.
- Flipping: The investment strategy known as 'flipping' involves acquiring properties with the aim of a quick exit. This approach requires a number of factors to be taken into account, particularly when dealing with off-plan projects, where having an information advantage is crucial. In addition to detailed knowledge of the developer, the property's value potential and the surrounding area, the payment schedule is also a key consideration, as it represents a leverage point for equity.
- Buy and hold: The buy and hold strategy aims to attract investors who prefer a long-term, stable return, similar to bonds. The main objective is to build wealth over time, with sustainability and rental income being more important than the potential short-term appreciation of the property itself. The selection of properties is based on criteria such as location, quality of the property, demand for rental properties and stability of the neighbourhood. We assist our clients in selecting properties that are likely to provide a stable return over the long term through comprehensive analysis and evaluation.
Regardless of the chosen investment strategy, it is important to consider the current market situation. Since 2021, the real estate market in the UAE has predominantly seen positive value developments, which are expected to continue in 2023/2024. However, if valuations reach a high level, there may be increased interest in rental yields.
Our recommendations are transparent and comprehensible, and we evaluate the specific risks of strategies or purchases by considering various scenarios. We would like to advise investors that by including real estate in the UAE, they can further diversify their global portfolios, particularly in a legally secure manner. Over the past decade, the correlation between EU real estate and its counterparts in the United Arab Emirates has been only weakly positive.
Off-Plan Investments
The greater the uncertainty in a market, the more valuable an experienced advisor becomes, especially for investment projects that are expected to pay off in 2-4 years. Off-plan projects offer interesting opportunities as they trade at an average discount of around 20% to existing properties. However, this is offset by interest or opportunity costs and development risks. The 'best' projects are often oversubscribed, creating strong demand that justifies higher prices in the secondary market.
Nevertheless, in heavily oversubscribed projects, this range is much greater, and anticipated returns outweigh risks, providing a certain liquidity to the property. The flipping strategy can be interesting in this respect, as it implies a leverage on equity, as only a down payment is required at the start of the project, but the full profit can be realised on sale.
BUY & HOLD
Purchase of properties with comparably high rental yields. Planned for 10 years.
FLIPPING
Timely resale with maximum profit can be achieved through the purchase of off-plan properties that have a high level of over subscription, similar to an initial public offering (IPO).
HOLIDAY HOME
Short-term rentals as vacation homes or through a hybrid model of personal use combined with occasional short-term rentals can be a viable combination to cover maintenance costs and general capital returns.