UAE residents should aim to get a second income by investing in short term property rental. That is according to Reem Al Khatib, Regional Managing Director of leading global hospitality and property technology company, GuestReady.
A business analyst by profession, Reem moved home to the UAE in 2015, when the country put in place a new regulation on short term rental property.
“I was looking to invest in property, and I had always had a passion for design and meeting new people,” she said. “I wanted to make my own stuff, so I decided to try investing in short term property. I gave myself a year to test the waters and found that the yield was about 8-10% higher than long term rentals. It was the best time to get into short term rentals as there were limited players in the market.”
With a focus on guest experience, her property portfolio grew and soon she was advising friends and family on property investment and short-term rental management. A chance meeting with GuestReady saw her lead the global startup’s expansion in the region. Today, she is a passionate about transferring her knowledge in property investment and entrepreneurship to others, especially women.
Even those with limited income can invest in short term property rental, says Reem. “Those who do not have cash to buy a property can lease and then sub lease it to do short term rental,” she said. “That is one way to start small and then build your way up.”
For those looking to buy a property, there are several factors that they should take into consideration. “I would suggest buying something in the 800K to 1 million range,” she said. “I would also encourage people to look at larger studios. These can fit roughly about 4 people. As a property owner, you can cater to 1-4 people while paying a lower service charge.”
However, she added that it was important to add value to the property. “Your property needs to stand out,” she said. “Invest in the right property management and maintain high guest ratings with good services. Then the guests will keep coming back. It is important to focus on increasing the rates and not the occupancy.”
According to Reem, building a source of steady second income is essential, especially for women. “The main benefit of investing in property is that people have a passive income,” she said. “It affords them financial freedom and is a great way to ensure steady cash flow.”
She said that real estate investment especially in Dubai is a safe investment option. “The global fluctuation in property is not too much,” she said. “Any city has volatility but Dubai always finds a way around it. They have initiatives to get people and investors to come back and that is why this city is such a great place to invest it.”
Tips on building property portfolio
In a quest to help more people build their short term rental property portfolio, Reem has put together a ten-step guide:
1. Set a Goal: Define your investment objectives. What do you hope to achieve with your investment property portfolio? Passive income, building equity, or diversifying your investment portfolio?
2. Determine Budget: Evaluate your financial situation and determine how much capital you can allocate. Consider factors like savings, income, and borrowing capacity.
3. Research & Education: Familiarise yourself with general real estate investing through books and podcasts. Spend time researching the market: regulations, areas of demand, yield potential and potential for appreciation.
4. Build a Team: Assemble a team to support you: a real estate agent, a property manager or management company, an accountant, lawyer, and mortgage broker.
5. Secure Financing: Determine the best financing options for your investment property or properties. Explore mortgage loans, private funding, or partnerships.
6. Begin the Property Search: Conduct thorough due diligence on properties you are considering including inspections. Look at factors such as location, rental income potential, expenses, property condition, and future appreciation prospects. Perform a comprehensive financial analysis to assess the property’s cash flow and return on investment.
7. Make an Offer: Once you identify a suitable property, make an offer but equally, negotiate the price and terms to secure the best deal possible.
8. Acquire and Manage Properties: Close the deal on the property and take ownership. For short-term rentals, engage a company who will handle all aspects of the property management including legal compliance.
9. Monitor and Evaluate: Monitor the performance of your investment property portfolio.
Along with tapping into the knowledge of your team, it’s important to stay informed about market trends and make adjustments to your portfolio strategy when necessary.
10. Expand and Diversify: As you gain experience and build equity, consider expanding your investment property portfolio. Use the profits from existing properties to acquire additional ones or diversify into different types of real estate investments.