How to build up a property portfolio from scratch

Hot to build up a property portfolio from scratchImage Credit: Supplied

Most people attending this year's Cityscape Global will be looking to buy property, but not all of them will be looking to live in their new villa or deluxe apartment. They will be looking to increase their rental property portfolio, or to start it. And for them, there needs to be a different set of considerations.

To begin with, here are some suggestions for the first few steps:

* As with buying for yourself, you have to be realistic in what you can afford. For those starting out in creating their buy-to-let portfolio, going straight in for a penthouse apartment or a sweeping six-bedroom villa might be stretching things. Stay within your means. Even starting with a modest one-bedroom apartment, you will be surprised how quickly you can build your portfolio up.

* Buying as a landlord is not necessarily about your personal taste. You have to put yourself in your prospective tenants' shoes. In a sense, you need to find a product that you know you can really sell, and sell widely. It's not so much thinking outside the box, but thinking outside your box.

* It is good to do some research beforehand into possible areas for purchasing a buy-to-let. For instance, 'What is the demand for rent in that area?' Look at property in that immediate part of town or particular development. If there are no others up for rent, then perhaps it is not a desirable area from a renter's point of view. If there are lots of properties available for rent, then perhaps there are too many in the area and you might be adding to the glut. It's a bit like Goldilocks's porridge — ideally the area should be neither too hot nor too cold.

* If it looks like a good area, then how do you narrow your decision down? Very simply, look around.

* Often transport links are vital for rental properties, particularly for the shorter-term rental market. For example, there are many international business people who spend just a handful of months in Dubai at any one time, and their numbers are likely to increase.

So be sure to gauge the property's proximity to things like the metro, tram and bus stations or stops, plus road links to other important parts of Dubai or ease of access onto the highways. Airport access is of great benefit, too.

If you've found somewhere that meets all or most of the above considerations, it might be time to do some maths. Think about what level of rent you would like to ideally charge. Perhaps you had a monthly profit margin in mind.

Seek advice from the people you talk to about projected growth for that area — if it is 'on the up' then the property might be worth its current low-margin given that this could increase in the coming years. There will be lots of independent advisers at Cityscape Global who can help with just this kind of question.

Plus, just by looking around you should start to get a real feel for this: if there are several developers being drawn to a particular area then, like iron filings to a magnet, there must be some strong forces of attraction at work.

* The apartment might be ideal, but the rent you can expect to realistically charge for it might not be what you were hoping for. If so, you might need to reconsider your rental hopes and/or the area that you are looking in. One of the many great things about Dubai is that there is a wealth of regions and developments to explore, so if a property doesn't quite work out in one particular place, there will be dozens of other options.

Assume you have gained some real insight to the possibilities before you and you have even found what looks like the ideal place for your buy-to-let plans. So now things get serious and the finer details come into play.

Capital values: Make sure you get all the information you can on your potential property's capital value, both current and any expected short or long term growth. This is worth stressing as it could strongly affect your investment and the rates you charge to tenants.

Lenders: Who can you turn to? What might they be able to offer you, and what are their terms? If a mortgage is involved, what is the percentage that they charge on this, and is it competitive? Remember that buy-to-let mortgages can offer quite different terms from regular mortgages.

It's surprising that, relatively frequently, prospective landlords don't look into the more hidden running costs of their new properties. Things like services charges, management fees, maintenance costs and voids are often not fully considered when looking at a property. But they can have an effect on your plans.

Look to the future and your property's resale value. Get opinions from different agents in the area, or those with similar properties. Listen to other people's stories.

The Columbo Moment

'One more thing,' as Peter Falk's great detective would say: Cityscape Global is a vast event, and if you are looking for a buy-to-let property then you have a good deal to think about.

Click on Property Portfolio and learn how manage it in the UAE

Source: Iseeb Rehman, Special to

The writer is the CEO of Sherwoods Global, London


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