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We have been told again and again that the crucial factor in a real estate purchase is location, location, location. Rubbish.
Living in a rapidly developing metropolis like Dubai, we know that a prime location can be turned into a no-go zone in no time. Equally, a dusty wasteland one day might be a glittering example of residential desirability the next.
When it comes to analysing the financial outlook of buying or renting a house, I encourage my clients to look beyond the four walls. Of course build quality and fittings are important, but assuming the developers are reputable and trustworthy, we need to know some other crucial details in order to appraise an investment in property.
I have written before that the first decision should be the curtains. If you plan to live in the building, buy curtains that your family will like. If you plan to rent or sell for profit, buy curtains that your neighbours will like. The rest of this article may well determine how much profit or loss you make after those curtains are hung and drawn.
An often-overlooked aspect of real estate investment is local transport. I'm not talking about how close you will be to the nearest Metro station. That is obvious. A brand-new apartment block 20 metres from a Metro station will clearly be at the top end of the price list. I'm thinking slightly more tangentially. Although many prospective buyers or tenants look at proximity to main roads, bus stops, Metro stations and the Dubai Tram when viewing properties, few consider the realities of using those links.
Let me give an analogy. An agent showing a prospective tenant properties in Dubai Marina would not take the client to view an apartment with a balcony on a Thursday evening. A mid-week viewing in the middle of the day would show the area as peaceful and quiet. Very little traffic. Wonderful views. No noise. Only after moving in will the tenant find that sleep is probably impossible for three nights of the week.
Similar patterns occur on the roads and public transport. Rush hour in some areas is far more uncomfortable than others. What's more relevant here is that the wrong location or an inconvenient journey to or from home can greatly increase costs.
Heavy traffic can more than double your journey time and fuel consumption. Bear in mind that your chance of being involved in an accident that results in an insurance claim shoots up. Furthermore, sitting in traffic or a crowded train can spike stress levels, which is damaging to your health and can affect your performance at work and personal relationships. What price could you put on that?
Is proximity everything?
Often people will argue that a property near a major road link is more valuable due to the easy travel routes. List prices would certainly back up this theory. In many cases, such proximity could end up costing extra. A residence closer to your place of work or on a less travelled route could reduce time, money and blood pressure. A longer drive on a clear road could be better than a short commute nose to tail.
So how can we look at the financial and time cost of a particular area or building? As is so often the case, the way to save time and money or improve the outlook for an investment in the long run is to invest your effort beforehand. Try travelling to and from the property during rush hour. Establish how much your decision will cost you per month or year in terms of taxi fares, fuel or tickets for public transport. If you are a landlord, share your findings with potential tenants. They will appreciate it.
The expenses associated with renting or buying a property do not stop at the front door. It is vital to know its impact on your wallet and well-being that transport links (or lack of) may have. As with any investment, take care to look into these external factors that may add or subtract value. The pain of enduring one rush-hour journey as a test run could save agony in the future and prove very profitable over time.
Get a glimpse on how your asset will be in five years
Source: Edward Mainwaring Burton, Special to Property Weekly
The writer is Senior Financial Planner at DeVere Acuma