Let us get the basic logic out of the way. In a typical market, you look for property in the most glamorous part of town with the best views and thus you have purchased a property that has the most value. And now that everybody else wants the same either for a short period (rent) or for their own (sale) your investment gains rental returns and appreciates in property value. Perfect. And it works very well. But if you have read so far you are looking for something extra, a counter strategy to do more with less. Essentially you have seen the movie “Moneyball”, and you are thinking to yourself is there more than one way to win championships in Baseball? Is this digression? No, it is exactly what we are going to explore. Can you get more rental income with a not so glamorous property or be able to sell it at a higher value? Yes.

There are some fundamentals that perhaps cannot be ignored. There is a target market for every type of property and there are only that many 1 percenters in the world. The majority of us are still probably wealthy for sure but not so wealthy as to acquire everything on our wish list. We must be smarter than others in order for us to get what we want. The property that you can afford is often just good enough, let us make it better.

Older Properties

Don’t be afraid of older properties, yes, the older properties look unattractive, but they do have value due to being in a prime location as well as still utilisable infrastructure. Inevitably older properties have better locations than most new properties and consequently have a higher future land value that could exceed the value of the property’s structure itself. If there is a region in which there is limited availability of land or property this scenario is more likely. However, in the UAE, where there is an abundance of undeveloped land this is not always the case. In Dubai for example, the market is more attuned to finding new properties than the old. And here lies the opportunity for acquiring a property that is developed a bit further along in terms of age but still has that desirable location. Furthermore due to the costs of construction at the time and other factors very often older properties have larger rooms and greater floor area than an equivalent new property. Take Ras Al Khaimah for example, the older properties in the city have bigger bedrooms and living rooms than newer properties. Thus even though a building is a decade old they still have something to offer that is not available in the newer properties.

The Strategy

What you are looking for in this case would be to develop a strategy where you acquire these older properties and find a great balance in lifestyle and thus boost your rental income. So, you will need to look beyond the property’s age to the various amenities that are available in the neighbourhood. This includes restaurants, shopping, schools, entertainment venues, nearby offices and access to public transportation. So, a person renting here is looking for more than the view and the location but the neighbourhood. Once you have determined the balance in these neighbourhood factors then you can leverage the interior design to your advantage. Some tenants like to create their own ambience, but most would rather step into a house that is already designed to their liking. And here if you are able to balance the neighbourhood and aesthetic aspects you can derive a higher rental value or sales price despite the lower price when buying the property. This strategy is also called flipping properties in some countries.

Interior Design

The neighbourhood is not entirely within your control and therefore you must choose based upon your instinct. Very often, it is as simple as Would you like to live there? And if you do others who share your tastes and lifestyle preferences would like to live there as well. Interior design is entirely within your control. This requires additional investment. First, take a decision on how much and what you are willing to spend. Equipment such as washing machine, oven and refrigerator is the basic. Here you have the option of spending on high-end equipment or simple is good enough. Know that if you have a discerning tenant the better the equipment the more value you will have in rent. A key to an interior design that is acceptable to a larger audience is to focus on neutrality and space. Colours are a very important aspect of appeal and neutral colours such as white and lighter shades of blue, yellow, green and pink are more attractive than bold more stringent colours. Spending some time thinking about the colours and the maximisation of light goes a long way in making the space more attractive.

Furnishing

Furnishing is always a balance between comfort and clutter. You don’t want too many couches and chairs and tables getting in the way. Also, size is important don’t get furniture that makes the house appear to be cramped. In the case of smaller Studio or 1 Bedroom apartments, look for dual use furniture. A couch that converts into a bed, a shelf that can fold out into a temporary table and other such furniture will retain the abundance of space without sacrificing functionality. Think of it like a flow of utilisation; the apartment organically transforming as per the needs of the daily requirement. When in doubt you can always go with what you would like but if the walking and standing space is restrictive then you have put too many items in the room.

Storage

Storage space is the one point very often overlooked. You must have space to put away luggage and other less used items. Here is a simple estimate of how much space an individual needs, consider that each individual in the apartment would have a suitcase and a half of clothes and belongings. If they are able to unpack all their belongings and put away their suitcases out of sight, then you have successfully found the right amount of storage. Under the bed, above the shelves (but covered) and under couches are all good dual use storage places and when buying these furnishing consider that there could be some things stored there and out of sight without affecting the aesthetics of the apartment.

Lighting

Light is a key factor, both natural and artificial light. Curtains are a key part of lighting and differs based on functionality. A bedroom for example should have curtains that are capable of entirely darkening the room even during the daytime. The living room on the other hand does not necessarily require curtains that entirely darken the room unless the living room is required to serve the purposes of sleeping or watching movies in a darkened environment. Artificial lights also have a similar requirement, a living room requires brighter light and yet it should be possible to dim them if you require a more relaxing atmosphere. Spaces such as the kitchen, dressing room or mirror area and workstations require brighter light. Once again you will need different lighting sources lamps, chandeliers and downlights to achieve the necessary mix of lighting conditions suitable for the multiple functionalities.

Differentiation

Get the right mix of neighbourhood, interior design, furnishing and lighting and you will have created an appealing house that caters to more tenants and thus driving towards a higher value thus improving your rental income. All of these come together to form a unique solution a differentiating factor that allows you to gain from smaller investment requirements. Rental value is the immediate gain that you will realise. Once you have achieved a higher rental income it immediately improves the property value as well. You now have sufficient justification for a potential buyer in asking for a higher price. Renting it out prior to a sale might be counterintuitive but when you can show the higher rental value as documented proof you have more leverage. Alternatively, the higher rental income can facilitate a loan to buy more property and you would be able to continue your strategy towards building a portfolio of real estate assets. The benefit of taking a loan on an undervalued property is the loan amount and the interest payments will be low, maximising rent would allow you to maximise the difference for greater profit.

• Photo by Ijaz Rafi on Unsplash