Real estate investment strategies in Dubai

Property in Dubai

One of the options for investing savings is investing in overseas real estate. The strategy can be conservative, moderate or aggressive. Have been thinking about purchasing houses for sale in Palm Jumeirah the UAE? Ax Capital agency has options meeting various requirements, budgets and investing strategies.

Villas for sale in Dubai for conservatives

The simplest option is to buy a property and rent it out, receiving a regular income. It is similar to a deposit or bonds, but with the only difference that real estate has the potential to rise in price, and has no restrictions. Profitability from renting varies and strongly depends on the country and region, type of real estate, etc., but is usually at the level of 3-5% per annum in foreign currency.

The main idea of ​​this strategy is to buy a property that will definitely be rented out, and ideally also has the potential for price growth: these include real estate near major cities (or directly in them) that have high-quality transport links with other settlements.

In addition, the standard of living in the country of investment must be stable, above average, so that tenants have the means to pay rent. Also study the habits of the local population: is it customary for them to rent an apartment or house or immediately acquire their own housing? In Europe and the USA up to 70% of real estate is rented. And if in the city where you are looking for real estate, almost everyone owns their apartments, then the chances of finding tenants are slim.

In addition, it is necessary to clarify the nuances of the legislation – what will be the rights of the owner to evict tenants and change the terms of the lease contract. There are times when a tenant may refuse to move out, not pay rent, and court hearings to evict him can last months.

If we talk about the technology of leasing, then before buying, study the market of management companies, their licensing issues, work on the market, compare prices, request examples of reports that they send to clients on managed propeties, as well as a full list of services (whether they will help with opening bills, with taxes, with the search for tenants if the current ones move out, etc.).

Additionally, you should clarify the procedure of buying and receiving rental income: will you need an account in a foreign bank, because this may require you to make regular additional reporting depending on your country of tax residence.

Only after all these issues have been resolved, you need to draw up a checklist of all expenses, calculate the expected rental yield and either buy or try to find more interesting options.

Real estate in Dubai for moderate investors

One option to increase yields is to buy the property you want to rent out with a mortgage. You can take out a mortgage loan in the country where you bought the property or, if interest rates are better, in a domestic bank secured by an apartment in your home country.

If the mortgage rate is lower than the expected rental yield, and the loan amount does not exceed 50-60% of the value of the property, your rental will generate passive income. At the same time, the return on invested capital will be even higher: for example, you buy a house worth EUR 200,000, which brings rental income of 5% (EUR 10,000 per year). You can invest EUR 100,000 of your own funds and take another EUR 100,000 on credit at 3% for 10 years, receive EUR 10,000 rent per year, pay EUR 3000 as interest on the loan, having an annual profit of EUR 7000, or 7% on invested EUR 100,000. After paying off the loan, after 10 years, you can sell the house. Thus, the yield in this case will be 5-8% per annum.

Flats in Dubai for aggressive investors

It is possible to take risks and invest in real estate with significant upside potential:

• Purchase of real estate at the construction stage, at the off-plan stage, in the hope of rising prices after commissioning. In this case, you need to carefully check the developer and the insurance company (if the investor’s down payment is insured in the country), as well as check the professional liability insurance of lawyers who conduct the transaction and check the real estate: in this case, you will receive compensation if the construction freezes.
• Purchasing real estate from a mortgage auction, or urgently due to the urgent needs of the owner. To have access to such offers, you need to clarify whether your real estate agency works in these areas: provide examples, perhaps partnership agreements with banks to participate in loans-for-shares auctions, etc.
• Purchase of property in need of repair to restore and resale. In this case, you need to clarify whether realtors have verified repair contractors, request examples of renovated houses or apartments, clarify how long they have been working, in what legal form (it is impossible to check private repairers who are paid in cash), how to track repair costs. Realtors must provide a full range of services for such a project, including the services of a competent architect. By the way, on the security of a renovated apartment, you can take a loan for a new apartment in need of repair (in the amount of 50-60% of the appraised value), or buy it with the proceeds from the sale of the first one. At the same time, it is important to rely on proven craftsmen who can not only correctly estimate the cost of repairs, but also perform them in a quality manner, as well as have an idea of ​​the required cost of the property after repair. Another option is to buy a house that is partly rented out and use the rent to pay for repairs to the rest of the building. According to an aggressive strategy, profitability of more than 20% per annum is possible, but there are also risks of remaining at a loss or with unfinished business.

Real estate agency in Dubai

If you are not sure which strategy is close to your views, then go over to the Ax Capital agency website and ask an advice. Their specialists will help you define your choice and will guide you through all the steps of the deal.