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Things You Need to Know When Investing in Rental Properties

Rental property in Dubai

For most individuals with a steady income, a common goal is to be able to buy their own home. From an investor’s point of view, a property is a future source of income that is likely to always be profitable. It serves as strong collateral in addition to be a good source of income.

Investing in property is not always as easy as pointing your finger at a property and having funds transferred within the day. It requires careful planning, research and time. Investors want value for money and potential to earn them a handsome profit therefore simply going by hear say in the market is barely sufficient enough. It involves studying the developer’s history, finances, understanding how to manage their finances and payments whether they handle it themselves or finance the home through a bank. It is also to keep in mind that investing in a rental property involves regular maintenance charges, capital expenditures that involve unplanned, random fixes like repairing the heating system.

A benefit of purchasing such property is that the value will appreciate as the surrounding area becomes more developed. Addition of a new metro station or department store is likely to raise the value of your property with time. Better amenities, accessibility are crucial points of consideration. Luckily for a city that is a favourite to many investors, Dubai benefits greatly from its market reputation and this paves way for a thriving property sector.

  • Investing in Rental Properties in DubaiPlan Plan Plan! This cannot be stressed enough. Especially if this is a first time investment, it’s best to play safe in areas that are already familiar to you and for this, public opinion and your experiences are enough to make a decision.
  • Plan for your preferred property, location, niche clientele, calculate gross income, clear your own existing debts, consider investment loans (investors are required to pay 20% down) and speak to qualified players in the market to gain first-hand information prior to your decision.
  • Consider a Property Management Company– this completely cuts off the chances you’ll have to take calls from tenants regarding a pest control issue or anything related to maintenance. The manager will do that for you!
  • For a more experienced investor, it is often a good idea to invest in rental properties. Clients are usually more willing to pay a premium price to enjoy their holidays in the comfort of a home rather than stay in hotels. This allows the landlord to charge higher prices on weekly/daily basis to ensure they are profitable for when the property is vacant and unrented.
  • Calculate Return on Investment as well as gross earnings monthly. You should be cash flow positive, keeping in mind all extra costs you may incur. While there are several rules of thumb people go by and basic formulas, it isn’t as easy as it seems. Your property is supposed to give you at least between 6-8 % so calculate down to every nitty gritty detail.
  • Think about payment schemes for tenants. Are you going to have them pay monthly, quarterly, bi annually or annually in a single cheque? This further allows you to forecast your finances more accurately.

Investing in Rental Properties in Dubai

In Dubai, there is a vast sea of rental properties to choose from. Whether you are renting to buy or buying to sell even rent out, there are unlimited options at hand. For those looking to invest to rent, there are several groups to consider. Groups based on income are one level to start at. Locations like International City, Silicon Oasis, Sports City, Deira and several others usually consist of working individuals that live on limited accommodation budgets. They prefer these locations due to affordable rents therefore investing in a property here is guaranteed to provide you with consistent occupancy and income throughout.

However, if you are looking to make a larger investment (larger gains in future), you can look at properties in City Walk, Jumeirah Beach Residence, Dubai Marina, Jumeirah, Al Barsha, Jumeirah Village Circle, Motor City and several others depending on the apartment/home you want to invest in. The best benefit of investing in Dubai is the influx of people that come to the city. Everyone needs a home therefore owning one gives you leverage in the market and the ability to rent it out very easily.