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I have an apartment I wish to rent out. Which would be a more practical approach, getting a rental agent or a property manager?
If you engage the services of a realtor, you enter a leasing agreement assigning the real estate agency to locate suitable tenants, facilitate the signing of the tenancy agreement, and leave you to assume the responsibility and devote your time to managing the tenant and all aspects of the property thereafter. A property management agreement includes a lot more. A competent property manager will provide an assessment, strategy and activity plan designed to harness the financial potential of your property. An activity plan will be provided covering many factors to be performed by the property manager under an agreement. A professional property manager will make your investment work harder for you and the additional returns you receive will outweigh any fees he/she might charge.
I am planning for my retirement. Right now, I want to invest in a property I can rent out then use personally during retirement. Is this a good strategy?
Including property as part of your retirement plan is a sound investment decision and a safe bet to ensure you maximise whatever savings or wealth you possess at this time. The key to choosing your property is determining the right balance between the amount to be invested, the returns you require in the interim period before you retire and what type of property you want to enjoy in your retirement. As the property will eventually be for your own use, determine what you will enjoy in your retirement. The good news is, your tastes are likely to be shared by your tenants in the interim so renting should not be a problem. Quality properties are available but if you want to purchase in the prime areas, you can easily double or triple that amount. The choices are varied and getting what works for you is certainly achievable.
Hire a reputable local real estate professional to help you minimise any risks with your investment.
What property characteristics should I, as a buyer, pay close attention to in order to minimise any risks associated with my investment decision?
Location is the first factor to consider as it can drive up a property’s value. Prestigious locations like Palm Jumeirah, Downtown Dubai and Dubai Marina fared well in the post-GFC period, and affordable areas such as Jumeirah Lakes Towers, The Greens, Dubai Sports City, Discovery Gardens and International City followed suit. But there are other factors as well. The quality of the end-product and infrastructure, maintenance services, and the extent of completion must also be part of any consideration. Value for money and superior ROI must be considered if you are an investment buyer. Current and future supply levels of various asset types need to be examined. However, it is the fundamental drivers of market values which remain: location, product quality, features and benefits, and demand and supply.
Can you please share some information on Dubai property management fees.
Like most services, property management fees vary among service providers. It may be anywhere between 3 and 6 per cent of the rental receipts and some will charge an administrative fee as well. You need to understand what you can expect from your property manager as the depth and breadth of services provided by him/her can vary greatly.
You can negotiate a fee structure based on your actual requirements. A competent property manager will provide an assessment, strategy and activity plan. Depending on the size and complexity of your portfolio, you should have, as a minimum, a rolling five-year activity plan which covers pricing and marketing, tenant management and policy, cost management and maintenance schedules.
Ask for referrals and make sure you follow up with some existing clients to get an appreciation of the levels of efficiency and professionalism.
Question of the Week
What would be the consequences if we hire a property manager who does not have the relevant property management licence?
The property management practice has risen in importance since the last GFC made it harder for real estate brokerages to generate revenue from transactional services alone. Demand for property management expertise grew rapidly as investors started to realise that investing in property requires constant attention as factors influencing its performance are broad and complex.
You need professional help to manage your investment. Your property manager must ensure that you maximise returns while operating within the law. He should be licenced, experienced and have a strong history of successfully managing properties. If you knowingly engage a person or organisation that does not possess the correct licence, you are aiding that person or organisation to operate outside the law which places you in an awkward position should something go wrong. If you have a legal dispute regarding your investment, any involvement of the non-licenced party will place your legal position in jeopardy.
It takes only a little effort to check the licencing status of an organisation by referring your query to RERA. Better to be certain than shoot arrows in the dark, especially when it involves investing your trust and hard-earned money in any business venture.
Send in your property issue-related questions to be answered by industry experts, mentioning ‘Ask the Agent’ in the subject line, to: email@example.com
Source: Mohanad Alwadiya, Special to Freehold
CEO, Harbor Real Estate