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Dubai attracts a large number of buy-tolet investors as the rental yields in the city are significantly higher than many other mature real estate markets. However, selecting the property type depends on a buyer’s personal preference and budget, says Gaurav Aidasani, Managing Director of Union Square House Real Estate.
“When a buyer doesn’t have a budget constraint, we suggest to invest in grade A properties from a prominent developer, like Emaar, which give higher appreciation in the long term, with a rental income ranging from 4-5 per cent,” says Aidasani. “When there is a limit to the budget or the buyer is interested in investing in a unit that offers higher rental returns, then opt for communities such as Executive Towers and Greens. Here, investors can achieve 7-8 per cent as rental income and a decent appreciation. A small-size investor can look for C grade properties that fetch 8-10 per cent rental income in areas such as Remraam, Discovery Garden and Dubai Silicon Oasis.”
Akash Kanjwani, Director of Sky View Real Estate Brokers, says a buyer should select a property based on the desired return on investment. He points out that apartments offer better rental returns than villas in the short term, while villas provide maximum value appreciation in the long term.
Kanjwani says villas have higher maintenance and service fees compared with apartments, and this should also be considered when looking for an investment property. If rental returns is the primary goal, he says it is best to invest in an apartment. “The location plays a significant role in determining the return on investment, so select a unit that is close to the city centre and the working communities, as this will allow the unit to be rented out faster,” says Kanjwani.
The apartment size also affects the sale and rental values. “Smaller apartments like studios and one-bedders are good for rental returns, while larger apartments such as two- and three-bedders give better appreciation,” Kanjwani explains. “For villas, units valued Dh35 million-Dh40 million and above are considered only for investment because people do not rent these units.
“Properties priced between Dh5 million and Dh35 million are not fast moving in the present market.”
Kanjwani also advises buyers not to make major upgrades on the unit because many tenants prefer to have their own furniture.
However, investors can increase rental returns significantly if they furnish the unit and put it on a monthly rental basis, says Jack Ward, Managing Director of Kirk Dixon Real Estate Brokers. A practical way to furnish the unit is to use furniture with neutral shade. “While furnishing a property can increase the yearly rental income by 10 per cent, the demand for furnished property is not very high,” says Ward. “Moreover, it is the landlord’s responsibility to maintain the furniture, which could be an additional cost.
“It is also a riskier proposition because the owner needs to keep the property occupied every month. If it is only occupied for six months, it is likely that the property would have generated a higher return if it were rented on a standard yearly basis. It’s also important that the landlord must acquire the correct certification from the appropriate authorities for short-term leasing.”
Declan McNaughton, Managing Director UAE, Chestertons Middle East and North Africa, says the first thing a prospective buyer or tenant would see is the façade and the porch. Therefore, the client should ensure these are freshly painted, clean and inviting.
“We also suggest a few simple interior modifications that may include having a modern kitchen with all white goods and a modern bathroom with an overhead rain shower.”
“It is important to price correctly and accurately according to the market.
Source: Hina Navin, Special to PW