Who needs an asset manager?

Who needs an asset manager?Image Credit: Supplied

On a typical day, Javed Khan would have his hands full managing a real estate portfolio that lists properties in Jebel Ali, Jumeirah Lakes Towers (JLT) and The Springs. It's a challenge managing multiple assets, but the Indian businessman is determined to grow his investments with more purchases in JLT and Discovery Gardens. With a much bigger portfolio, he admits he needs help.

Sunil Pathak manages an even bigger mix of real estate assets in many freehold locations, including Dubai Marina, Dubai Silicon Oasis, Victory Heights, Meadows, Springs, Green Community, Downtown Dubai, International City and JLT. He also has industrial and commercial plots in other parts of Dubai.

When investing in multiple properties, Khan and Pathak agree it's best to hire a property management firm. ''Being an owner of multiple units in Dubai, hiring a reputed property management company to look at property-related issues is a good way to meet one's investment goals,'' says Khan.

When a property portfolio gets larger, Pathak says the daily and weekly tasks and other responsibilities, including maintenance, enforcement of tenancy terms and agreements and renewals, can be stressful.

''As an investor, the challenges usually come from maintaining professional and standardised management of properties,'' says Pathak. ''Another source of uncertainty is the rapidly changing legal system pertaining to property ownership and tenancy laws. Although [these changes are] welcome, there is a cost associated with staying abreast of the legal terms and abiding by the new and often more clarified rules.''

Khan says there are things that have held him back from signing a management agreement with his broker. ''There is always a risk of lack of transparency when dealing with an individual broker regarding pricing, services, maintenance issues, etc.,'' he says. ''This is a major problem for an investor.''

Pathak also plans to expand his investment activity in Dubai and is looking for a broker that will provide crucial support. He says Dubai's quality developments, rapidly maturing legal landscape and cutting-edge approach to development will keep investors like him interested. ''We are always clamouring for what's next and we know we will get what we expect to get,'' he says.

With Dubai investors enjoying 5-8 per cent rental yields, compared with around 2 per cent in other international markets such as London and Mumbai, Dubai consistently attracts property investors from all around the world, says Pawan Batavia, Managing Director of Synergy Properties.

But many foreign investors are not mainly into real estate. ''These investors collect information from various channels such as agents,'' he says. ''However, hiring a property management company is a convenient option that will [make their] real estate investment more profitable and hassle free.''

Batavia says the management company keeps investors updated about the market and makes sure the asset achieves good returns. ''Even tenants want to stay in a property that is operated by a professional agency as they feel secure,'' says Batavia.

Market practice

Real estate investors in Dubai often appoint their sales brokers as property managers. ''Property investors are often busy with their primary jobs and businesses, and some do not even reside in the UAE,'' explains Suraj Rajshekar, General Manager at Rocky Real Estate. ''Therefore, the broker that has a good rapport with the investor will usually look after all the investor's property.''

Rajshekar points out that agents do not often get direct financial compensation in this set-up. ''Managing the client's units is just a valued-added service without any financial benefit,'' he says. ''The agent normally does this in the hope of doing more property deals with the same customers in future. The brokers make money only when the investor sells an asset or buys a new unit from them. It is an agent's obligation to service the client without a reward. In some cases, the investor may offer to pay the agent, but if the investor does not buy or sell new assets, then it will be up to the individual broker to service a client, not the brokerage company.''

Rajshekar says many foreign investors who don't live in the UAE typically don't have a local bank account, so there are cases wherein tenants pay rent to the broker or deposit the amount into the broker's account. It is a setup that has worked for many investors, but there are risks.

''There were cases where investors gave a power of attorney to their agents, but the agents misused the authority,'' says Rajshekar, adding that in some cases the agent did not transfer the money to the owner and some even left the country with the investor's money. ''Others rented out the property to unknown people without due diligence on the tenant.

''There is a lot of vulnerability in the whole process.''

The trust factor and the level of service also often diminish over time due to lack of monetary gain, as the agent's principal job is to sell property. There are also other matters that agents are not equipped to resolve, such as legal issues and court disputes as a broker may not have time to represent the investor in court, as opposed to a professional property management company.


Rajshekar believes many investors in Dubai are not fully aware of the benefits of professional property management services, which is why many investors continue to rely on brokers to manage their real estate assets.

''We have seen a misconception that asset management companies are expensive,'' says Rajshekar. ''In reality, hiring a management company offers value for money, as the investor gets a more responsible team to take care of the unit, wherein there is a signed contract, which makes the whole process transparent and clear for the investor.

''Any [financial] transaction between a landlord, tenant and property management company is always done through the company's bank account, which makes it more secure. Moreover, a statement of account is regularly sent to the landlord.''

Louise Heatley, Managing Director of Exclusive Links Real Estate, says investors with multiple properties in Dubai will benefit from professional management services as the primary issue for these buyers will be organisation and time management.

''[Property owners] deal with maintenance, tenancy contracts and renewals, rental payments and service charges, and these are just the basics,'' says Heatley. ''Keeping track of all their properties can become problematic and inconvenient.''

Foreign clients should therefore consider hiring a property management company with a good track record, says Heatley.

For Pathak, a property management company should have a strong understanding of the rules.

''I am open to a property management firm with a robust plan to maintain and manage the properties and optimise income,'' says the Indian property investor. ''At the end of the day, it is about maximising income and minimising stress.''

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Source: Hina Navin, Special to Property WeeklyPW


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