Ask the Agent: Should I invest in commercial real estate in Dubai?

We are encouraging everyone to invest in this segment as there are some great opportunities.Mohanad Alwadiya, Managing Director, Harbor Real Estate

I am currently dealing with a real estate broker who also wants to be my property manager. Can a broker be a property manager?

The best property managers I have encountered all cut their teeth as successful brokers. To be an effective property manager, you need to be able to provide your clients with a complete and realistic property assessment, and strategy and activity plan designed to harness the true financial potential of your property. If you expect to provide the services expected of a property manager, such as vetting tenants, executing rental agreements, handling maintenance issues, conducting inspections and providing regular financial statements, then the “on the ground” knowledge accumulated by being a broker will be beneficial. Brokerage is an important learning platform to become a professional property manager, which is not to say that a property manager will necessarily make a good broker.

Should I invest in commercial real estate in Dubai?

Things are looking very promising for new business in Dubai and opportunities exist for commercial real estate investors to benefit accordingly. As Dubai seeks to grow economically, readily available office space is one of the important factors that new enterprises will consider.

The amount of infrastructural, development and economic initiatives, culminating in the hosting of the World Expo in 2020, is indicative of the government’s commitment to economic progression. Office rental returns are staging a strong recovery. Already, there is a relative shortage of Grade A large floor-plate, single owner space favored by multinational companies.

Nevertheless, there is still a considerable albeit shrinking vacancy rate of around 23% which represents good opportunities for value purchases providing strong cash flows.

There has been a lot written about the lack of affordable properties in Dubai and the increased demand for such type of property. This sounds like a good investment opportunity to me. Would you agree?

We are encouraging everyone to invest in this segment as there are some great opportunities.

An excellent example of a high-performing yet affordable development is Skycourts whose apartments have seen excellent capital growth.

Another is Queue Point, where you can invest in an apartment and retain ownership for at least five years to benefit from superior capital growth.

Aside from the two Dubailand projects, Dubai Silicon Oasis also offers a wide range of residential options, from villas to apartments.

Dubai Investments Park has a variety of residential offerings such as apartments and townhouses, and even staff housing.

Of course, International City and Discovery Gardens always figure in the “affordable” list.

I am new to Dubai and looking to settle for the medium term. While I have an extensive investment portfolio, I am new to investing in property. What advice can you give?

Investing in property is all about recognizing and capitalizing on opportunities that are supportive to your overall wealth accumulation objectives. You must have a clear understanding of what you are trying to achieve and what role your portfolio will play within a larger diversified portfolio.

You must have some knowledge about the investment you are getting. You may not be an expert, but you need to be able to communicate intelligently and knowledgeably with the experts.

What is your source of finance and where do the greatest risks lie in the event of an economic downturn? How liquid might you need to be? All these need to be addressed.

You also need to identify and work with a professional in the industry. Selection of the right agency is a skill in itself. Choose wisely. Remember, cheapest is not always the best.

Question of the Week

I am considering entering into a lease-to-own contract with a developer for my first apartment. Do you have any advice?

In today’s market, lease-to-own schemes make a lot of sense as they help manage any uncertainty that the potential purchaser may be experiencing. Buying an apartment or villa is a big commitment, and lease-to-own schemes can make it a lot easier from not only a financial point of view but also from an emotional or peace of mind point of view.

By entering into such an agreement, you are effectively allowing yourself to “buy some time” before committing to the final purchase. The major advantage of this scheme is that during your leasing period, you are effectively building some equity which can be utilized. In essence, if you choose to eventually purchase the unit, the money which would have been lost forever as a rental expense is being utilized as capital towards your new home which, if you are taking out a mortgage, will also provide savings on interest charges.

In our opinion, this scheme, which essentially makes buying a new home easier, has been massively underutilized.

Projects which have offered this scheme include The Greens, the Andalusia Collection at The Villa project and Sulafa Tower at Dubai Marina. All of them have done extremely well because of this scheme.

Source: Mohanad Alwadiya, Managing Director, Harbor Real Estate


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