Ask the Expert: Homing in on affordable housing

Investing ResidentialMohanad Alwadiya

Should I buy a villa or an apartment for investment?
A simple question to which there is no simple answer. The market rarely moves uniformly. There is always a difference in the investment returns to be expected from different asset types, in different areas, at different stages of completion and over different periods of time being completed by different developers.

In today’s market, knowing what we know about Dubai’s economy going forward, I recommend to my clients to invest in affordable apartments or construct a portfolio of affordable apartments and villas.

You will note the key word is “affordable”. Projects such as Queue Point in Liwan and Skycourts, Ajmal and Windsor Residence at the Dubailand Residence Complex along the Dubai-Al Ain Road are filling the affordable housing void. If you wish to diversify asset types, I suggest you consider Pacific Village, as this recently launched project offers high-quality affordable and extremely spacious modern villas and town houses.

All provide good-quality, affordable solutions with little compromise and have the potential to provide excellent rental returns and capital appreciation as affordable housing will be in high demand going forward due to the burgeoning growth of the middle-income and lower middle-income segments in Dubai.

Should I assign my property to a leasing broker or a property manager? Keep in mind that leasing brokers will not charge me any fees, whereas property managers do.

You enter into a leasing agreement when you wish your real estate agent to locate suitable tenants for your apartments and facilitate the signing of the tenancy agreement, while leaving you to assume responsibility of 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 true financial potential of your property. Considerations include history, current market factors and risk factors, whether they be global, regional or local in nature, requiring a good understanding of economic factors, industry knowledge extending to policy and regulation, finance and market dynamics.

An activity plan will be provided covering pricing and marketing, customer relationship management, tenant management and policy, cost management, maintenance supervision, communications and review schedules, status reporting, financial reporting and resourcing.

All of these activities will be performed by the property manager under a property management agreement.

A good property manager will make your investment work harder for you and the additional returns you receive will outweigh the fees.

A bank representative called offering to refinance my property. Should I go for it?

The easy answer is yes, but only if it makes financial sense. In short, you need to do some arithmetic. There are some very attractive mortgage products in the marketplace with a few mortgage providers offering rates as low as 3.99 per cent or even 3.49 per cent, which shows that competition among UAE banks for a higher share of the mortgage market is getting pretty intense.

There are a number of things you need to consider, including the early payment penalty for your current mortgage. Find out if you have to pay a hefty fee to exit the existing contract.

While 3.99 per cent is an attractive rate, consider how long you will be guaranteed this rate. Interest rates will eventually rise and this eventuality needs to be understood by mortgagors as the attractive 3.99 per cent interest rate enjoyed today could in all probability be replaced with a significantly higher rate in two years, requiring increased mortgage payments to cover the interest rate hike. You need to factor this into your financial planning.

Will you need to pay any establishment fees for your new mortgage contract? With the mortgage market becoming so competitive, you should be able to have any fees waived.

Finally, make sure you can pay out your new mortgage contract at a future point in time without any penalty. This is an unnecessary expense that you should not be burdened with.

I would like to work as a real estate broker and I don’t know how to choose the best company. Please provide me with some guidelines.

As it appears that you have never worked in the industry before, I suggest you join a company that will enable you to fast-track your learning. Make no mistake about it, you have a lot to learn. I suggest you look for a full-service company so that you can get a greater understanding of what the real estate business is all about. It’s not just buying and selling property.

The company you choose should value you as an individual and remunerate you appropriately. But it should also be prepared to invest in you by providing the types of learning experiences that come with formal training (mandatory to become a licensed agent in Dubai) and in-house training. This may involve being assigned a mentor, being placed in an internal rotation scheme to gain a broader knowledge of the business or being given special projects that will facilitate your learning by encouraging you to seek answers and solutions to complete the task at hand.

The companies that invest in high-potential people are those that typically succeed.

Finally, it is very difficult to be passionate about your chosen profession if it is not part of the culture of the company that you work in. Try to surround yourself with people who are passionate about the industry, because passion is contagious and it is what sets champions apart. Good luck!


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Source: Mohanad Alwadiya, Special to Property Weekly
Managing Director of Harbor Real Estate and advisory board member and instructor at the Dubai Real Estate Institute, the official training and certification arm of the Dubai Land Department

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