Dubai’s real estate market is thriving because investors from all over the world were quick to realize that the returns they can get exceed the typical for the industry gains. During the past few years the market has matured and it has become much more secure even for people who are yet to select their first property for investment in Dubai.
Owning and renting real estate has long been considered one of the best ways to build personal wealth over time. Real estate investors with portfolios of dozens or even hundreds of rental properties can realize enormous annual profits while also building up wealth in the equity of their properties. In order to reach such level of success, however, every investor has had to take the initial step of buying his or her first rental property.
In many ways, the first property in a rental portfolio is the most important. Its success or failure will often determine whether or not an investor decides to commit more deeply to real estate.
Here are a few tips for selecting your first rental property for investment in Dubai to help you make a successful choice.
Determine Your Parameters
The first step in selecting a property is to determine a few of the basic aspects of what you are looking for. Decide, for example, what area you want to rent in. In most cities of any size, neighborhoods near metro lines or close to downtown business centers will offer decently high rental incomes.
Also, determine what kind of property you want to purchase. For most investors, the answer to this will be a single-family home. Studio and one bedroom apartments are most preferred in Dubai, but two and three bedroom townhouses are also quite popular amongst the most experienced and wealthier investors.
Another important factor to determine is your budget. Many first-time investors believe that the more they spend, the more income they will make. While this is true to some extent, it is possible to turn a profit on lower-cost properties if they are in the right area and appeal to the right tenants. Determine what amount of money you are comfortable spending to purchase your first property for investment in Dubai and stick at least fairly close to that number as you search for properties.
Prepare A List Of Suitable Properties
Once you have decided what you are looking for in a property, it is time to start mapping the city’s communities for homes that meet your criteria. Look in the neighborhoods that you have determined to be good areas to own a rental property for homes that are close to your price range. Take into account the size, condition and age of the property, as well as any other factors that may impact how much you can reasonably charge in rent for it. Online listings can be invaluable in this stage of the search, as they will typically list square footage, bedrooms, bathrooms and pertinent utility information, as well as show pictures of the inside of the home that you can use to determine its general condition.
Though the number of properties you find will vary based on availability in the desired area and the criteria you set, you should aim to find at least 3 or 4 properties that are worth further investigation. Even if you think you’ve been lucky enough to find the perfect property on your first or second try, continue to find others. Experienced real estate agents are usually able to offer the right options and help you find relatively easy a property that meets your criteria.
Sample acquisition criteria that are workable in Dubai:
Minimum of 1 bedroom
Minimum of 1 bathroom
Minimum of 800 square feet
Maximum year built: 2008
Minimum monthly rent: AED 6,000/month
1 parking spot
Target purchase price: AED 1,000,000 to AED 1,500,000
Narrow Down Your List
Next, arrange viewings for each of the homes on your list so that you can get a good look inside each one and the community. This step alone will likely narrow down your list considerably, as there will be some buildings you simply decide don’t meet your standards. For the rest, do more in-depth research. Find rental listings for similar properties in the immediate neighborhood to determine what standard rent is. Begin comparing each property’s potential rental income to its price, and you’ll soon be left with only two or three properties that stand out as offering the highest potential return on investment.
Explore Payment Options
Now that you’ve done the hard work of selecting a small handful of good properties, it’s time to explore your payment options.
Usually people decide to start investing in real estate once they find themselves making more money than they can spend. The majority of investors in Dubai pay for their assets in cash.
If you do not have a large amount in the bank ready to be disposed, you can opt for an off-plan property or one that it is still under construction, because they are usually offered with payment plans. Most of the payment plans comprise of installments on quarterly basis.
Another option to purchase your first property for investment in Dubai is by securing a mortgage. If this is your prefered mode of payment, it is advisable to approach your lender in advance for mortgage pre-approval, so you know how much you will be able to spend. According to the local regulations, you must have 25% of the total price in cash and a lender can should provide mortgage for the balance of 75%.
When you consider buying your first property for investment in Dubai, it is better to remain as practical as possible.