How to make money on real estate investments in Dubai?

Where and in what part of the United Arab Emirates, can you make good money on real estate investments?

What are the current estimates and projections for real estate in Dubai? What is the outlook for real estate currently in Dubai? Furthermore, can the capital of the state of Abu Dhabi compete with it? What about the other emirates and other cities?

In which areas of Dubai can one find the most profitable real estate investments?

We’ll be looking at and answering all these questions in this article.

Dubai’s estimates and projections for the real estate market

The largest of the seven emirates in the UAE is Abu Dhabi, where the capital of the state is located. Although, one shouldn’t forget that there are more real estate businesses in the other part of the country, namely, in Dubai.

Evidence of this can be seen when in 2019, businesses in Dubai alone sold $ 22 billion worth of real estate.

While in contrast, other emirates didn’t even reach half of this amount in total.

What’s more, if we continue to compare Abu Dhabi and Dubai, we can say that the latter has a more developed urban infrastructure.

Expo-2021

For the past few years, Dubai property prices have been falling. Yet, at the same time, the real estate market has continued to develop with apartment buildings and detached cottages which are now being built here as well. What’s more, in Dubai and nearby neighborhoods, these developments are currently being built with a budget of more than 40 billion US dollars. This is the equivalent of what it would cost to develop more than 300 real estate properties.

In addition to this, the city is also preparing for the EXPO 2021, which was postponed last year due to the spread of the coronavirus.

So the UAE is expecting an influx of at least 25 million guests from 250 countries to attend this prestigious event.

For right now though, the participants are excitedly preparing and putting up their company posters and billboards. So, you’ll find the city filled with a lot of representatives from the engineering and construction sectors. This includes the heads of other prominent businesses and industries.

Also, what’s important to note here is that all of these people are potential tenants and housing buyers. So now is the ideal moment for investors to purchase apartments and easily sell them at a higher price or rent them out.

 

The best urban areas for investment

Experienced investors know that the most profitable properties in Dubai are located just a few districts away.

Those who come here on vacation prefer to rent a house closer to the ocean or on the shore. This means that apartments are in demand, including those located on artificial islands.

Dubai Marina holds the top spot on the list of the most attractive districts (including among capital investors).

This area is located on only two square kilometers, which is quite small. Surprisingly though, it’s comprised of 200 skyscrapers, along with many restaurants and luxury hotels.

The most attractive district that holds the second spot on this list is the world-renowned Palm Jumeirah, which is a man-made island made in the shape of a palm tree.

Here, the apartments and villas are reported to cost more than those in the Dubai Marina. However, according to the level of demand among tenants and investors, the apartments are about the same.

Accommodation here is often chosen by people who want to live in the city, but who still want the luxury of experiencing that wonderful quiet and calmness without all the hustle and bustle of the city. What’s more, there are more cottages on the Palm Jumeirah than high-rise residential buildings.

The most attractive district that holds the third spot on this list is taken by the Downtown District. This is a very busy place, with a lot of tourists. Also, one can visit the Burj Khalifa here, the tallest building in the world.

The real estate market

Before 2014, real estate prices increased by 18% in the city. This was largely influenced by the excitement in the market at that time. Because as soon as prices began to rise, buyers stopped and purchased houses. So as you can see, the initial price increase in 2014 positively affected the real estate market.

In addition to this, experts have reported that the market is currently close to its lowest point, at which point investors will certainly become more active – which is what they usually tend to do.

Furthermore, the past few months have seen a considerable arrival of capital investors coming to Dubai. As a result of this, the American company “Berkshire Hathaway Inc” opened an office here and began to purchase property in the local real estate market.

Cost and budget

In the UAE, prices in the real estate market start from 100 thousand dollars (360 thousand dirhams) onward. Of course, you can find residential premises at a cheaper price. However, if you want to make money on real estate, it’s better to focus on more promising projects. Furthermore, where other options are concerned, you either won’t be able to find tenants quickly or you won’t be able to sell the properties as easily (because they’re more expensive).

Long-term rental accommodation

Most investors still prefer to rent out apartments, rather than sell them.

They rent them both for long-term and short-term periods. Usually, companies that help to find the tenants don’t take money from the landlords for their work.

Additionally, employees of management companies who are paid by the tenants, are usually paid five percent of the rental amount.

What’s more, once an agreement has been reached between the tenant(s), and the landlord, a sample of a contract can be found and downloaded from the Government’s website.

This contract typically specifies the rights and obligations of both the landlord and the tenant(s).

Furthermore, such an agreement is usually determined for one year. So if tenants leave an apartment early, they have to pay a hefty fine. However, it should be noted that the landlord also cannot demand that the tenant(s) move out before the contract expires – the contract’s expiration date. Moreover, if there is a need, then material compensation also needs to be paid for. The amount of this is also high for both the tenant(s) and the landlord.

The tenant(s) either pays this amount either for the full year or once every three or four months.

Also, the person acting as the mediator between the tenant and the landlord takes a receipt or receipts from the tenant(s) and the investor puts them in a financial institution. Also, since the receipts show the payment dates, this means that the money will be credited to the account on these dates.

Moreover, if the amount is paid in full for the year, the investor can agree on a discount. Although, usually, the smaller the payments are, the smaller the discount is.

Short-term rental accommodation

This option can bring in more income than renting a house long-term. For instance, if you rent out accommodation to guests for the long-term, then you’ll only have a profit of about seven to eight percent. Whereas, if you rent an apartment for the short-term, you can get almost twice as much profit, up to 11 to 13% per annum.

However, this option is less profitable for those in management establishments and positions because it’s necessary to clean the room for each tenant, etc. But, as mentioned above, the landlord doesn’t pay anything to the management company. What’s more, employees of such companies charge more to tenants of apartments for short-term rental accommodation, specifically, 20% of the cost.

To rent out accommodation for short-term rent, you need special permission, namely, a license. In addition to this, the document needs to be registered and valid for up to one year as well, all at a cost of about $600.

One should be aware though that while rental rates have fallen by 20% since 2019, real estate has become less expensive since 2014.

Choosing the right apartment

Rental accommodation in Dubai is one of the most expensive in the world. For instance, one-room apartments in Dubai Marina can be rented for an average of 30 thousand US dollars per annum (if you rent it out for the long-term, which is for at least one year).

This may seem too expensive to many people, but this is widespread and typical for residents and for those who are used to the local prices and salary.

Renting a house for a short period often requires at least $100 a day.

So, to have regular customers, you need to ensure that you purchase the right apartment.

How can you be sure to find the right apartment? Let us tell you all about it.

The first step is to know how old the house is. Also, since residents are the ones who frequently purchase new houses and apartments, the profitability of this type of housing is higher. In addition, you can also get an installment plan from a construction company. For example, according to the following proposal, you first pay half of the cost for the apartment. Later, you divide the rest of this amount and spread out the payments over a period for the next five years. So in this way, if you rent out a property, you can pay for it with the funds you receive as income from the tenants.

We will assist you to purchase apartments in Dubai

AX Capital is always ready to assist those who are looking to purchase an apartment or house in Dubai. From finding your dream home to registering property, we do it all. What’s more, our company’s employees are friendly and happy to be of service to you ensuring that you have all the support you need. So get in touch with us right now and we’ll assist you in choosing the right property. Also, if you have any questions at all, please don’t hesitate to contact our experts with the number provided on the website.