Dubai. guaranteed Rental.Is it true?

[ukyorkie]

Hi,

Looking at these property in Dubai/Ajman at property shows, it's tempting me to buy a property. It also says assured rental for 8_10 years of 15%. Has anyone already started getting this kind of guaranteed rental income. Also if the promoters give their RERA registration details, how can we check if its true?

Please help me. Planning to buy a property.

UKyorkie.

[richie83]

Originally Posted by ukyorkie

Hi,

Looking at these property in Dubai/Ajman at property shows, it's tempting me to buy a property. It also says assured rental for 8_10 years of 15%. Has anyone already started getting this kind of guaranteed rental income. Also if the promoters give their RERA registration details, how can we check if its true?

Please help me. Planning to buy a property.

UKyorkie.

you can check out the RERA website for registered developers/projects.

http://rpdubai.ae/rpdubai/home.jsp?lang=0

[JimmyM]

HI,
I'm very new to property investing. Currently I'm in Iraq and I have been talking to my interpreter whos brother is currently investing in UAE. It sparked my interest but he does not know too much about it so I'm looking for any information about the area. ie. expected prices, is this a good area for a new investor and things like that.

Any help would be greatly appreciated.

Thanks,
Jimmy

[sheray]

Hi Jimmy

Depends what is your risk appetite. Some areas are guaranteed value appreciation. Like business bay, palms , waterfront. But they are little expensive. But with good returns also. Again i guess depends on you.

Are you looking at stable monthly income? Where buy the property then rent it. For example today in international city you buy flat for 650k and easily rent
for 65k yearly. And for Marina sector you can buy for 2.2 million and rent for 200k plus easily.

Incase you want to buy property and sell it. I advise you to buy prelaunch properties and sell at premium. People are making millions like that. But it’s little risky. Would you be able to withstand the payments if it does not sell in short time?

Some people say there is some concirn about 2010 property re evaluation.
When many units would be ready. would rental price go down. Well i don’t know. i don’t think so it would as Dubai holds great future.
I believe in Dubai.

Regards
Sheray
Cheers

Originally Posted by JimmyM

HI,
I'm very new to property investing. Currently I'm in Iraq and I have been talking to my interpreter whos brother is currently investing in UAE. It sparked my interest but he does not know too much about it so I'm looking for any information about the area. ie. expected prices, is this a good area for a new investor and things like that.

Any help would be greatly appreciated.

Thanks,
Jimmy

7

[really_true]

i would expect 10 % rental at least on my current properties atleast or ill hold them even for 6 months empty . Just to cover my costs according to present demand scenario

[U.A.E.1973]

Hi there UKYorkie,

I would be cautious when people are quoting these types of "guarenteed" returns to you.
The fact is if you buying off plan say for a development 2 years till completion does ANYONE have the foresight to predict the state of the rental market at that stage. We can make informed approximation's but again unless these companies give you some kind of financial guarantee (ie renumeration of lost rent if not upheld) most of these gurantee's are nothing more than a sales tool used by developers.

Regards
Paul

[stylinexpat]

Be very careful on the rental returns as many calculate current rental rates and do this before deducting the community and maintenance fees for the unit. Many developers are not telling the buyers about the community fees and only mention maintenance fees to the buyers. Some community fees along with the maintenance fees are around 40-50K per year around the Burj Area So if they tell you that you can expect 150K per year in rental then be sure to see if this rental return is before or after you pay the community fees along with the maintenance fees. When hey hand you the unit they make you pay the maintenance fees up front too

Dubai may be tax free but these community fees and maintenance fees can be worse then taxes. In California Property Taxes are about 1.8% (take or give) which is not cheap and if you are looking at something near the Burj you can basically nearly double to triple that from the community and maintenance fees

[kk1974]

I haven't seen a rental guarantee where the actual net amount of money you get will cover your mortgage payments, what to say of putting you in positive cash flow.

The rental guarantees are marketing tool to attract the buyers or to differentiate from other similar projects.

The facts show that most of people who can do some basic maths don't take rental guarantee.

There are few ways that developers will arrange for that guarantee:

1. By bringing property management company of a hotel operator on board
This is the most genuine guarantee, but you have to have on thing in mind - they will only take a risk to give such a guarantee if there is a big margin left for them. That means that you will eventually be putting your self out of pocket, you could be renting it your self for (much) more then the guarantee is. If you are in he place like Dubai where the rents are rising very rapidly, it probably wouldn't be a good idea. If the property is connected with the hotel, then is is quite usual that the guarantee will be for at least 5 yrs. the reason is that in principle for the first year or two the operator will be loosing money on it (unless you are at the great location), but then it will pick up and they will make good money on the next 3 yrs. In any case, they will not give it unless there is a good financial safety buffer.

2. By building in that amount in the price of the unit
This the most common and the most deceiving guarantee. The developer will come with the end price for the project, and then will ad some percentage on the top as the rental guarantee. It doesn't at all reflect the facts on how rentable this property actually is.

3. Insurance
The developer will get some insurance company to give guarantee. This is very similar to the first one, the insurance company will perform all the due diligence and will only give it if their rental projections are around 50% over the guarantee, so they can have some safety buffer as well.

The first step when you see that kind of guarantee is to ask the developer for the guarantee document, and unless all the details are there, find who is issuing the guarantee.

If the guarantee is by a property management company or an insurance company, then you know that is a good property and that you should NOT take the guarantee because you can probably make 50% more by renting it your self. But it indicates that the property is a good investment.

If it's by the developer, then you can totally disregard it and due your own due diligence, and then make a decision after you have assessed the rental potential. The best way of doing it is to go to 2 local letting agents. They will give you the best picture.

And all of this is only if the numbers stuck AFTER getting a NET return figure by deducting all the charges etc.

8-10 yrs of 15% guarantee in Ajman sounds crazy, and little digging will soon reveal some interesting facts.