UAE Property: “My tenant is paying low rent, so I can’t find a buyer.”

UAE Property: "My tenant is paying low rent, so I can't find a buyer."

I previously wrote to you about evicting my renter for renovations, but the case was lost in court.

Due to my intention to sell the property, I have now served my tenant with a new eviction notice.

But the rent my tenant is currently paying is merely Dh190,000 ($51,735) every year. At this price, nobody wants to purchase my property with a tenant already living there.

Given that the going rate for a comparable home is Dh310,000, should I get a rental appraisal done?

I would be unable to collect rent beyond Dh190,000 should I lose the case once more. But I don’t want the tenant to think that I’m against his eviction or that I want him to stay. Thank you, Mr. Dubai.

In the event that you feel the rent being paid by the tenant is far less than what is reasonable, you can obtain a rental valuation letter from the Dubai Land Department for around Dh3,000.

The appraisal will be beneficial, but the rent increase must also comply with Decree 43 of 2013, which sets the most percentage that can be increased for real estate in Dubai.

Although there are end users as well, having a tenant paying less in rent would certainly not help you locate a buyer if they are an investment.

To see if the rent can be raised, I would suggest that you proceed with the rental value letter for the time being.

In the end, you might have to hold out for an owner-occupier to purchase your real estate.

Q: I wish to invest in Dubai real estate as a way to diversify my income. I have some money set aside, but I’m not sure where to put it.

I don’t want to live in the property; I only want to buy it as an investment.

In terms of returns and capital appreciation, would investing in a residential or retail property be more advantageous?

And does a smaller apartment or a villa yield higher returns? Which communities are best to invest in: burgeoning or established?

I also want to investigate the concept of property fractional ownership. Advertisements I’ve been seeing say you can invest as little as Dh500 in real estate in Dubai. Are these models dependable and how do they operate? GK in Dubai

A: Real estate investing can take many different forms, so you’ll need to do your homework. Prior to doing anything else, though, you must determine whether the main reason for buying is capital appreciation or a return on investment. In other words, you must determine whether the property is already constructed and can be rented out for capital appreciation or off-plan.

It is crucial to remember that capital appreciation is only feasible in rising markets, and that property values can decrease as well as increase, much like stock and share values might.

Having said that, prices are now rising during what is referred to be a bull run, but as previously stated, this might alter at any time based on a number of variables.

In terms of investing, the distinction between residential and commercial properties might seem intimidating. Therefore, unless you have a keen sense of business, I would advise sticking to residential properties as both can appreciate in value. It can be more difficult to get it exactly right with a commercial unit.

As far as villas or apartments go, that again depends on what’s popular right now. Villa communities are currently fetching high prices for both sales and rentals. This is because tower block apartments are being constructed at a faster rate than villa/townhouse complexes.

If an apartment building appeals to the vacation home market because of its beach, attractions, and location, it can also fetch a high return on investment.

Particularly in peak season, these asset types are capable of double-digit returns on investment. But be mindful of any potential quiet times during the off-season.

In Dubai, fractional ownership is beginning to gain traction. A few programs exist where you can contribute a few thousand dirhams and join a larger investor community, but keep in mind that the rewards will be proportionate to the amount you invested.

Because of the low entry level, for instance, you will only receive 1% of the capital appreciation or return on investment when the property is sold, if you own only 1% of it.

Returns on investment might range from 8% to 12% annually. A Dh2,000 minimum investment is required.

After that, you will own a portion of a particular property. The best part is that, following the initial holding term, you can increase, retain, or reduce your investment. You have the option.

Mario Volpi has 40 years of experience in the real estate industry, having worked in Dubai and London as head of brokerage at Novvi Properties. The views given are for informational purposes only and do not represent legal advice.

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