Hey everyone, welcome back to another video. Today, we’re going to discuss finding the most profitable investment in Dubai. We’ll talk about rental yield and appreciation because many people ask me where they can find the best rents and properties that will appreciate. Currently, I’m in Business Bay, and I wanted to stop here to talk about this building in particular.
Understanding Key Investment Metrics
When looking for a profitable investment, I consider a few things: the price per square foot and the rental yield. Once we know the price per square foot, we can calculate the property’s price. Many people get confused when looking online at the listing price versus the transacting price.
Price Per Square Foot
The price per square foot gives you an idea of the property’s value relative to its size. It helps you compare different properties and make an informed decision.
Rental Yield
Rental yield is the annual rental income divided by the property’s purchase price. It helps you understand the potential return on your investment.
Example: Paramount Tower
Let’s use the Paramount Tower as an example because it’s a high-transactional building. It’s considered quite high-end, with amazing facilities, and it’s a hotel brand as well as a residential complex.
Listing vs. Transactional Prices
If you look for a one-bedroom in this building, the listing price might be around 1.7 million AED. However, if you look at completed rental transactions, they might be around 110,000 to 115,000 AED for a one-bedroom, which is a considerable amount of rent.
Calculating ROI
If you buy at the listing price, taking 115,000 AED as an example for rental, you’re paying 1.7 million plus fees. Your ROI would be considerably lower than desired, somewhere between 4% and 5%.
Structuring a Profitable Investment in Dubai
Consider that the listing price is 1.7 million, but transaction prices are around 1.4 or 1.5 million. This shows that although people ask for higher prices, it’s often due to brokers listing properties at inflated prices. The actual transactional values are not rising proportionately. If you were to pick up a one-bedroom for 1.4 million and rent it out for 115,000 AED, your ROI would be pretty good, around 7%, and potentially more for short-term rentals.
Steps to Finding a Profitable Investment in Dubai
1. Choose the Right Area
First, establish which area you’re going to buy in. Dubai has many different areas, each with its unique advantages and disadvantages.
2. Do Your Due Diligence
If you’re not using a professional and want to do it on your own, that’s fine, but you need to do your due diligence. Compare transactional prices with listing prices to have leverage during negotiation.
3. Check Live Rental Transactions
You also need to see live rental transactions because brokers might promise you high returns, but unless you see actual rental transactions, those promises might be unrealistic.
4. Verify Facts and Data
Go online and check the real facts and data of transactional records, which are all available in Dubai. Only then can you consider it a profitable investment.
Real-Life Example: SLS Dubai
Now, you might notice I’m standing at a construction site. This is the SLS, an absolutely beautiful building. In terms of appreciation, this place has done fantastically.
Potential Risks of Construction
However, there’s something you need to know. If there’s a plot of land near your building, there’s a good chance something will be built there. For example, next to the SLS, there’s a plot where another high-rise might be built, affecting the views and causing long-term construction noise.
Impact on Property Value
If you buy a property on a lower floor with a currently unobstructed view, within the next 2 or 3 years, a new building might obstruct your view and create a lot of noise. This affects the property’s potential appreciation.
Importance of Local Knowledge
That’s why it’s crucial to have someone who understands the city’s dynamics when buying a property in Dubai. Even if there are no building permits now, there’s a good chance something will be built soon due to the fast-paced development in Dubai.
Factors to Consider
To make a Profitable Investment in Dubai, consider the location, the developer’s reputation, the views, and verify the rental yield through actual listings and transactional history.
Conclusion
So, that’s how I would find and structure a profitable investment in Dubai. I hope you found this video useful. See you in the next one, and feel free to book a call if you need more information.
FAQs
1. What is the average rental yield in Dubai?
The average rental yield in Dubai varies by area but typically ranges from 5% to 8%.
2. How can I verify the transactional prices in Dubai?
You can check the Dubai Land Department’s website for verified transactional prices.
3. Is it better to buy off-plan or completed properties in Dubai?
Both options have their pros and cons. Off-plan properties might offer lower prices, while completed properties provide immediate rental income.
4. How do I know if a property will appreciate in value?
Consider factors like location, developer reputation, upcoming infrastructure projects, and market trends.
5. Can I invest in Dubai real estate if I’m not a resident?
Yes, non-residents can invest in Dubai real estate. However, it’s advisable to work with a professional to navigate the legal and financial aspects.
