TOP 5 Investment Mistakes: For Potential Buyers of Real Estate in the UAE

8:51 pm  |  19.04.2024

If we look at the various failures associated with investment in real estate in Dubai, there is a question. Are you planning to buy an investment property? Read this article, it will help you not to lose money and make money on your investments.

Lack of Strategy

Often investors want to buy an apartment, rent it out, sometimes come for holidays, and then resell it at a profit. This is a fundamentally wrong approach since this request contains 3 completely different tasks:

  • Investing free capital with dividend yield.
  • Speculative investments with a fast transaction cycle.
  • Buying a property for living.

In most cases, all these factors do not coincide in one object.

For example, you want to live by the sea, but the property, which has potential profit from resale, is located in a family residential area 10 km from the shore.

Trying to combine everything in one, investors buy a property where they don’t like living, and the profitability is low, and they can only resell it at a loss.

Or you want to rent out an apartment and get an ROI of more than 5%, but you don’t want to buy an old apartment at a good price, from which you can squeeze out 10% of the annual return.

READ: How to Invest in UAE Commercial Real Estate: About Profitable Deals

Buying a New Building without Studying the Secondary Real Estate Market

Before entering any project, take the time to check the prices for similar projects in the same location. Very often the price of new buildings will be higher than the secondary one. Now this is the situation in JVC, where a good finished one-room apartment on the secondary market costs $200,000, and developers have prices higher by $50,000 – $100,000.

The price of new buildings is dictated by the developer’s desire to make money, while the price of a resale property is the price dictated by the market based on supply and demand.

Sometimes there is nothing wrong with the developer’s price being higher than the market. Developers may offer good installment plans and high-quality projects that surpass those of their competitors, but in many cases, they are simply capitalizing on the high demand for their services to earn more money.”\

In this case, only an experienced broker who knows the market well works not only with new real estate but also secondary market, and understands the quality level of different developers, will help you.

Installment in Short Terms and Hope for Resale

In 2020 – 2022, the market had the following trends. Having paid 30-50% of the apartment, it was possible to resell it in a year or two with a good profit, earning 50-100% on the invested capital. Nowadays, you can witness situations where people are simply happy to get their money back. Developers take away apartments from debtors, impose large fines, and investors cannot sell the apartment even at a large discount.

READ: Labor Rights of Workers in the UAE: Detailed Analysis

Apartment on the secondary market can be sold for a year or two. The investor needs to understand how he will ensure installment payments during this time. If this understanding and stable sources of income do not exist, there is no need to go into debt.

We advise you to invest in real estate for the long term and sell not when you need to deal with the next payment, but when there is a suitable market situation.

Negotiating with Only One Agent

Every realtor will praise his offer, but it is better to have several opinions and arguments than to blindly follow some popular blogger who has just come to the Dubai market to earn extra money from subscribers. Talk to 3-4 different brokers, consider the offer, and choose the one who shows an adequate picture of the market and can confirm their expertise.

This statement is true only at the initial stage of decision-making. After starting work, agents should be changed only as a last resort. An agent is your future partner, and he will solve many problems related to your real estate: paperwork, leasing, negotiations with the management company, listing, resale, etc. If you have a bad relationship with your agent, keep in mind that finding a new one to take care of post-sales issues will be very difficult.

Blind Trust in a Real Estate Agent

There’s a reason people don’t like realtors. Commissions for the sale of any overvalued illiquid property are high, and as soon as you conclude a deal, the agent will forget about you, take his commission from the developer, and you will be left alone with the problems that have arisen.

READ: The Rules for Apartment Redevelopment Are Not So Simple: Information for Dubai Studio Owners 

To prevent this from happening, you need to choose your agent carefully. How to choose an agent is the topic of a separate article. It is recommended that you ask the broker to provide their license and inquire about their experience with investor cases. It is also important to listen to the broker’s strategy for exiting the property and whether they have experience in selling secondary properties or renting out apartments.

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