Ask The Agent

Mohanad Alwadiya

CEO, Harbor Real Estate

Can you please share some details on how rental increases are determined in Dubai?

Your landlord needs to give you a notice of increase at least 90 days prior to contract expiry. You should familiarise yourself with Law No. 43 which introduced the following restrictions (summarized) with regard to legally allowable rental increases: There should not be any rent increase if the rent for the real estate alit is no more than 10 percent below the average rent that a similar property commands within a neighborhood; The annual rent increases can range from 5 up to 20 percent according to how much the current rent s less than the market average, The market average rates are to be determined by the RERA rental index. The implementation of Law No. 43 is necessary to safeguard consumer interest, the overall industry and the economy at large from unjustifiable rental increases on existing rental contracts.

What documents do I need to provide so I can arrange for an agency to market and sell my villa? Give a proof of identity, usually a passport and/or Emirates ID, and a copy of the original sales and purchase agreement to be verified with the Dubai Land Department (DLD). If the property is leased, provide details of the lease agreement including the status of outstanding payments and any information pertaining to the history with the tenant. Also, provide the status of payments of service and owners association charges. The agency will sit and consult with you as to what your requirements are and prepare for you a letter of engagement which will contain the details of what you require from the agency and what fees have been mutually agreed upon. If you are located overseas and like an agency to represent you, you need to provide a power of attorney detailing the extent to which you would like the agency’s representation in the various facets of marketing and selling your property.

What property features should I prioritise when listing my apartment for sale?

If you have a listing agent or are already working with a realtor, they would know exactly what characteristics of your property should be highlighted to make it stand out from the rest and be highly marketable. But the most important features that will make or break your goal to sell your apartment include the fact that it must be competitively priced or paced just right for the market, its location or proximity to landmarks and important infrastructure such as transportation links and commercial districts, size, building facilities and community amenities, duality and current physical condition, whether or not it is being handled by a professional property management firm, or fully paid or financed. Also, make sure you mention any improvements done, and if it has special features such as a nice view, balcony, closed kitchen or extra storage.

I have just joined the market as a property investor. Can you please help me in determining an optimal rental rate to attract may first tenant? The simplest way to determine a good rental rate for your property is the sales comparison approach (SCA) which relies on identifying a factor that is homogenous to similar properties. For example, an apartment similar to your planned investment which attracts a monthly rental rate of Dh7 per square foot can indicate the likely cash flow you expect: however, as property managers, we do not advocate this approach. A more comprehensive method is the capital asset pricing model (CAPM) which comprehends levels of risk and opportunity cost as it applies to your investment. It identifies your potential return on investment derived from capital appreciation in addition to net rental income and compares it to other investments that you may be considering. This enables smarter investment decisions and, therefore, is the one that we use as standard procedure.

Question of the Week

With many attractive off-plan offers today, I am tempted to buy an off-plan property. But how do I know if I am buying one with real potential?

Whether you are buying ready or off-plan property, market fundamentals still apply. Make sure that an off-plan purchase is consistent with your property portfolio strategy. Location can never be disregarded. Considerations regarding how close the project is to commercial, educational and leisure hubs, medical and health facilities, public infrastructure, popular and established communities, and the manifold views one can enjoy all add up to the desirability of a property’s location. The asset type is also important. What type of asset will be in demand in the future: affordable apartments, townhouses or villas? Be smart about the “product” that you buy. Look for certain property types in locations which you believe will be keenly sought in the future. You need to do some careful financial analysis which will enable you to determine the value of the discount that you anticipate receiving by buying off-plan. Easy payment plans can ensure you limit your capital exposure before completion. Also, you need to be conversant with financial concepts such as net present value (NPV) and internal rate of return (IRR) to guide you in the decision-making process when assessing your alternatives.

Ask the agent

ask the agent

ask the agent

By Mohanad Alwadiya
CEO, Harbor Real Estate
Advisor & Instructor, Dubai Real Estate Institute (DREI)
Published in Freehold – Gulf News
Dated: 9 April, 2016

Question: We’re a successful startup company and currently looking for office space with the best value? Should we rent or buy?

Congratulations on your successful venture! AT this stage, however, you would still be looking at keeping costs to a minimum until such time you become fully established in the market.

As you may very well know, the old cliché of “location, location, location” is critical. It’s all about proximity and the convenience and prestige that a well-chosen location can bring to your potential customers, staff and business associates. Currently, you will find great value, very affordable and well-constructed office space in Business Bay, which will cost you anywhere between AED 70 and AED 120 per square foot (higher for fully fitted space), but it will be pointless if the location is a hindrance to conducting your business. You need to choose your preferred location first, and work from there.

Think about purchasing your premises. It’s in your best interest to do a complete analysis to see if this option will work for you. We at Harbor have always advocated that, cash flow permitting, businesses acquire their own premises. If you are a business committed to operating long term in Dubai, it makes sense to own your office space, particularly if it is a well-negotiated purchase. There is no tax advantage in leasing in Dubai and, as long as your office space is appreciating, your balance sheet will look a whole lot better and grow stronger over time.

If you decide to lease your premises, try to get the best deal possible and lock it in for at least 3 to 5 years. Lease rates in Dubai will be on the increase, going forward, so make sure you take advantage of current rates.

Question: I came to the UAE with an objective to join real estate as I have several years of experience overseas under my sleeve. Can you advise me on how I can land myself a realtor’s job in a reputable company?

It is good to know that you plan on joining the local real estate sector with some experience. Nevertheless, each real estate environment is unique so I suggest you join a company that will enable you to fast track your learning.

Look for a full service company so you gain a greater understanding of what the UAE real estate business is all about, beyond the buying and selling of property.

The company you choose should value you as an individual and remunerate you appropriately. But they should also be prepared to invest in you by providing the types of learning experiences that come with formal training (mandatory to become a licensed agent in Dubai), and also in-house training. This may involve being assigned a mentor, be placed on an internal rotation scheme to enable a broader knowledge of the business to be developed or be given special projects that will facilitate your learning by encouraging you to seek answers and solutions yourself to enable you to complete the task at hand. Those companies that invest in hi-potential people, typically are those that succeed.

Finally, surround yourself with people who are passionate about the industry because passion is contagious, and it’s what sets the successful ones apart.

Question: How do I know for sure my property consultant is giving me the right advice?

In any relationship, whether it be personal or professional, trust is key.  So if you have a nagging feeling that your property consultant is not representing your interests, have a meeting with him and request a justification and rationale for his recommendations and advice. To ascertain whether his justifications and rationale make sense, you should do some research yourself so you can verify the veracity of his claims and assertions. If you remain doubtful, seek an alternative as there are plenty of property consultants out there hungry for your business.

Getting a new consultant is not always the solution and you may want to rethink your criteria in choosing one so you develop rapport and trust in the long run.

Look for experience and passion – people who really enjoy what they are doing. The best way to find such professionals is to ask around. Seek out friends or peers who have recently conducted a real estate transaction and ask. Seek out the positive stories as well as the negative ones.

Find a consultant or agency that exhibits a breadth and depth of industry knowledge and expertise. When conducting initial meetings, make sure you assess how much the agency or its brokers actually know.

Look for longevity. Those that survived the recent recession must be good!

Look for a strong network of corporate, government and industry contacts. The consultant or agency that has good relationships with key industry stakeholders such as the major developers or authorities such as the Dubai Land Department, RERA, DEWA or Economic Department will be able to operate more efficiently and effectively.

And finally, look for an agency that has received some form of industry or peer recognition as they lend credence to the name and reputation of the realtor in question.

Question: We purchased a villa in Dubai back in 2009. However, instead of continuing to rent it out, my husband and I have decided that we want to go ahead and sell our property soon. How do we find a good seller’s agent?

There is a large number of licensed real estate brokers in Dubai, and the whole of UAE of course. But finding the right agent to sell your property is something you need to pay close attention to because getting the best person to represent you and your property out there is crucial to how quickly you can make a sale without compromising on your agreed-upon expectations.

Factors such as years of experience in the UAE property market, track record of success, an in-depth understanding of market trends, area expertise (especially in the neighborhood where your unit is located), client testimonials, level of commitment, passion, dedication, professionalism and honesty are important, not to mention the fact that he/she should also be a duly licensed RERA-certified real estate broker. Before committing to any realtor, make a list of all the questions you want answered first and see how they respond as doing so will help you gauge whether or not giving him/her your business is the best thing for you and your husband, and your property.

Question of the Week: I have been looking at Dubai (or the UAE) as a possible part-time destination during my retirement. Hence, I would like to purchase a property here, rent it out initially and later use the property myself during my retirement. Do you have any advice?

Including property acquisition as a part of your retirement plan is a good move, but you must choose wisely. The key to choosing your property is determining the right balance between the amount to be invested, the returns you require in the interim period before you retire, and what type of property you want to enjoy during your retirement. The good news here is your tastes are likely to be shared by your tenants in the interim so renting it out should not be a problem.

Quality properties are available starting from AED 700 per square foot; however if you want to purchase in the prime areas of Dubai, either in Downtown Dubai, or somewhere close to the beach, or with a golf course view, you can easily double or triple that amount.

You can expect a minimum net rental return of around 5 percent to 7 percent which, given the cheap financing available at the moment, makes for a solid investment in preparation for outright ownership and retirement. Be careful with fluctuations in exchange rates.

Factors such as location, the developer’s record and reputation, quality, service fees, building management and the existence of a functioning owner’s association will require a reputable local real estate professional to help you minimize any risks with your investment, whether during the procurement stage or managing your investment until you are ready to assume occupancy once you will have retired.