Gainesville, FL · Member since 2018 · 6 posts · 1 vote
Good morning all,
I was talking to a friend today who lives in Dubai. This friend informed me of an investment opportunity in Dubai renting out flats (multi room apartments) by the room. I was told the investor pays to lease out the entire flat for 6-12 months and then sub-leases the individual rooms for a profit. Anybody have experience doing this or experience in buying flats and renting them out this way?
Jason Bierman
Rental Property Investor · Sandefjord, Norway · Member since 2015 · 202 posts · 87 votes
8y
@Tiffany Griggs as far as I’m aware, this practice is not legal, but not enforced. This could be wrong so don’t take this as fact until it’s been verified. At the very least, make sure to get an ok from the landlord if you are leasing from someone else. Dubai has a need for affordable housing, so the demand is there. I have done multiple housing occupants before in Norway and it is very profitable but it requires more management and you will have more tenant issues and vacancies.
We will discuss this issue further on Friday’s meetup.
@Sam Josh the exchange risk is not something I would be concerned about. The UAE Dirham is pegged to the dollar so these currencies move together.
I find that there are other risks related to investing in Dubai however, such as major Developments happening all over the city leaving the investor clueless about supply and demand in the future. Which directly impacts rents and property value. Another thing I’m looking at is the brand new tax authority that recently introduced VAT on many goods. Only a matter of time before your rental income gets capital gains tax I think.
If you are purchasing a property in Dubai, also be aware of the 4% stamp duty fee.
I know several people that invest successfully in Dubai and it might be an ideal market for many investors, but it’s not for me. I like transparency and slow moving market prices so I can predict my investments to a higher degree of certainty.
Gainesville, FL · Member since 2018 · 6 posts · 1 vote
8y
It’s going on all over Dubai from my understanding. Subleasing mostly to immigrant workers who bring 3-4 members for their family to work in Dubai and live in same room. I know a 20 sq meter room with bath, close to Mall of Emirates is renting for 4K AED.
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
I wonder how things net out after you account for all the transaction and property management cost each month plus the foreign exchange risk you carry. Not to mention any legal issues you may run into and how the laws of the land can help or hurt you.
Rental Property Investor · Sandefjord, Norway · Member since 2015 · 202 posts · 87 votes
8y
@Tiffany Griggs as far as I’m aware, this practice is not legal, but not enforced. This could be wrong so don’t take this as fact until it’s been verified. At the very least, make sure to get an ok from the landlord if you are leasing from someone else. Dubai has a need for affordable housing, so the demand is there. I have done multiple housing occupants before in Norway and it is very profitable but it requires more management and you will have more tenant issues and vacancies.
We will discuss this issue further on Friday’s meetup.
@Sam Josh the exchange risk is not something I would be concerned about. The UAE Dirham is pegged to the dollar so these currencies move together.
I find that there are other risks related to investing in Dubai however, such as major Developments happening all over the city leaving the investor clueless about supply and demand in the future. Which directly impacts rents and property value. Another thing I’m looking at is the brand new tax authority that recently introduced VAT on many goods. Only a matter of time before your rental income gets capital gains tax I think.
If you are purchasing a property in Dubai, also be aware of the 4% stamp duty fee.
I know several people that invest successfully in Dubai and it might be an ideal market for many investors, but it’s not for me. I like transparency and slow moving market prices so I can predict my investments to a higher degree of certainty.
Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes
8y
@Morgan Nilsen, That is a great insight, thank you. I agree, that the level of transparency is very important especially to western investors who are used to operating and investing in more organized markets. Definitely not an option for me either but always interesting to learn.
Rental Property Investor · Dubai, UAE · Member since 2018 · 16 posts · 5 votes
8y
@Sam Josh I have heard of this practices. According to my information this is happening in low-end parts of the city and it is practiced mostly by specific group (understand nationalities) for the specific groups.
What I mean is, it is not western style of thinking or doing business and the investor has insides and connections into the communities who he rents the apt to.
There are better ways to make good passive income by investing in shot holiday rentals here in dubai. This market never has a downtime as there are always tourists visiting Dubai and searching for luxury accommodation