The United Arab Emirates attracts people from all over the world. Dubai is one of the most popular destinations among tourists and those planning to move to permanent residence. Both the regular and luxury segments are in demand. To a large extent, people are attracted by the climate that allows them to enjoy summer almost all year round. Stable economy is the factor that matters too. Buy-to-let property investment generates returns. However, the property value and location affect the period it will take.
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- Things homeowners need to know before renting out
- Benefits of renting out
- Rental rates
- Procedure for renting out luxury real estate
- Paying real estate rent in Dubai
- Rental paperwork and requirements for tenants
- Dubai-Luxury.Property helps choose the best rental property
There are no property or rental income taxes in the UAE. This allows owners to make money without paying tax on rental income froma residential property. In addition, no license is required for long-term rentals.
If you are planning short-term rentals, then you need a permit for commercial activity as the owner of the hotel or apartment. To do so, you can use property management services by respective licensed companies. This is a wonderful solution if owners live outside the country in which they own the property.
Foreign residents comprise about 90 percent of the population in Dubai. Some come for vacation, others for work. Therefore, it is definitely worth renting out. The advantages include:
- Solid returns. Several factors weigh on the profit. But experts estimate that rental property ROI is at least 5 percent. Demand and returns depend on the property proximity to the coast and the prestige of its location.
- High occupancy rates. The United Arab Emirates has a desert climate, with very mild winters and hot and sunny summers, resulting in year-round tourism. The occupancy rate is always high, which allows you to get a stable income stream.
- Benefits of using mortgage lending. Rental income allows you to pay the loan without additional investment.
- Possibility to manage your rental property remotely. Some people cannot stay in the UAE permanently. So, companies operating remotely can take over real estate management in Dubai. Here, the homeowner does not make any effort either to maintain the property or to find tenants.
Even though homeowners pay no property taxes, they have to pay utility bills and annual services fees. If the apartments are in a residential building, the charges may include the maintenance of the pool, sports complex, playground, and a landscaped garden. The amount is debited from the property owner's account automatically in advance for the year ahead. For commercial real estate, the rate is higher, but the process is the same.
Rental rates are negotiable and are set out in a rental contract. There is no upper limit. The pricing policy is not regulated in the UAE, although there are certain features of the transaction. When concluding a rental agreement, the owner does not have the right to raise the price when the contract is renewed. The price can be revised only in two years. The average rental rates set by the respective Dubai authority should be taken as a basis.
A real estate agency charges a homeowner a commission for finding a renter. The commission size varies depending on the property value and the demand. In most cases, the amount is 5 percent of the total annual rental price.
Additional costs include:
- utility bills for electricity, water, centralized air conditioning
- an annual maintenance fee. It is not paid only where the property is not connected to a centralized water supply and electricity system. However, it is impossible to use such a property.
Homeowners can choose potential renters themselves or delegate this to a real estate agency. The renter signs a contract, which states the rental term, cost, conditions, and the parties’ responsibilities. Long-term rents should be paid in advance. It can be both cash and cashless settlements. A security deposit is also included in the expenses amount. Usually, it does not exceed 5 percent of the annual rental amount.
Advance payments can be issued by multiple cheques. Meanwhile, the cheques issue date is put according to the reporting period, i.e. later than the very fact of the payment. For a year, it can be divided by quarters or by each month, so the number of checks will be 4 or 12, respectively. Circulation of cheques is not regulated in Dubai, however, issuing a cheque with insufficient funds is an offence. Therefore, the calculations are as transparent as possible, and there is no reason for landlords to mislead tenants.
Homes in the UAE, including the luxury ones, can be rented by any person with the status of a resident. The rental agreement is concluded either with the UAE citizen, or with a citizen of a country that is part of the Gulf Cooperation Council. Expats must have a valid residence visa. This makes it possible to rent out a luxury home to almost any citizen of the world, since it is impossible to stay in the UAE without a visa.
It is obligatory for the tenant or landlord to register their tenancy contracts with Dubai with the Real Estate Regulatory Agency (RERA). All rental contracts can be registered through the online portal.
It requires only basic information:
- information about the property
- information about the participants in the transaction, a tenant also must provide a residence visa.
There is no liability for not registering a rental agreement. However, its absence automatically deprives parties of the right to go to court if parties have any disagreements.
Buying a property in another country can be a daunting business. There are many things to consider, from property location to legal issues. If you plan to buy a rental property, the rental process can also get complicated. Fortunately, we will take care of everything related to purchasing a rental property.
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