Dubai has become an international destination that attracts jet setters, family vacationers, business people, and more. The crown jewel of the Emirates, Dubai offers an incredible range of things to see, do, and enjoy. For real estate owners, Dubai presents an opportunity for high earnings through renting property, but ensuring that you consistently see a high yield can at times be somewhat challenging. Thankfully, we are here to help you with some simple ways to ensure your property has the right appeal and delivers the best ROI.
Make sure you’re calculating ROI correctly
Before we dive into how to keep your property generating high yields, we need to ensure that you’re looking at ROI in the right way. ROI stands for return on investment, and it’s a measure of success for property owners and investors. You need to see a return on your investment – otherwise, you’re just throwing money away. How do you ensure that you’re really making as much money as you should be?
To determine the return that you’re currently seeing on your property, you’ll need to take your net profit or gain, subtract your operating costs, and divide the result by the cost of the property. This will tell you how much of a return you’ve seen during the calculated period. It’s usually simplest to calculate your return annually.
The formula looks like this:
NET ROI = (Gain on Investment – Operating Costs) / Cost of Investment
For individual property owners with a mortgage, you’ll need to add in things like the amount of your down payment and your mortgage payments. Other variables should be accounted for as well, including:
– Service charges
– Repairs and maintenance
– Upgrade costs
So, now that you know how much you’re seeing from your property each year, we need to discuss strategies and tactics to boost your yield. Don’t worry, it’s not that difficult, but there are a few specifics that you’ll need to consider. We’ll discuss all of those below.
Know your audience
First, make sure that you know your audience. Without a good understanding of who is most likely to want to rent your property, you can’t effectively market to that demographic. For instance, an apartment will have a largely different audience of potential renters than a villa or a traditional single-family home. If your property is located in a luxury development, you’ll be marketing to a different demographic than if it is located in a more affordable development.
So, make sure you know who is most likely to want to rent your property before you do anything else. Are you looking to attract GCC or European expats? Are you targeting the jet setter crowd? Is your property a better fit for families with children? Is it geared for active adults or couples?
Market your neighbourhood effectively
You want to put the neighbourhood forward for its qualities that are most attractive to your target tenants. For example, do they care about the quality of the schools? Is public transport important to them? What about shopping? Do your research to find out what is available and attractive in your community to your target tenants and let them know about it. You should also consider the age of the area. Newer areas like JVC or Meydan may include warranties on property-related items, but older areas like JBR may be more established and might carry more name recognition and greater appeal with your audience. Established areas also usually have developed infrastructure and better facilities so let your target tenants know why they should consider your neighborhood when renting a property. Of course, if you are working with a real estate agent who is an expert in the area, they will already have the right information to market your property and its area well for its ideal audience.
Know your ideal rental period
A lot of your yield will be determined by your rental period. Are you serving the short-term rental market? Short-term rents tend to yield higher returns but you’ll have peaks and troughs that correspond with tourist travel trends. Often, you can set your rental rates higher during peak season and lower during the off-season. This will help you offset any periods when the property is not rented. Moreover, short term rentals do offer you the flexibility to use the property yourself throughout the year.
However, if you want to earn a steady return on your investment, longer-term rentals may be the better option. Most commonly, properties are rented by the year, but you can get creative. Some tenants might like the option of renewing every six months. Others could appreciate longer rental contracts that extend to three or even five years.
Again, determining the right rental duration means that you need to have a good idea of what your ideal renter wants and expects. It also means that you should be flexible – a long-term rental contract for a lower rate reduces the risk that you might not see any renters during off-peak season.
Invest in your property
Perhaps the single most important thing you can do to ensure that you’re attracting renters who will be happy to rent your property is to invest in the property itself. You must create the right environment for your audience, so establish who you’re marketing to first, and then consider making important upgrades. What sort of upgrades should you consider? Again, it’s going to vary depending on your ideal renter, but if you want to generate the highest yield, you need to focus on the most in-demand renovations. These can include the following:
Carpet is fine for properties where affordability is what you’re going for, but not in higher-end properties and neighborhoods. If you’re focusing on the luxury segment, you should also avoid floorings like vinyl or wood-look laminate. Wood flooring can be an interesting option that helps your property stand out from the rest, but tile and natural stone are usually the better options for truly luxurious properties that command the highest rental prices.
Dubai rentals are something of a gamble when it comes to furnished or unfurnished homes. While an argument can be made for both, furnished properties can command slightly higher rents, particularly in specific market segments. For instance, if you’re catering to travelling executives who will be in the area for three or six months and then returning home, a furnished apartment, town home, condo, or villa is a big selling point. However, many facilities in Dubai will have furnishings of their own and it is the norm for villas to be unfurnished. Make sure your furniture is appealing too, as a property with poor furnishings is much less likely to attract tenants. However, remember that replacing the furniture every few years can add to your operating costs and decrease your profits.
Great appliances can be a big plus for tenants, but don’t spend big on brand names or luxury marble countertops if you want to maximize your rental return. Look for appliances with good warranty coverage to increase your overall ROI.
Touch up your property between tenancies. Make sure your property looks great for viewings. The most important considerations include the following:
– Fresh paint throughout
– Clean thoroughly
– Service the air conditioning
– Clean the grout in bathrooms and kitchens
– Replace any broken items
Pay attention to curb appeal
The interior of your rental property is only part of the equation. For properties with grounds, it’s also important to leave a great impression from the outside. Many renters come to Dubai for the sunshine and warm climate, so investing in landscaping features that maximize the tropical aesthetic can yield major returns. Think about palms and other foliage that will grow well in Dubai’s climate, as well as outdoor areas such as patios or porches where renters can enjoy the outdoors. A little artificial turf and a few strategically placed plastic plants can give a positive first impression even with no DEWA between tenancies.
Really maximising your property’s value to tenants requires a lot of knowledge, particularly when it comes to your ideal tenants and what they want from a Dubai rental property. Based on that information, you can upgrade your property to be as attractive as possible and leverage the unique benefits and advantages offered by the local area to attract tenants throughout the year. Ultimately, ensuring that your rental property delivers the highest yield possible can be complicated but there are many steps you can take yourself to give it a boost! Our agents are very experienced when it comes to knowing the area, your audience and how to market your property so they will be sure to give you a helping hand with the process.
If you’d like to get started with maximising the value of your rental property in Dubai, visit our rent my property page or give us a call on 04 409 0995.