Here in the UK, an annual rental return of 5% is the norm, 8% can be considered a miracle.  So when developers offer 8% return guaranteed for three years you can see why investors interests are peaked.  Add in the capital appreciation accrued during construction and this must be the most solid, best value property investment around.  Especially as it means that an investor doesn’t have to do any work.  Or is it.

 In Dubai you can comfortably expect a return of 12% for long term residential leases.  Rates can vary from 10 to up to 15 per cent.  Renting on a short term basis to the holiday market can easily see returns of 18 to up to 25% per annum.   Perhaps some investors would rather sacrifice a percent or two of return if it means not having to go through the daunting task of renting out the property themselves.

However bear in mind that the guaranteed rental schemes are calculated on the price paid not the value of the apartment when complete which is what rental rates are estimated at.  An off plan apartment costing £100k when purchased will probably be worth in the region of 150K 2 years down the line when it is complete.  So on the guaranteed rental scheme of 8 percent, an investor makes 8% of 100k equals £8k per year in rent.  However, by renting themselves or using a letting agent, even at the most conservative estimate of 10%  an investor makes 10% of 150k equalling £15k.  If one lets to the holiday market instead of the long term market a conservative 16% will still gain 16% of 150k, a whopping 24k, 3 times more than gained by the guaranteed scheme.

If the task of renting out the property yourself seems daunting one can simply utilise the services of a good letting agent/property management company and still come out well ahead of the rental schemes.

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