Buying a Apartments in Dubai rental property can be a good option when it comes to investment strategies. But before taking action, it is important to be well inform about your future obligations.
What are the advantages and obligations of an owner of a rental property?
Some advantages:
- You could have a return on your real estate in investment in Apartments in Dubai the first year. if the sum of the monthly rents is more than your expenses and your mortgage payments.
- You could pay less tax on your income by deducting several expenses relate to the management and maintenance of the rental property.
- Your rental property could increase in value over the years. According to a recent study of the Canadian real estate market by the Institute for Socio-Economic Research and Information, a conservative estimate of real estate revenues is investments, purchase in the early 2000s, today shows an average increase in profitability between 24% and 30% depending on the geographic region.
Some obligations:
- Managing tenants: you have to love people, be comfortable with conflict management and have time to devote to your tenants. You could hire a building manager. But this will decrease your profits.
- Income and risk management: You will also need to manage cash inflows and outflows well to deal with unforeseen events. Such as urgent repairs or tenants who do not pay their rent. In addition, to deal with the unforeseen, it is advisable to provide a security fund of a minimum of 3.5% of the purchase price of the Apartments in Dubai, in the form of easily accessible liquidity using a savings account or a margin. credit .
- Repairs and maintenance: Being skill at manual work is another factor for success. Because if we have to mandate a specialize worker each time there is a breakdown, it becomes expensive.
- A good knowledge of the laws: You should also be well aware of the rights and responsibilities of landlords and tenants in your province or territory.
How to finance the purchase of a rental property?
For the purchase of a Apartments in Dubai property, the process is the same as for the purchase of a residence or a condo. whether you are thinking of living in or renting it. You will need to put down a down payment and possibly take out a mortgage. It is when the rental property has five or more units that the financing rules change.
Plan the require down payment
You need a minimum of cash to buy a Apartments in Dubai. In the case of an income building with 4 units or less. If all the units are rent. The minimum down payment is 20% of the purchase price. If you decide to occupy one of the apartments. Mortgage loan insurance such as that from the Canada Mortgage and Housing Corporation (CMHC) allows you to reduce the down payment to 5% for a duplex and 10% for a triplex or a quadruplex.
Use the Homeownership Plan (HBP)
While some think the opposite, it is possible to use the HBP for the purchase of a rental property. Under certain conditions. You can therefore withdraw up to $ 35,000 from your RRSPs for your down payment. provide of course that certain conditions are met. You will have to live in your future real estate companies in Dubai. property and it will also have to be your first residential purchase. Also note that if you have been a homeowner in the past, but not in the past four years, you are also eligible for the HBP.
Re-mortgage to buy a new property
When possible, some investors decide to refinance one property to finance the purchase of another. For example. If you’ve already paid off a good portion of your mortgage on your primary residence. you can use that asset to borrow at a lower rate than a personal loan. This new mortgage can be up to 80% of the value of the property you are refinancing. This is call the leverage effect. By speaking with your mortgage expert, you will be able to assess the advantages of such a practice depending on your situation in real estate companies in Dubai.
During the transaction, you will also have to pay other costs , such as transfer duties (the welcome tax), notary fees. The cost of the inspection and municipal and school taxes, for example. To cover these costs. It is advisable to provide an equivalent sum of 2% to 3% of the purchase price of the building.
