When investing in hotel property, it’s essential to pay due attention to a number of important issues, including location and the choice of developer.
Dubai as an investment destination
Dubai is one of the most popular investment destinations, especially when it comes to hotel real estate. Being a large resort and important regional business hub, Dubai attracts more than 15 milliontourists each year, which makes it a great destination for hotel business. Hotel developers in Dubai offer apartments for private investors. How do people capitalize on it?
Advantages of hotel investment
Since you can’t actually control your hotel apartment – as it’s a part of the building operated by a managing company, – you hand it over to the hotelier. Investors conclude an agreement, according to which the room owner either gets paid a fixed rent or a certain percentage of the hotel’s revenue.
This scheme is also convenient to those living outside of the UAE, as it doesn’t require your actual participation in the hotel’s business. On the contrary, a professionally managed business has high chances of successfully coping with all kinds of challenges.
As for Dubai, local legislation is also an advantage.
Why is it safe to invest in Dubai?
The most profitable strategy is to invest in off-plan objects. However it isn’t always safe. You don’t have to be an experienced investor to understand the risks of such an approach. You invest huge sums of money intosomething which does not exist yet. Who can guarantee that the building will be finished in time or completed at all? The answer depends on the location and local legislation.
All hotel developers in Dubai are obliged to open escrow accounts for each of their projects. An escrow is the money held by a third-party – governmental regulator DEWA in Dubai. It keeps the money paid by investors, while the project is being built, transferring part of it step by step.
In other words, developers get paid only after completing certain phases of the project. According to the law, if the company fails to finish the building, it must return all the investments. These rules make it much safer to invest in local real estate when compared to other destinations.
Another common practice in Dubai is payment by installment, i.e. step by step transactions. Developers usually ask 10-25% of the total sum as starting fee, after which you can pay on monthly basis or according to other agreements.
How to choose developer
These laws and practices are all very well, but can you really choose just any random developer and expect it to finish the project in time. Don’t get it wrong – according to the local legislation, you can have your money back, if the developer fails to complete it. But it’ll take time. Besides, you won’t get your property after all. That’s why you’d better spend some time for proper investigation.
In order to find reliable hotel developers in Dubai, look up for the following information:
- How long does the company work on the local real estate market? The longer the better.
- Do local media mention the developer? And if they do, what are the reviews? A more or less famous company with good reputation is just what you need.
- What prices does the company offer? If the costs are suspiciously low, you’d probably better keep looking.
- Was the developer involved in court actions? If yes, it doesn’t necessarily mean you can’t trust the company, but you should check it out.
- Does the developer have partnership with well-known companies? When it comes to hotel investment, it is especially important if the partner is a hotel managing company.
You can also examine all kinds of ratings of local developers such as this one.