Rate of Retun of Investments

[Don.W]

Hi Guys,

I have attached a word document that highlights the Rate of Return calculations for a studio property. This is what I used to assist us in with our investment decision of purchasing a studio in France, so I thought I would share it with fellow members of this forum (my way of giving something back for all the bits and pieces of helpful advice I have got from all the posts).

Well I hope it helps + if anyone would like an Excel version (one which you can use to tweak the numbers),please email me.

all the best

 

[georgihh]

IC prices are cheap

I have bought a studio 2005 mid for 237000 DHS
At the end I have paid total of 258000 inclusive of all the charges from building owners
Government and agents
OK 260000DHS
With 10% interest per year that’s makes it 300000DHS.
Today if you get net 340000DHS its OK
So 40000DHS profit – not bad but not much
The rent is almost 42000DHS at the moment.
So if I don’t get 420000DHS net I won’t sell.
And even for that price I still get 10% out of the selling price
And this is the only place in Dubai with that much return

Conclusion – The prices for a studio will pass 400000DHS in a very short time.
Do you agree?

 

[eyeC]

wow

lets hope 400,000 AED will be worth 300,000 AED in two years time otherwise

you are making more negative profit

have you reached break even to think about making profit



if you think money now is equal to money in the future buy US bonds

good luck

 

[georgihh]

lets hope 400,000 AED will be worth 300,000 AED in two years time otherwise

you are making more negative profit

have you reached break even to think about making profit



if you think money now is equal to money in the future buy US bonds

good luck

lets hope 400,000 AED will be worth 300,000 AED in two years time otherwise

That's the problem good point.
Dubai is full of surprises and most of the time very bad ones.
I have wasted 6 years of my live in Dubai.
I had enough of this place and I am leaving very soon.
But still 1000$ a month (from rent) is a very good income.
Let’s hope this place won’t be a desert in a couple of years

 

[eyeC]

i agree with you georgihh

But still 1000$ a month (from rent) is a very good income.

i agree with you 1000$ monthly income is good IF AND ONLY IF you can get back your initial investment

and if you get back your initial investment money you want it with the same purchasing power

otherwise its a loss

 

[georgihh]

agree with you 1000$ monthly income is good IF AND ONLY IF you can get back your initial investment

and if you get back your initial investment money you want it with the same purchasing power

otherwise its a loss


Ok here is the trick

Now you buy a studio for 400000 DHS all inclusive including the service charges for 3 years.
Get the money from the bank and pay 7% interest per year = 28000 DHS per year

3 x 28000 = -84000 Dhs interest for 3 years
3 x 40000 = +120000 Dhs rent for 3 years
Balance 36000 DHS
Plus sell the studio after 3 years for 500000 net and pay the bank 400000

Total profit 136000.00 DHS

You don’t spend nothing and make 136000 DHS from one studio
With the above money after 3 years whatever you buy a Mercedes or a Hyundai
IT’S A PROFIT
Cant go whrong

 

[eyeC]

Well if you can sell for 1 MILLION after 3 years i guess you will make even more profit


but lets keep it as you say 500,000 AED for a studio which makes roughly 1050 AED/sft

1000+ AED/sft right now can get you better locations else where

so for you to get your 500,000 AED for a studi in IC other locations need to increase in price too to become say 3000-4000 AED/sft and i dont see this happening any time in the near future

 

[georgihh]

Only one year ago and i was spot on

 

[nabeelc]

good prediction.

so have you left the country yet?

 

[georgihh]

good prediction.

so have you left the country yet?

I am in the country Business is good (not the property).

 

[anwar khan]

very good georgihh!!! I have read through this thread in which you looked very optimistic and there you are.....fantastic !!! so now what would predict for next year for IC???? How far a studio and 1 bed can go in terms of prices???
Regards,

Anwar...

 

[georgihh]

very good georgihh!!! I have read through this thread in which you looked very optimistic and there you are.....fantastic !!! so now what would predict for next year for IC???? How far a studio and 1 bed can go in terms of prices???
Regards,

Anwar...

I have a feeling we are approaching the peak.
But you never know suddenly the rest of the market can start going up again and can drag on the IC prices up.
But the advantage is that we are protected from the rental side 60k for studio and 80k for one bedroom

If you buy a studio now 500k and rent it out for 60k per year – you can’t lose
After 2 years the prices will not go down but might go up and this will be a bonus to your rent
Personally I expect slow growth of 10-12% for the next 2 years but if the banks open their pockets with a reasonable rates maybe we can see a growth of 25-30% per year.
I don’t think the bubble has burst yet they are patching it now to get some more air until explode

 

[zombie]

Why not look at it on a longer term, say 10 years. In that time frame you would have got back your capital value from the rental income, with no loans associated with the property. The whatever the sale price of your property is your net profit.

Today the markets are baad & prices HAVE fallen(PANIC SELLING/CASH FLOW PROBLEMS),but rental demand in IC remains very strong, so the rate of return on investments is higher than 10%. Where in the world can you get that. Thus according to me the prices will go up again(IC Specific thoughts here),but even if they linger around the price of 450k for studio & 625k for 1BR, I have to think long haul.

Also the lack of proper Bank Finance in IC has hurt the price movement of the Clusters. Hope once all properties have title deeds associated, then it may help banks to value the property & provide mortgages to buyers who intend on using it as primary residence.

BTW Geogeihh is right, there are times one feels like getting the hell outa here, but then there are always other issues that bring you back.

 

[anwar khan]

I dont think the bubble is going to burst ever bcz flats in dubai will always be required on rental and as long as we are getting around 10% rental yield we are safe..arent we?
I dont know how long is it going to take for title deeds for our flats prices might pick up after that ..I spoke to ARY about the title deed and they said might take 2 , 3 months...

 

[Anwar]

What would be the selling price today (price per square foot)?

 

[eyeC]

said might take 2 , 3 months...

Nakheel will provide us what we need after bankruptcy

 

[eyeC]

What would be the selling price today (price per square foot)?

1000 AED per foot

 

[anwar khan]

Lets hope we dont go bankrupt....

 

[georgihh]

1000 AED per foot

Not anymore now 900 DHS

 

[eyeC]

Not anymore now 900 DHS

well it can go higher than 1000 AED per foot if you have the property registered in your name