The Pros and Cons of taking the foreclosure route towards investing in a Dubai Rental Property Dubai is a place that is destined to make the news headlines no matter what. After years and years of blockbuster realty launches and deliveries, each trying to outdo the others in exclusivity and opulence, the cracks have begun to appear. The industry has been through some rather turbulent times in recent past. As the financial and general economic downturn started to take a firm grip on the market sentiment, investors and owner confidence started to erode rapidly. Animated discussions have been erupting everywhere, from the traditional print media to the new-fangled digital versions, on how people have been struggling to make ends meet. With the drying up of jobs and revenue streams, people have been facing significant difficulties in keeping up with the monthly payments on their home loans. With lenders beginning to evoke the repossession clauses on defaulters, the number of repossessed homes has been steadily increasing. The thirty-five repossessed homes that were on offer at the first ever bulk sale of such homes by the Dubai Land Department (DLD) has only been the precursor of things to come. The 2008 Mortgage Law Number 14 has added significant steam to the speeding up of the foreclosure process as developers look to ways in which they can recoup their losses has only served to add some teeth to Law on Mortgages. There have been some concerns being raised over the timing of such a move. Given that realty prices are at an all time lows, and some areas experiencing value erosions to the tune of almost half the purchase price, the effect of foreclosed home auctions is waiting to be seen. A section of prospective homeowners though have been following these developments rather closely. Informally called the bargain-hunters club, these investors are rather gung-ho over snagging some great bargains in an already bottomed out realty market. Apart from the obvious financial benefits, foreclosed properties also offer significant gains for those looking to invest in a Dubai property rental . Not only do they enter at a lower price-point, the exit strategy can be then carefully drafted to maximize profit margins from property sale at a later stage. There are also certain factors that must be considered before getting in line to purchase a foreclosed property. The foreclosure of a property is often the last choice for lenders. They have to explore all the available avenues and pursue a possible renegotiation on the loan. Only when all efforts to this measure fail to revive the payment delivery, does a lender activate foreclosure procedures. It is therefore only used as a last resort measure.
Thus, such properties are likely to have suffered from neglect and there could have been severe corner cutting on the maintenance factor. Considering the safety issues that could arise, it becomes extremely important for investors to do their due diligence and inspect potential properties thoroughly. Key points of evaluation include: the super-structure and build quality of the home, damaged or missing amenities, etc. Factor in the repair/replacement costs for bringing up the property to livable standards. Remember, that there are no warranties or assurances as most properties in such casesare sold on an ‘as-is’ basis. If the previous owner couldn’t afford to pay the monthly installments or maintain the property, it is likely that he/she may have reneged on their civic and utility bills as well. Safeguarding against unsavory surprises from the authorities later on through a clear title purchase is extremely important. Lastly, one must keep in mind that a foreclosed property comes with its own share of moral dilemmas for the potential investor. After all, one would be benefitting from the misfortune of another and unless one is absolutely clear and satisfied with their actions, they should consider such purchasescarefully. Having discussed all of the above, if one is satisfied with their informed decision, there is no stopping the determined investor. Who knows, they could even get lucky and find their dream holiday villa or vacation apartment among the 80 odd foreclosed properties that are up for adoption by the Dubai Land Department (DLD) in the current year.