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Case Study: Investing in a Highly Profitable £118,000 Off-Plan Studio in Jumeirah Village Circle (JVC) with Flexible Payments
Sep 21, 2024
Dubai’s real estate market is well known for attracting investors seeking high rental yields, stable property values, and flexible payment plans.
In this case study, we explore a 40-square-meter off-plan studio in the family-friendly neighborhood of Jumeirah Village Circle (JVC). Priced at just £118,000 (approximately AED 550,000), this property offers significant rental income potential and a flexible 3-year payment plan, making it an ideal choice for both seasoned investors and those new to Dubai's property market.
Here, we will break down the payment structure, expected rental yields, and return on investment (ROI), based on different occupancy rates. We will also consider additional costs such as mortgage payments, management fees, and maintenance considerations.
The Property
This 40-square-meter studio is situated in Jumeirah Village Circle (JVC), a vibrant and family-friendly residential community in New Dubai, developed by Nakheel Properties. JVC is renowned for its perfect blend of affordability and luxury, making it an attractive destination for both long-term residents and short-term visitors.
Key features include:
High-End Finishes: Premium materials and craftsmanship throughout the studio.
A Modern Layout: Open-plan living space designed for comfort and functionality.
A Prime Location: Situated in a community with parks, schools, and retail outlets nearby.
Versatile Rental Options: Perfect for both long-term rentals and short-term vacation stays
Why Jumeirah Village Circle (JVC)?
Jumeirah Village Circle (JVC) is a family-friendly community offering a diverse range of villas, townhouses, and apartments. Its strategic location provides easy access to Dubai Marina, JBR, and the Mall of the Emirates, making it highly desirable.
The area’s affordable pricing and prime location have led to an impressively growing demand for short-term rentals.
Rental Potential: Long and Short-Term Options
Long-Term Rental Income
The average annual rental income for a studio in JVC ranges between AED 30,000 and AED 45,000. The exact amount depends on the location and condition of the property. This offers a steady and reliable income stream, which is particularly attractive to investors seeking lower tenant turnover and consistent occupancy.
Short-Term Rental Income
Short-term rentals in JVC offer higher rental yields due to the flexibility and premium rates guests are willing to pay for vacation stays. Based on market data, the nightly rates for a studio in JVC range as follows:
Low-end studio units: AED 150 – AED 250 per night
Mid-range studio units: AED 250 – AED 400 per night
High-end studio units: AED 400 – AED 700 per night
For this case study, we’ll assume a conservative nightly rate of AED 300, which falls in the mid-range, ideal for attracting both leisure and business travelers.
Flexible Payment Plan
One of the standout features of this investment opportunity is the highly flexible payment plan:
20% down payment: AED 110,000
1% per month for 30 months: AED 5,500 monthly
50% mortgage for non-residents: 4.89% interest rate for 25 years
Investors can spread out their financial commitment over three years with this payment structure, minimizing upfront capital requirements. The remaining 50% can be financed through a mortgage, making it accessible for international buyers looking to invest in Dubai’s profitable real estate market.
Expenses
Before calculating the return on investment, let’s first consider the ongoing costs associated with owning this studio property:
Annual maintenance fee: AED 8,000
Upkeep costs: 1-2% of property value annually (assumed to be AED 11,000)
Property management fee for short-term rentals: 17% of rental income
Return on Investment (ROI) Calculation
We will calculate the ROI based on two occupancy scenarios: 80% and 90%, which are realistic for short-term rentals in JVC, given its growing popularity among tourists and expatriates.
1. ROI Calculation for 80% Occupancy:
80% occupancy = 292 nights per year
Revenue: 292 nights x AED 300 per night = AED 87,600
Expenses:
Management fee (17%): AED 14,892
Annual maintenance: AED 8,000
Upkeep costs: AED 11,000
Total expenses: AED 33,892
Net Revenue: AED 87,600 - AED 33,892 = AED 53,708
Mortgage Cost:
Mortgage (50% of AED 550,000) = AED 275,000
Annual mortgage payment (at 4.89% for 25 years): AED 17,327
Final Net Income (after mortgage):
AED 53,708 - AED 17,327 (mortgage payment) = AED 36,381
ROI (based on invested capital):
Total amount invested: AED 275,000 (down payment + 30 months’ installments)
ROI: AED 36,381 / AED 275,000 = 13.23% annual return at 80% occupancy
2. ROI Calculation for 90% Occupancy:
90% occupancy = 328 nights per year
Revenue: 328 nights x AED 300 per night = AED 98,400
Expenses:
Management fee (17%): AED 16,728
Annual maintenance: AED 8,000
Upkeep costs: AED 11,000
Total expenses: AED 35,728
Net Revenue: AED 98,400 - AED 35,728 = AED 62,672
Final Net Income (after mortgage):
AED 62,672 - AED 17,327 (mortgage payment) = AED 45,345
ROI (based on invested capital):
ROI: AED 45,345 / AED 275,000 = 16.5% annual return at 90% occupancy
Key Benefits of This Investment
Flexible Payment Plan: The 3-year payment plan with only 20% down allows investors to minimize upfront capital while securing a high-quality property in a prime location.
High Rental Yields: With short-term rental rates in JVC averaging AED 300 per night, investors can achieve returns of up to 16.5% based on occupancy rates.
Low Mortgage Rate: Non-residents can finance 50% of the property at a low interest rate of 4.89%, making this a highly accessible investment for international buyers.
Family-Friendly Location: JVC’s reputation as a family-friendly neighborhood ensures high demand for long-term and short-term rentals.
Conclusions
This off-plan studio property in Jumeirah Village Circle (JVC) offers an exceptional investment opportunity, combining high rental yield potential with a flexible payment plan. The growing demand for both short-term and long-term rentals in JVC further enhances its appeal. With ROI projections reaching up to 16.5% and manageable upfront costs, this property is perfect for investors aiming to tap into Dubai’s booming real estate market. Secure your investment in this vibrant community and enjoy the benefits of a well-planned, high-yield property.
Interested in learning more about this investment? Contact Totality Real Estate today for personalized advice and guidance on maximizing your return in Dubai’s property market!
