Homeowners by choice, landlords by chance

Several residents of the UAE buy an apartment and villa, live in for a while, and then let it out to someone else. There are others who have never resided in the properties they have purchased, choosing instead to live in rented homes elsewhere. Personal interests, investment factors, costs, comfort levels, and even pets seem to contribute to this phenomenon of incidental and accidental landlords in the country.

Earlier this year, Forbes identified a large number of homeowners stuck in one of two property crises — unable to sell their home, or unable to pay its mortgage — and named them accidental landlords. “The solution that has emerged is an interesting alternative to foreclosure, or to taking a steep loss on the sale of your home — moving to lower cost housing and renting out your current home,” wrote Liz Davidson, in the international business magazine, clearly referring to the US market.

House or home?
In the UAE, the big difference is that property investors are unwilling, not unable, to sell their homes. A large percentage is only biding their time until the market shows marked improvement. There is however, an astounding variety of other reasons that make homeowners transform into landlords overnight.

British couple Noel and Jean Border moved recently from their one-bedroom apartment in Discovery Gardens to a two-bedroom villa at Layan, Dubailand, and their reasons are both compelling and amusing. “We were disgusted with our noisy neighbours, tired of complaining about the lack of services, and wanted more space for ourselves and our new kittens. The idea occurred to us when our friends upgraded from a rented apartment to a rented villa,” says Noel.

The income from their apartment amounts to a paltry  Dh50,000 and it neither covers its mortgage, nor the rent of the new villa, but the couple are ecstatic with their decision. “There is a difference between a house and a home.

Owning a house should not restrict anyone while making a home,” he says. Ameena Buker, Director of a Dubai Media City-based communications agency, has owned a three-bedroom apartment in Dubai Marina for the last four years, but has been inside it only once. She chooses to live with her family in a sprawling villa in Mirdif.

“Communing with nature is very important to me and I like reading under a tree at my villa. At some later stage in life, we will move into our sea-facing apartment. We would like to live in Dubai long after retirement and our investment is a solid foundation for the future. “We have invested in a distant dream, but the rent from our apartment fully covers our mortgage, so it is a very practical dream fulfilment,” she adds.

Significant income
Using the rent from one apartment to pay the mortgage on another is also a practical strategy, says Elizabeth Jorge who owns a tenanted studio, and a two-bedroom apartment which she occupies — both in Jumeirah Lakes Towers. “I bought the studio for cash at a ‘distress sale’, and it provides me an annual income of roughly Dh42,000. The mortgage on my other apartment is Dh96,000. The idea sounded bright, the math sounded right, and I just took the plunge,” says the Indian national.

Meanwhile, an East European national, Mahmoud MK, is one of many investors in the UAE who lets out properties, to earn a steady and significant income. Although he cites uncertainties in economy and employment as his motivation, he may have undisclosed reasons for investing in 30 apartments in Jumeirah Beach Residence and Dubai Marina — but all under the names of his wife and children.

The family chooses to reside in a modest three-bedroom apartment in Jumeirah Lakes Towers. According to Mahmoud, the difference between the amount he gets as rent and what he pays as mortgages creates a great cash flow. Whenever the real estate market improves, he plans to sell some of the properties (for more than the purchase price), without damaging his credit or his credibility. “It is my business and it is profitable,” he says of the many houses he owns. “I have a right to exercise my personal choice,” he says of his rented home.

(Names have been changed on request)