All Forum Posts by: Luca Dal Molin

@Percy N. I'm not too much in the subject but here in Dubai there's so much offer of resorts that I don't feel I would risk investing using this strategy. On the other side renting here has net yields of about 7,5%. even if vacancy rate could be another issue to consider.

@Morgan Nilsen Morgan, I definitely agree with you, I expressed the same concern last year here in the forum. I've been here in Dubai for three years now and I've always stayed away from the market just because I think there are other interesting opportunities abroad. That said I also think that there are some areas that might be worth being considered, at least to run some numbers and see what comes up. We both experience the peculiarities of the economical situation here and me I'm the first to say that it's not easy to predict what will come up in the medium term. There are areas like Marina that I consider much better than others but at the same time the population here is changing and some nationalities that are interested in cheaper areas are taking over the western expats with more cash disposal. And then,,,the Expo...will they continue to keep the economy running until that day??

PS. a big thank for taking care of the Biggerpockets community here in Dubai. I'm always on the go, often even in my days off but I really hope I can join you for a meeting soon!!

Luca

Hi everyone,

I live in Dubai and I'm starting to consider to buy a property to rent here in Dubai. The market at the moment sells at good discounts compared to 2/3 years ago and probably will see another correction in the upcoming months.

I would like to hear your opinion about two possibiliteis I have and, for convenience, I'm going to convert all the numbers in USD (rounded for easiness)

I receive from my employee an allowance to rent on my own of 46.800 USD a year. I spend 28.500 USD (utilities paid) to rent an apartment, the rest, 18.300 USD comes in my pocket.

Let's consider I want to buy an apartment at 360.000 USD (fees included) that can give me a rent of 24.500 USD a year. Having saved from my allowance 18.300 USD, would be like having a rent of 42.800 USD.

The bank offers me two options:

1. Mortgage at 4.25% variable (fixed rate not possible)

2. Personal loan of 231.000 USD to be payed in 4 years at a fixed rate of 3.25%

If I run the numbers in my Excel sheet, of course the personal loan gives me a negative cash flow for the first four years of about 15% but, after the loan is paid, the same would jump at 22% per year.

In summary, my Company contributes in paying my apartment and in 4 years it would be mine.

What do you think is best, mortgage or loan?

Luca

 If you fly from BOS is about 13 hrs :-)

@Wade Sikkink

Thanks for the answer

@Account Closed

Bob, maybe I was not clear enough in my request and I guess that saying "purchase" I set you off track...that's being not a native English speaker...:-))

I think that having a NOI and a market cap rate is a very good way to estimate the price of a property you'd like to buy. Let's say I know that in that area the cap rate is around 10%. Now I decide to run my numbers on three differet properties; I get all my data, the vacancy rate, the bills, maintenance costs, property management costs, real estate taxes and so on...

In one case, I see that the advertised price is 120.000 and the NOI is 10.000. So my cap rate is 8,33%. What should be the correct price? 100.000 given the 10% cap rate of that specific area.

This essentially the same thing you said except that I don't agree that you need to have a closed deal to do that. On the contrary this is essential to know BEFORE you close the deal.

So, back to my question, do you consider the closing costs when you run the numbers? Wade gave me an answer, and I'm happy with that because I think it's reasonable, but what I would do is to negotiate a price to include the closing costs in the deal, since it's still my money! 

Hope this makes sense now.

Luca

@Account Closed

Bob, what I mean is that given a purchase price and a NOI, that I know, when I calculate a cap rate to compare it with the average market, do I consider the eventual closing costs or not?

Example: price 100.000, closing 10.000, NOI 10.000. The cap rate is 10% or 9,1%?

Who said that? I haven't purchased anything, I need to evaluate first! :-)

Luca

Hi BP users,

After calculating my NOI and wanting to know the cap rate, given the formula CR=NOI/V, where V is the value of the investment, do you also consider the closing costs in the total value of the property? Or you disount it when you present your offer?

Luca

Hi BP community,

In my journey learning RE, I'm reading some books to educate myself since I'm looking for a new investment next year. New readings are on the way because I'm really interested in having different points of view and find a model that can fit my personality and style.

One of the best ever is the 7 Habits of Stephen Covey, I really found a lot of my beliefs in this book. Then I moved to a book about negotiating, interesting but not the best for the way it was written. I'm planning to read Getting to Yes, as soon as I come to US and I can get it in a book store.

By the time, I wanted to consolidate a bit my understanding and I came across a very nice video on Youtube. It's a lesson on negotiation given a few years ago at Stanford University and I completely share what the teacher says about the concept of negotiating.

I hope you like it too and I'd be very happy to have your comments about what you think about negotiating and how it should take place in your opinion.

https://youtu.be/rCmvMDrCWjs?list=PLtgCx39XZR8tkhF1JQlOQfDOtbtbWAp3J

Luca

Hi Karl, here's just my 2 cents...

I'm Italian and of course Venice is surely a beautiful city. I'm not an expert of that market but having considered the involved costs of buying in Italy and the necessity to find a reliable property manager I would be careful. The involved capital would be quite high, considered the city, and so the related risks.

Closing costs in Italy are around 15% and you need to understand the taxation system. Not a big deal but be sure to have your numbers clear before you proceed.

Here's a link where you can find more info about Italian market.

http://www.globalpropertyguide.com/Europe/Italy

Let us know if you decide to go on with your research, I'm interested in it!

Luca

I will Daniel!