In Dubai, tenanted properties are often priced more attractively than comparable vacant units. Many buyers avoid them due to existing rental contracts, but those who strategically navigate this situation can achieve significant savings. Here is an example that perfectly explains why and how this works.
A Unique Opportunity in Madinat Jumeirah
Two weeks ago, a sales contract was signed for a four-bedroom penthouse in Madinat Jumeirah. The buyer knew the neighbourhood well as he rented there himself, so he knew exactly what realistic prices were. When he saw an advertisement for AED 12.5 million (€3,125,000 / £2,700,000), he thought it was fake, far too cheap.
But it turned out to be real. The property was for sale, but was still tenanted for another 19 months at just AED 460,000 per year (€115,000 / £99,000), which equates to a net yield of just over 3%. That is half the typical rental level in that area, where the market rate is around AED 1 million (€250,000 / £215,000).
Why the Price Was So Low
The property is unique: a private terrace, views of the Burj Al Arab, the ocean, and even the towers of Palm Jumeirah. In the same neighbourhood, a comparable property had recently sold for AED 17 million (€4,250,000 / £3,660,000), likely renovated. The buyer therefore knew he had an exceptional opportunity.
The deal was finally closed for AED 11.75 million (€2,937,500 / £2,530,000). The seller turned out to be… the tenant himself. He was therefore paying extremely low rent for a property with a much higher value. This allowed the buyer to negotiate aggressively and save AED 2.4 million (€600,000 / £517,000) on the market value.
A Smart Strategy for Owner-Occupation or Renovation
According to tenancy legislation in Dubai, you cannot force a tenant to leave simply to charge higher rent. However, if you intend to occupy the property yourself or undertake large-scale renovation, you are permitted to terminate the contract upon its expiry. This is precisely the buyer’s plan: to renovate the property and then move in.
Meanwhile, the tenant continues to pay rent for another 19 months, and with only a 30% down payment, this purchase moves faster than many off-plan projects.
This Happens More Often Than You Think
The buyer’s business partner also found a villa that sold for AED 1 million (€250,000 / £215,000) below market price, purely because it was still tenanted. Tenanted properties are harder to sell in Dubai, especially if the rental income is low. Many buyers want to be able to use their purchase immediately. This results in fewer bidders and allows for strong negotiation.
For savvy buyers, this represents an opportunity to purchase quality at a reduced price, as long as you are willing to wait a while or make a strategic move.
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