I went with my mate the other day to The First Group, a British property developer, to second what he thought is a good investment opportunity: a buy-and-let luxury apartment in Dubai Sports City. We were supposed to be taken for a ride near the site but since the hour had grown late the site visit didn’t happen, and we settled for a chat at the showroom.

The First Group is selling a fully managed real estate investment plan which they call The Wealthbuilder. As I said earlier, the plan is about buying and letting a luxury apartment in any of the projects being developed by The First Group. You will be injecting cash at regular instalments for two to three years, and then, when the building is ready, you can sit back and watch the Dirhams coming in. Sadly enough for me mate, you need to have “disposable cash”. You can’t take any mortgage to finance such investment. The First Group is not supported by any of the UAE finance houses, and they don’t seem to have any plans there. Therefore, my friend fell back to The First Group’s best bargain, a luxury studio in emerging Ras Al Khaimah for around AED 600K to be paid over three years and to start yielding around 30% upon operation.

Now a 30% return sounds lucrative but remember that it could only start showing after three years, and it’s not really as “hassle free” as The First Group is saying. You will actually be exposed to the risk of insufficient occupancy rates while your ten years management contract pays the management company a handsome 40% and takes out 10% as a reserve for replacing worn out furniture. Who knows where Ras Al Khaima is heading to. It might sound promising especially when you see models of Al Dana island or you read in the newspaper that Virgin Galactic is planning to build a spaceport there to launch the world’s first commercial flights to the space. Nevertheless, as an individual investor you are time-sensitive, and few months of insufficient occupancy rates could render your investment inefficient and significantly influence your cash flow.

The sales consultant absorbed all our rants and raves about the riskiness of such investment and agreed to many of them, but he offered that the management company they deal with has an excellent history and it won’t enter into a business unless it’s positive of its feasibility because it’s their reputation and profits on the line too.

But again, if you have some disposable cash you might want to buy into such a plan for the overall convenience of it: instalments, attractive returns, appreciation of the asset, ability to opt-out, up to four weeks personal use per year, semi-annual income payments, web access to your statement of account, etc.

If it’s your long time savings you’re chipping in, I suggest you hold your horses. There are plenty of other options for you, including other buy-and-let opportunities.