Rental yield in Dubai: gross, net and how to calculate it

The yield shown in an advertisement is almost always a gross yield. To compare two investments, you need to move to net, taking all costs into account.

Gross yield

It is the annual rent divided by the price of the property. It gives a first indication, but it ignores acquisition costs, charges and periods without a tenant.

Net yield

It relates the income actually collected, after charges, to the total cost of the acquisition. The items to include:

• Acquisition costs (4% registration, any commission and related fees).
• Service charges, which vary by building.
• Rental vacancy: one month without a tenant per year is a prudent assumption.
• Management fees, if the letting is entrusted to a professional.
• Maintenance and renewal of equipment.

An illustrative example

An apartment bought at AED 1,200,000, let at AED 85,000 a year:

• Gross yield: 85,000 / 1,200,000, about 7.1%.
• Total acquisition cost: 1,200,000 + 4% registration (48,000) + related fees (about 10,000), i.e. AED 1,258,000.
• Service charges: AED 12,000. One month's vacancy: about AED 7,100. Management at 5%: about AED 4,250.
• Net income: about AED 61,650, i.e. a net yield close to 4.9%.

This example is purely illustrative: actual rents, charges and fees depend on each property.

How to improve the reading

• Compare the rents actually achieved in the building, not those of isolated advertisements.
• Ask for the history of service charges.
• Include the taxation of the country of residence, which can change the result significantly.
• Also look at resale: a good yield in an illiquid district can be a trap.

Yield is not everything

A well-served district, a recognised developer and a property that is easy to relet protect profitability over time better than a high gross yield.

To review your project and check the conditions currently in force, book an appointment with Arzouni Properties.