BUYER’S GUIDE · Rentals and yields
Renting an apartment in Dubai: how to calculate profitability and expenses
Gross and Net Yields of an Apartment in Dubai: Formulas, Simple Example, Expenses, Periods Without a Tenant, and Long-Term and Short-Term Rental Comparison.
Separate market assumption from contract
The rental price in the ad is the requested amount, not the confirmed income of your apartment. To evaluate, select comparable options for the building, area, condition, furniture and lease term. Save the date and an explanation of why the selected objects can be compared.
Calculate a few load and expense scenarios: the promise of a certain percentage needs to be negotiated by contract: who pays, for what period, what is deducted and on what terms the obligation is terminated; don't include the increase in property value in current rental income.
Two formulas for comparison
Gross yield = annual rent before expenses/purchase price × 100%. This value is convenient for the first comparison, but does not show the amount remaining with the owner.
Net operating return = (yearly lease − owner's operating expenses) / full investment × 100%. The investment in this calculation includes the price, registration and preparation of the apartment. Interest on the loan and taxes are not included here: after financing and taxes, you need a separate calculation.
Conditional example, not market forecast
Let's say the apartment costs 1,000,000 AED, the design and preparation costs another 100,000 AED, the planned lease is 80,000 AED per year, the gross yield at the purchase price is 8%, this is a fictional educational example, not a catalog offer.
If you actually get 72,000 AEDs after the downtime and the owner's operating expenses are 20,000 AEDs, the balance is 52,000 AEDs. For a total investment of 1,100,000 AEDs, that's about 4.73% before funding and taxes, and the difference shows why you need to factor in base and expense.
Long-term and short-term leases
Long-term rentals and guest accommodations differ in operating load and cost structure. For the first scenario, review the Ejari contract and procedure; for the holiday home, check the applicable permits and management conditions separately. Regular registration of a rental agreement does not replace verification of travel accommodation requirements.
For a short-term scenario, count the site and the manager's commission, cleaning, supplies, utilities, and furniture renovations. Compare the balance you get for the same year, not the price of one good night to a month's rent.
What to request from the manager
Ask for an example of a report to the owner with individual income and expenses, how the money is transferred, and the rules for agreeing on repairs, and who is responsible for finding a tenant, delays, damage, and downtime.
- The basis of the rental forecast and the date of evaluation.
- All deductions and minimum payments under the contract.
- A scenario of reducing rent and increasing downtime.
- Procedure for termination of management and transfer of access.