Step 1: Calculating gross rental yield
Gross rental yield is the simplest calculation:
Gross yield = (Annual rent / Purchase price) × 100%
Example: You buy a one-bedroom apartment in Dubai Marina for AED 1,200,000. The annual rent is AED 80,000.
Gross yield = (80,000 / 1,200,000) × 100% = 6.67%
This is the figure most often quoted by agents and developers, but it takes no account of the true costs of ownership and letting.
Step 2: Including acquisition costs
The true investment cost is higher than the purchase price alone. The purchase of our example apartment at AED 1,200,000 carries the following costs:
DLD registration fee (4%): AED 48,000 Agency commission (2%): AED 24,000 DLD admin fees: AED 4,000 Mortgage registration (where applicable, 0.25%): AED 3,000 Oqood/trustee fee: AED 4,200
Total investment: AED 1,283,200
The adjusted gross yield then becomes: (80,000 / 1,283,200) × 100% = 6.23%
Step 3: Deducting annual costs
To calculate the net yield, we deduct all annual costs from the rental income:
Service charges: AED 12,000–18,000 (on average AED 15 per sq ft for an apartment of 800–1,200 sq ft) Maintenance and repairs: AED 4,000–7,000 Insurance: AED 1,000–2,000 Property management (if you appoint a manager): 5–8% of annual rent = AED 4,000–6,400 Vacancy (allow two to four weeks per year): AED 3,000–6,000 Ejari and administration: AED 500
Total annual costs: AED 24,500–37,900
Let us work with an average of AED 30,000 in annual costs.
Step 4: Calculating net yield
With our example apartment:
Annual rent: AED 80,000 Annual costs: AED 30,000 Net rental income: AED 50,000
Net yield = (50,000 / 1,283,200) × 100% = 3.90%
This is the true cash-flow yield you receive. The difference from the advertised gross yield of 6.67% is substantial: almost 3 percentage points.
Important: Dubai levies no income tax on rental income. The tax treatment in your home jurisdiction varies by country and personal circumstances; consult a cross-border tax adviser to understand how foreign rental income and property holdings are treated where you are resident.
Total return: including capital growth
Net rental yield is only part of the total return. Dubai property prices have risen by an average of 8–12% per year in sought-after areas over the past five years. The total return (rent plus capital growth) can therefore be considerably higher.
Total return = Net rental yield + Capital growth
In our example: 3.90% (rent) + 8% (capital growth) = 11.90% total return.
Note: capital growth is not guaranteed and can be negative. Base your investment decision primarily on the net rental yield and treat capital growth as an additional benefit.
Would you like a personalised yield analysis for a specific property? Augusta Properties prepares a detailed calculation at no cost, including all expected costs and income.