A listing in JVC advertises an 8 percent yield. The maths is simple: annual rent divided by purchase price. AED 80,000 rent on a AED 1,000,000 apartment is 8 percent. It is also not what you will earn.
Start with service charges. In Dubai they are set per square foot by the building's owners' association and approved by RERA. A JVC building typically runs AED 12 to 20 per square foot per year; Downtown and Palm Jumeirah run AED 20 to 30. On a 900 square foot unit at AED 15, that is AED 13,500 a year, or 1.35 percentage points of yield gone.
Then management. If you do not live in Dubai, somebody has to find the tenant, collect the cheques, coordinate repairs and register Ejari. Budget 5 to 8 percent of annual rent for full management, so AED 4,000 to 6,400 on our example, another 0.4 to 0.6 points.
Vacancy is the number most investors forget. A tenant leaves, the unit needs a repaint and two weeks of viewings, and you lose a month of rent. Over a five-year hold, one month every two years is a realistic assumption. That is roughly 4 percent of gross rent, or 0.3 points.
Maintenance, the small kind: an AC unit at AED 2,500, a water heater, a repaint at tenant change. AED 3,000 a year on average is prudent for a newer building, more for older stock. Another 0.3 points.
Add it up. From 8 percent gross we are at roughly 5.5 to 6 percent net before any financing. That is still two to three times what a comparable apartment yields in Munich or Vienna, and it is the number to use when you compare communities, buildings and off-plan payment plans.
Two practical rules. First, always ask for the current service charge per square foot and the last two years' history before you offer. Second, compare net to net. A Downtown unit at 5.5 percent gross and a JVC unit at 8 percent gross can end up closer than the headline suggests once Downtown's lower vacancy and higher tenant quality are priced in.
Want this calculated for a specific unit? Send us the listing, we send back the net numbers.
