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.
Service charges
In Dubai, service charges 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.
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
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.
The worked example
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 rules for comparing yields
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.
Frequently asked
What is a good rental yield in Dubai?
Gross yields of 5 to 9 percent are typical depending on the community. A net yield of 5 percent or more after service charges, management and vacancy is a solid result for an apartment.
Who pays service charges in Dubai, landlord or tenant?
The owner. Service charges are the owner's cost and are not passed to the tenant under a standard tenancy contract.
Are Dubai rental yields taxed?
Not in the UAE for individuals. Your home country may tax foreign rental income; check with your tax adviser.
Want this calculated for a specific unit? Send us the listing, we send back the net numbers.
