ROI of a property in Dubai can be divided into two parts:
- Annual rental ROI of a Property
- Total ROI on an investment
To better understand a property’s ROI we need to understand both of these individually. In this Article I will explain on how to calculate your property’s ROI in an easy way. Let us establish a property to use as an example first which we will use for both calculation types. Let’s say that we buy an apartment in a high rise building and the price of the apartment is AED 1,000,000 whereas its size is 700 sq. ft. For such a property we would be expected to pay the following additional costs to reach our final investment amount:
Total Purchase Cost Calculations:
Unit Price 1,000,000
DLD Transfer Fees + Trustee Fees 44,200
Agency Fee (2%) 20,000
VAT on Agency Fee 1,000
Total Unit Cost 1,065,200
Annual rental ROI of a Property in Dubai:
The annual rental ROI of a Property in Dubai can be calculated by obtaining the following figures:
- Annual rent of the unit
- Service Charges of the unit
- Maintenance and Up Keep Costs per year
- Total purchase cost of the unit.
To get the net rental return of the property, we subtract Service Charges and Maintenance from the annual rent to reach the Net Annual Rental income figure. Once we have the net annual Rental Income figure we divide it by the total purchase cost and then multiply the result by 100 to reach the annual rental ROI percentage.
For the property that we bought the calculations will show up as follows:
Rental ROI:
Total Unit Cost 1,065,200
Annual Rental Income 85,000 (Gross Income = 7.98%)
Service Charges 11,200 (Calculated at 16 / sq. ft.)
Apartment Maintenance. 1,500
Net Rental Income 72,300 (Annual Rental Income – Service Charges – Apartment Maintenance)
Net RoI 6.79%. (<Net Rental Income / Total Unit Cost> x 100)
Net Rental ROI Calculation:
From the calculations above you can reach the expected net annual ROI of a property in Dubai and the figures taken into consideration are very close to reality as Dubai properties are expected to generate 6% – 8% annual rental income.
- Total ROI on a property in Dubai
- The total ROI of a property in Dubai will factor in the following:
- Total duration of ownership of the property.
- Total net rental income.
- Selling price of the unit.
Long-term ROI Calculation:
To get the Total ROI of a property in Dubai we first get the figure of profit we received from the sale of the property which can be done by subtracting the selling price from the total purchase cost. Now we add the total rental income generated to the profit from sale figure to get our net income from the property during the ownership period. Using a similar formula to what we used to calculate the Rental ROI we get to the total ROI figure.
Now applying the same to our property – which we will suppose we owned for 2 years and was rented throughout the duration of our ownership we reach the following calculations:
Resale After Two Years:
Total Unit Cost 1,065,200
Net Rental Income 167,390
Selling Price 1,250,000
Profit from Sale 184,800
Total Income in 2 Years 352,190 (Profit from Sale + Net Rental Income)
Net RoI 33.06% (<Total Income / Total Unit Cost> x 100)
NET ROI of a Property in Dubai
From the calculations you can see that over a period of 2 year ownership the Net ROI for a property in Dubai was 33.06% which comes to 16.53% per year which is an excellent Return on Investment in any asset class. These figures are realistic and attainable in Dubai if you time your entry and exit right and MOST IMPORTANTLY if you have the right Property Consultant on your side.
If you want me to publish a ready google sheet where you just input your figures to get ROI then drop me a message from the contact page.
Investing in Dubai’s real estate market is a golden opportunity, especially with regulations in place to protect buyers. The market is on fire, with transactions surging year-on-year. The year 2022 showed a 61.9% YoY increase, according to Property Finder.
Remember, for first-time buyers, a mix of research and expert guidance is key. Consider maintenance fees and service charges in your calculations and stay informed about market changes. This way, you’ll be well on your way to making a smart investment in UAE property.