How to calculate rental yield in Dubai, properly

Gross rental yield is annual rent divided by purchase price. That is the number you will be quoted, it takes ten seconds to work out, and it is almost never the number you actually earn.

The useful calculation is not harder. It just subtracts the things the first one leaves out.

The three figures, and why they differ

Gross yield is rent ÷ price. It assumes the property costs nothing to own and nothing to buy.

Net yield on price is (rent − running costs) ÷ price. Closer, but it still pretends the purchase itself was free.

Net yield on capital deployed is (rent − running costs) ÷ (price + acquisition costs). This is the one that answers the question you are actually asking: for every dirham I part with, how much comes back each year?

The gap between the first and the third is usually two points or more. On a property quoted at 7%, you may be earning 4.4%.

What comes out of the rent, every year

The service charge is the one that surprises people. In the UAE it is billed per square foot per year, and it varies far more than buyers expect — roughly AED 6 at the cheaper end of Dubai and Sharjah, past AED 40 in a prime tower. On a 2,000 sq ft home that is the difference between AED 12,000 and AED 80,000 a year, out of the same rent.

RERA publishes a Service Charge Index through the Dubai REST app. Check the actual figure for the actual building before you model anything. An area average is a starting point, not an answer.

Then, depending on how you hold it:

• Management, if you are not self-managing — commonly around 5% of rent
• Letting commission — Dubai tenancies are annual, so in practice this recurs rather than being a one-off
• Vacancy — the weeks between tenants, which are not zero
• Maintenance — a replacement allowance, not just repairs

None of these appear in a gross yield. All of them come out of your rent.

What comes out before you own it at all

Budget roughly 6–7% on top of the purchase price, and note that since a UAE Central Bank directive in February 2025 these must be paid in cash — they cannot be added to a mortgage.

That money is capital you have deployed and will not get back. Leaving it out of the denominator flatters the answer.

A worked example

Illustrative figures, not a quote or a forecast. Substitute your own.

A one-bedroom in Dubai Marina: AED 1,500,000, achieving AED 110,000 a year, 850 sq ft, service charge AED 21.50 per sq ft.

Service charge     850 × 21.50          = 18,275
Management         5% of 110,000        =  5,500
Letting            5% of 110,000        =  5,500
Vacancy            4% of 110,000        =  4,400
Maintenance        5% of 110,000        =  5,500
                                          ------
Running costs                             39,175
Net income         110,000 − 39,175     =  70,825

Acquisition costs  4% + 2%+VAT + fees   ≈ 97,855
Capital deployed   1,500,000 + 97,855   = 1,597,855

• Gross yield — 110,000 ÷ 1,500,000 = 7.33%
• Net yield on price — 70,825 ÷ 1,500,000 = 4.72%
• Net yield on capital — 70,825 ÷ 1,597,855 = 4.43%

2.90 points between the headline and the reality. Nothing in that example is unusual or pessimistic — it is an ordinary apartment with ordinary costs.

If you are using a mortgage

Yield stops being the right measure. What matters then is cash-on-cash return: annual cash left after the mortgage, divided by the cash you actually put in — deposit plus those acquisition costs.

A mortgage can raise cash-on-cash return while lowering net yield. Both are true at once, and which one you should care about depends on whether you are short of capital or short of income.

What to ask before you model anything

1. The service charge, per square foot, for that building — not the area
2. The achievable rent, which a letting agent will tell you is below the asking rent
3. Whether the quoted yield is gross or net, and if net, net of what

A seller quoting a yield without naming the service charge has given you a number you cannot use.

Run your own figures

Every cost above is adjustable, because every one of them varies. The calculator below works in your currency, shows each line of the arithmetic, and pre-fills service charges from RERA’s published area ranges so you can start from something real and then replace it with the building’s actual figure.