How to actually calculate the return on a Dubai apartment, with every cost included

Four numbers circulate in property conversations and get used interchangeably. They are not the same, and each answers a different question.

The four numbers

• Gross yield. Annual rent divided by price. Useful only for a first sort of a long list.
• Net yield. Rent minus all operating costs, divided by the all-in purchase cost. This is the honest headline number.
• Cap rate. Net operating income divided by market value. Used to value income property and to compare assets rather than deals; it ignores how you financed it.
• Return on equity. Net income after finance costs, divided by the cash you actually put in. With a mortgage this is the number that answers "what did my money earn".

A listing quoting 9% is quoting the first. Your bank account reflects the second or the fourth.

Building the number properly

Start with the all-in purchase cost, not the price. Add the Land Department transfer fee of 4%, agent commission of 2% plus VAT, trustee and administrative fees, the developer's NOC, and — if financing — mortgage registration, arrangement fee and valuation. On resale that totals roughly 6–8% above the price. Furnishing, if the unit lets furnished, belongs here too.

Then take annual rent and subtract, in this order:

• Service charge — dirhams per year for that unit, not a rate per foot.
• Void — assume at least a few weeks a year unless you have evidence otherwise.
• Letting commission on each new tenancy, plus registration and renewal fees.
• Maintenance and replacement — air conditioning servicing, appliances, repainting between tenants.
• Insurance, and management fees if you are not managing it yourself.
• Finance costs, if there is a loan.

What that does to the headline

An advertised 9% on a mid-market apartment typically resolves to 5–6% net. On premium and branded stock, where service charges run several times higher and voids are longer, the same exercise commonly lands between 3% and 4.5%. Neither result is bad — but the second is a capital-preservation asset, not an income asset, and it should be bought as one.

The two things people leave out

The payback period is not the inverse of the yield. A 6% net yield does not mean sixteen years to break even, because rent rises, costs rise, and — if you sell — the exit price dominates the result. Payback is a rhetorical figure, not a decision tool.

Capital growth is not income. Adding an assumed annual appreciation to the yield produces a large and meaningless number. Model them separately, and stress-test the appreciation assumption at zero. If the case only works with growth in it, it is a bet on the market rather than an investment in a property.

A short sanity check

Before committing, ask the seller or agent for three figures: the service charge in dirhams for last year, the rent actually achieved in each of the last two years, and the number of weeks the unit stood empty. If those cannot be produced, no return has been calculated — only quoted.