Rental yield is the number every brochure leads with. It's also one of the most misunderstood figures in property. Here's what it actually means, and how to work out what you'll really earn.
Gross yield: the headline number
Gross yield is your annual rent as a percentage of the price you paid:
Gross yield = annual rent ÷ purchase price × 100
So an apartment bought for AED 1,500,000 that rents for AED 100,000 a year has a gross yield of about 6.7%. Simple — but it ignores every cost of owning the property.
Net yield: what you actually keep
Net yield takes your running costs off the rent first:
Net yield = (annual rent − annual costs) ÷ purchase price × 100
Using the same example, with illustrative costs:
| Item | AED per year |
|---|---|
| Annual rent | 100,000 |
| Service charges | −18,000 |
| Maintenance and repairs | −3,000 |
| Letting and management | −5,000 |
| Net income | 74,000 |
AED 74,000 ÷ AED 1,500,000 = a net yield of about 4.9%. That's still a solid return, but it's a very different number from the 6.7% on the brochure. These figures are for illustration only; every building's costs are different.
The costs people forget
- Service charges. Charged per square foot and they vary a lot between buildings. Always check the actual figure for the building you're buying in.
- Empty periods. Even a few weeks between tenants reduces your annual income.
- Management fees. If you live overseas, you'll almost certainly pay someone to manage the property.
- Furnishing and wear. Particularly for furnished and short-term lets.
A word on short-term rental numbers
You'll often see short-term rental returns worked out as "AED 300 a night × 365 nights". No property is booked every night of the year, and short-term letting comes with extra costs: cleaning, higher management fees, and furnishing. Some buildings don't allow holiday lets at all. Short-term renting can be very profitable, but not every property suits it, and the numbers need to be realistic.
The bottom line
Always ask for the net yield, and ask what assumptions sit behind it. A good adviser will show you the costs, not just the headline. If you'd like us to run the numbers on a property you're considering, we're happy to.
This article is general information, not financial advice. Figures are illustrative.
