Dubai properties are one of the best investments if you are looking forward to building a passive, hands-off, and yet steady income stream.
The rental demand is high in Dubai. Due to the Global Visa program and strong job growth in fields like tech, hospitality, logistics, and finance, the city is seeing a steady inflow of skilled foreign professionals and business personnel who come here for employment or business expansion. The population is rising in the city, and they prefer to rent before buying a property outright.
If you are a real estate investor who wants to maximise his/her rental income, a seasoned property consultant in Dubai can help you find the best property for it within your budget. Here are some things to keep in mind during this journey:
Understand the Difference Between the Gross and the Net Rental Yield
The Gross Rental Yield is simple to calculate. You can use this formula to calculate it:
Gross Rental Yield = (Annual Rent ÷ Property Purchase Price) × 100
For example, if you bought a property for AED 1,000,000 and are getting AED 60,000 as rent per year, your gross rental yield will be:
(60,000 ÷ 1,000,000) x 100 = 6 percent
However, as a property consultant in Dubai, our experts at Flair Properties International will tell you that this is NOT your real income.
Your real income is reflected by the Net Rental Yield – what remains in your account after paying all the property-related expenses, such as:
- Property Management and Maintenance Charges,
- Utilities, Insurance, and Service Charges,
- Furnishing and Repair Costs, etc.
You can calculate it using this formula:
Net Rental Yield = ((Annual Rent – Annual Expenses) ÷ Property Purchase Price) × 100
So, if you spent AED 10,000 on various expenses related to the above property, your net rental yield will be:
((60,000 – 50,000) ÷ 1,000,000) x 100 = 5 percent
At present, gross rental yield of 7 percent or above and net rental yield of 5 percent or above is considered good.
Should You Invest in a Residential Property or a Commercial Property
Residential properties in Dubai have higher rental demand, lower occupancy rates, and easier resale potential. You can expect a gross rental yield of 6.5 to 7.5 percent on a residential property.
Dubai commercial properties have higher rental yields, usually ranging from 8 to 10 percent. They have longer leases too – ideal for those who prefer a more hands-off approach. However, they have a higher entry cost, may have longer vacancy periods, and require more due diligence.
As a reputed property consultant in Dubai, we consider the following before recommending to our clients whether they should buy a residential or a commercial property:
- Their budget (AED 1.5M+ or less),
- Their risk appetite (whether they can handle long vacancy periods or not),
- Their income goal (whether they are looking for a consistent monthly income or long-term returns),
- The time they want to invest (whether they will manage the property actively or not)
According to our experts, people looking for a lower entry point, safety, and consistent and predictable rental income should consider Dubai residential properties. Those who are looking for higher returns, can tolerate more risk, and research well may invest in commercial properties.
A good and knowledgeable property consultant in Dubai considers many more things before suggesting the best options for you. They will tell you whether to go for short-term rentals or long-term leases, help you learn about Dubai’s tenancy laws, tell you how to upgrade your property to fetch better rent, how to make sure that your vacancies remain less and the occupancy rate is high, which property will have higher capital appreciation in the long term, and more.
If you need a personalised rental income building recommendation in Dubai, contact us today.
