Net rental yield: known limitation 1

It says nothing about capital growth. A four percent net yield in a market rising six percent a year and a four percent net yield in a market falling six percent a year are not the same investment.

Net rental yield: known limitation 2

Service charges are not fixed. Owners associations raise them, and a tower with an ageing chiller or a disputed developer handover can see a step change that removes a full percentage point of net yield overnight.

Net rental yield: known limitation 3

The rent input is the achieved rent, not the asking rent. Using the asking rent quietly rebuilds the same optimism the gross yield had.

Playbooks / Property

Net rental yield

Net rental yield is annual rent minus every running cost, divided by the purchase price plus every acquisition cost, and it is typically two to three percentage points lower than the gross yield a listing advertises.

The rule

Gross yield is a marketing number. It divides annual rent by the purchase price and stops, which means it silently assumes two things that are never true: that you paid only the price, and that the rent arrives without deductions.

Neither holds. In Dubai you pay a four percent Dubai Land Department transfer fee, plus an administrative charge, plus a two percent agency commission with five percent VAT on top of that commission, plus a trustee office fee of around four thousand dirhams. If you borrow, add a mortgage registration fee of 0.25 percent of the loan. Before a tenant has viewed the property you are roughly six to seven percent of the purchase price down, and none of that is recoverable on exit.

Then the rent gets eaten. The service charge is the big one and it is the cost most buyers under-model, because it is quoted per square foot per year and never appears in the listing. A nine hundred square foot apartment at eighteen dirhams a foot is sixteen thousand two hundred dirhams a year, gone. Add management at five to eight percent of collected rent if you are not there to handle it yourself, a maintenance reserve, insurance, and a vacancy allowance for the weeks between tenants and the cheque that arrives late.

What the gap actually looks like

Take a one bedroom at one and a half million dirhams renting for one hundred and five thousand.

Gross yield: 105,000 divided by 1,500,000, which is 7.0 percent. This is the number in the advertisement.
Service charge at eighteen dirhams on nine hundred square feet: 16,200.
Management at five percent of collected rent, a four week vacancy allowance, a five percent maintenance reserve and fifteen hundred of insurance: roughly 19,700 more.
Net operating income: about 69,100.
Acquisition costs: 4 percent of 1,500,000 is 60,000, agency at 2 percent plus VAT is 31,500, trustee and admin about 4,600. Total 96,100.
Net yield: 69,100 divided by 1,596,100, which is 4.3 percent.

Seven percent became four point three. Nothing dishonest happened. The advertised number simply answered a different question from the one you were asking.

Why this is the first page on this site

Because every other property decision is downstream of it. Whether to buy at all, whether to borrow, whether one building beats another, whether to sell: all of them are comparisons between net yields, and a comparison between gross yields is a comparison between two pieces of marketing. The cap rate sits between the two: better than gross, still short of describing your position, and useful mainly for ranking buildings.

It is also the number that turns "Dubai yields beat London" from a slogan into a testable claim. Dubai's gross yields genuinely are higher. Dubai's service charges are also genuinely higher, and in some waterfront and serviced towers they are high enough to close most of the gap. You cannot know which until you run it.

The arithmetic

Net operating income = Annual rent - Service charge (size in sq ft x rate per sq ft) - Management fee (share of collected rent) - Maintenance reserve - Insurance and fixed costs - Vacancy allowance Total outlay = Purchase price + Transfer fee (4% in Dubai) + Agency commission x (1 + VAT) + Trustee, admin and mortgage registration Net yield = Net operating income / Total outlay Break-even occupancy = (Fixed costs + debt service) / (Annual rent x (1 - management rate))

Where it breaks

It says nothing about capital growth. A four percent net yield in a market rising six percent a year and a four percent net yield in a market falling six percent a year are not the same investment.
Service charges are not fixed. Owners associations raise them, and a tower with an ageing chiller or a disputed developer handover can see a step change that removes a full percentage point of net yield overnight.
The rent input is the achieved rent, not the asking rent. Using the asking rent quietly rebuilds the same optimism the gross yield had.
It is an annual snapshot. It does not handle a rent free period, a fit out cost, or the eighteen months of below market rent that the RERA rental index can lock you into after a tenant is in place.
On a leveraged purchase the net yield on total outlay and the cash on cash return diverge sharply. Look at both or you will misjudge how much risk the debt is carrying.

When to use it

Before any offer on an income producing property, and on every property already in your portfolio at least once a year. If you have never calculated it on something you already own, that is the first calculation to run.

Run it on your own numbers

The Net Rental Yield does this arithmetic for you, in your currency, in about thirty seconds.

Open the calculator

Sources

Last reviewed 26 August 2026. Commercial relationship disclosure: the author works in Dubai real estate brokerage. See the disclosure standards. Disclosure standards.