Calculating your Real Estate ROI

Let’s face it: every investor would like to get the highest return on investment (ROI) from their Dubai properties. Real estate investments are sizable and when you make an investment, you want to make sure it turns out a profitable one.

There are two main ways to earn as a property investor. Depending on your needs, budget, financial situation, and preference, you can choose between rental yields or capital gains.

Rental Yields

As the name suggests, rental yield is the income you obtain from renting your property. The higher your rental yield, the easier it is for you to cover operational costs, mortgage, and property management fees and still get something left for yourself.

So, how can you calculate your ROI on a rented property? It is not that simple since there are certain variables that you can choose to include or exclude. There are also other factors that may come into play that would affect the accuracy of your ROI calculation.

In its simplest sense, ROI is equal to net profit divided by cost of investment.

For instance, you bought a property for Dh 1,000,000.  You rented the property for Dh 10,000 per month. Your monthly expense is Dh 1,000. Your net profit would be Dh 9,000 per month (Dh 10,000 – Dh 1,000). Now, you would need to multiply Dh 9,000 for 12 months to get your annual net profit. This should give you Dh 108,000. From there, you can now divide net profit by the cost of investment which is Dh 1,000,000 and then multiply by 100 to get the percentage.

For this example, the ROI for the rented property is 10.8%.

Ensure that for net profit, you have subtracted all your expenses including maintenance, insurance, and utility bills, among others.

Capital Gains

Calculating capital gains is much easier compared to rental yields. Capital gain is the income you generate from the sale of your real estate in Dubai.

Let’s have another example. You bought a property for Dh 1,000,000 and sold it for Dh 1,500,000. To get the net profit, you would need to deduct Dh 1,000,000 from Dh 1,500,000. This should give us 500,000. The difference would be divided by the purchase price which is Dh 1,000,000 and then multiplied by 100. The ROI for this example is 50%.

It is worth noting that predicting the acceptable future selling price of your property could be based on educated guess or speculations. The selling price could be less or higher than your purchase price at the time you decide to put your property for sale.

Need help in making the right investment?

Before you buy a property for sale in Dubai, why not seek professional help first? Rocky Real Estate has the right knowledge and expertise to help you determine the actual ROI of the property you are interested in. Let Rocky Real Estate provide you accurate ROI calculation to ensure you are making the right decision. Not only that, but Rocky Real Estate has a solid background in Dubai’s real estate market. So, give them a call today and find out how they can help you get the highest ROI possible from your investment.