If you're still calculating ROI as (Annual Rent ÷ Purchase Price), you're leaving money on the table. and potentially misleading your clients.
Institutional investors and elite brokers don't look at "Gross Yield." They look at Net Cash Flow, Cash-on-Cash Return (CoC), and Internal Rate of Return (IRR).
This guide breaks down the advanced math behind true property profitability in Dubai, factoring in DLD fees, mortgage leverage, service charges, and vacant periods.
Detailed Cost Breakdown
Before we calculate returns, we must accurately calculate the Total Acquisition Cost and Total Operating Expenses. Omitting these creates a phantom ROI that doesn't exist.
1. Total Acquisition Cost (TAC)
- Purchase Price: Actual DLD Sale Price
- DLD Fee: 4% of Purchase Price + AED 580
- Trustee Fee: AED 4,200 (+VAT)
- Agency Fee: 2% (+VAT)
- Conveyance Fee: ~AED 6,000 - 10,000
Note: For mortgage buyers, add Loan Processing Fees (1%) and Valuation Fees (~AED 3,000).
2. Annual Operating Expenses (OPEX)
- Service Charges: Actual per sqft rate from DLD Index (Index dependent on area, e.g., AED 15-25/sqft)
- Maintenance Reserve: 0.5% - 1% of property value (for appliances, painting, repairs)
- Property Management: 5% of rental income (optional but recommended for investors)
- Vacancy Rate: 5% (standard modeling allowance)
Scenario A: The "Cash King" (100% Equity)
For cash buyers, we calculate the Net Yield based on the total capital deployed.
Example Property: 1BR in Downtown Dubai
DLD Sale Price: AED 1,800,000
Size: 850 sqft
| Item | Amount (AED) |
|---|---|
| Purchase Price | 1,800,000 |
| + DLD Fees & Transfer Costs | ~ 118,000 |
| Total Invested Capital | 1,918,000 |
| Recurrent Income & Expenses | |
| Gross Annual Rent | 135,000 |
| - Service Charges (AED 22/sqft) | (18,700) |
| - Maintenance & Management | (6,750) |
| Net Operating Income (NOI) | 109,550 |
💰 True Net ROI (Cash)
NOI (109,550) ÷ Total Invested Capital (1,918,000) = 5.71%
Compare this to the "Gross Yield" of 7.5% that basic brokers quote. This 5.71% is the REAL number.
Scenario B: The "Leverage Master" (Mortgage)
This is where it gets interesting. When you use a bank loan, your ROI calculation changes completely. We use Cash-on-Cash Return (CoC) because you are only putting down a fraction of the price.
Financing: 80% LTV (Loan to Value) | 20% Down Payment
Interest Rate: 4.5% Fixed | 25 Year Tenure
| Item | Amount (AED) |
|---|---|
| Down Payment (20%) | 360,000 |
| + All Transaction Fees (DLD, Agency, Bank) | ~ 135,000 |
| TOTAL CASH INVESTED | 495,000 (This is your denominator) |
| Cash Flow Calculation | |
| Net Operating Income (from above) | 109,550 |
| - Annual Mortgage Payments (Principal + Interest) | (80,040) |
| Net Free Cash Flow | 29,510 |
🚀 Cash-on-Cash Return
Net Free Cash Flow (29,510) ÷ Total Cash Invested (495,000) = 5.96%
Wait, isn't that almost the same? YES, but here is the magic variable: Principal Paydown. Every month, your tenant is paying off your loan. That is equity building up in your pocket, not cash, but wealth.
📈 Total Leveraged ROI (The "Wealth Formula")
If we add the Principal Paydown (~AED 16,000 in Year 1) AND conservative Capital Appreciation (e.g., 5% via DLD trends):
- Cash Flow: AED 29,510
- Principal Paydown: AED 16,000
- Appreciation (5% of 1.8M): AED 90,000
- Total Wealth Generated: AED 135,510
Total Wealth (135,510) ÷ Cash Invested (495,000) = 27.3% Annual ROI
How to Calculate This in Seconds?
You can't do this on a napkin. You need precise data:
- Exact Service Charges per tower (from DLD/Mollak data)
- Real Rental Contracts (EJARI data)
- Accurate Appreciation Trends (DLD Transaction history)
FalconPro aggregates all these distinct data points into one dashboard. We don't just give you a price; we give you the Investment Grade Analysis that allows you to present calculations like this to your investors.
Stop Guessing. Start Modeling.
Impress your sophisticated clients by showing them you understand the difference between Gross Yield and Leveraged IRR.