Calculating ROI on Rental Property in Dubai for Good Return on Investment

Figuring out the right price to rent out your apartment can be tricky. You want to make sure you’re charging enough to reflect its value without scaring off potential tenants. To help you nail down the perfect rental price, here are some handy resources when calculating ROI on rental property.

The rent hikes are here, and so can your ROI.

RERA (Real Estate Regulatory Authority) recently shook things up with a new rule: landlords can now adjust rent prices to match the current market value when renewing tenancies. This means the old cap of 10% on rent increases is out the window.

With landlords now able to hike up rent by as much as 20%, they can make a good return on investment for rental property, but tenants may start looking for better deals, leading to fewer renewals in areas hit by price surges.

This could actually help stabilize the rent market and put the brakes on skyrocketing prices in already pricey communities.

As a ripple effect, we can also anticipate a surge in the property transaction market.

After all, with rent yields potentially becoming juicier, property ownership becomes an even more enticing investment opportunity.

So, how do you decide on the right price for your apartment to rent out? Here are a few resources you can use to get a good ROI on rental property.

1. Use RERA Calculator to Calculating ROI on Rental Property

If you already have a current tenant and want to know the maximum rent permissible, the RERA calculator provides transparency and clarity on what’s the justified rental increases for your apartment.

Here’s a guide to using the RERA calculator:

Step 1: Visit the Dubai Land Department’s ‘Inquiry about the rental index‘ – Click on “Access Service” button.

Step 2: Fill out the form (Contract End Date, Property Type, Area, Number of Bedrooms, and Current Annual Rent)

Step 3: Click on ‘Calculate’ button to generate the result. This will show you the average rent for an apartment in your area and the maximum percentage of rent hike permissible. You can also export this result as a PDF .

How the increase is calculated:

If rent is 10% less than market value, there is no increase.
For rents 11-20% lower, maximum increase may be up to 5%.
For rents 21-30% lower, maximum increase may be up to 10%.
For rents 31-40% lower, maximum increase may be up to 15%.
For rents lower than 40% or more, maximum increase may be up to 20%.

2. Estimate Rent Using Transaction History

First, understanding the rent market and how much rent is charged for similar properties is essential before coming up with an amount.

Here are some property websites offering rent transaction history and property market analysis:

Of course, getting the numbers right before you put your property on the market is important, but you will also need to consider what makes your property unique to justify a higher rent.

When calculating ROI on rental property, take the time to access the details of the comparable rental properties. Here are some guidelines:

Compare the rental amount for at least 3-5 other rental units as closely match (i.e. same number of bedrooms, bathrooms, layout, square footage, etc) to your rental property as possible, preferably in the same building or community.
Find comparisons for rental properties that best match the category and style of your property (i.e. waterfront apartment, beachfront villa, off-plan, etc)
When was the property built? Find comparisons rentals that are approximately the same age as your property.
Compare rental properties that have the same visual appeal and amenities as yours (i.e. similar waterfront view, modern renovation, open kitchen, built-in gym, swimming pool, etc)

3. Calculating ROI on Rental Property with Property Management Companies

For short-term rental, income is seasonal. In Dubai, short-term rental peaks from October to March, but you’ll also need to consider the ‘dead’ months in the hot summer when bookings can be a struggle.

Companies like Airdna.co and local property management companies have tools that can help make better forecast. A great property manager, much like a good agent, should know which areas are in high demand for long-term rental and which ones are better performer for short-term rentals.

You can find some great insights to help get a good return on your investment for rental property in Dubai.

When calculating ROI on rental property, ask the property management companies for this data.

4. Estimating Rent With Your Agent

If you’ve an agent skilled in investment properties, you are in luck. They know the rents. They have a pretty good understanding of this area versus that area. Many agents invest in properties themselves and know the market well enough to help you pull comparable properties to figure out potential rent yield. They have done what you are trying to do.

5. Calculating ROI on Rental Property – ROI Calculator

Once you have some numbers in mind, here are our most-viewed calculators you can use to analyze your ROI on rental property to reap in the profits:

1. If you’re interested in long-term rental, use our Free ROI Calculator – Long Term Rental

2. If you’re interested in short-term rental, use our Free ROI Calculator – Short-Term Rental / Airbnb

It’s no secret that people continues to invest in Dubai, and rental properties offers lucrative rewards to those who do it right.

Calculating ROI on rental property optimally can be a challenging task. You don’t want to charge too much that makes it difficult to attract and keep good tenants, but you want to charge enough to maximize revenue.