Highest Rental Yield in Dubai: How to Find the Best Dubai Properties for ROI
When it comes to investing in rental property in Dubai, you’ve got to think differently than you would about buying your own home. It’s all about finding a place that’ll bring in the most cash, not just somewhere you’d like to live. So, what do we need to consider when selecting a potential property with the highest rental yield in Dubai?
In this guide, we will go through 6 important indicators that define an area’s strength which can impact your potential property’s ROI. That’s Part 1.
And, in Part 2, we will show you step-by-step how to search for rental properties with the best return on investment (ROI).
Part 1: 6 Factors That Will Impact Your Rental Yield in Dubai
1. Location
As an investor, you will need to find area that aren’t just good but highly desirable.
According to fäm properties, here are the top 10 best areas to invest in Dubai (as of Nov 2024).
| rea | Sold properties | Average price (AED) |
|---|---|---|
| Jumeirah Village Circle | 14,405 | AED 882K |
| Business Bay | 9,888 | AED 1.6M |
| Dubai Hills | 6,230 | AED 2.2M |
| Dubai Marina | 5,387 | AED 2.4M |
| Meydan One | 4,521 | AED 731.3K |
| Jumeirah Lakes Towers | 4,375 | AED 1.3M |
| Arjan | 4,246 | AED 900K |
| Dubai Sports City | 3,557 | AED 843K |
| Madinat Al Mataar | 3,428 | AED 3.1M |
| Dubai Land Residence Complex | 3,258 | AED 720K |
Success through property investing can be found in any location, but only if you understand that location!
Take a look at these top 10 communities, learn what they offer, and research the type of tenants these communities attract.
2. Local Businesses Around You
When searching for a rental property, keep an eye out for what’s nearby.
For long-term rental, how far is it from the closest grocery, school, or work areas?
For short-term rental, how far is it from the beach or tourist spots? A tenant is just like us.
They want to grab a quick coffee, go for a bike ride in the park, and get to the grocery store easily. Invest in communities where you think tenants want to live.
Tip: Take a look at which location big businesses (i.e. Starbucks and Waitrose) are investing in. Large businesses like these tend to spend a lot of time and money researching before investing in a new location. If Starbucks and Waitrose are doing well in an area, it might be a potential location for you to consider too.
3. Property Type
According to Property Finder’s findings:
- Apartments typically provide stronger rental yields than townhouses and villas due to Dubai’s largely transient, low to mid-income population with a budget geared toward smaller, affordable homes.
- Opt for smaller-sized apartments (studio and 1-bedroom) in affordable communities with established infrastructure, near to transport and essential amenities such as education and healthcare.
- Resale of smaller units is faster and offers a better value compared to larger sized properties, mainly because a major segment of Dubai’s expat population can afford to purchase these when the investor wants to release equity.
Keep in mind: Functionality, facilities, and amenities offered by each type of property will also affect its demand as a rental property.
4. Property Condition
New or old? Off plan property or resale?
Generally speaking, the older the property, the more maintenance costs and repairs.
The newer property, the fewer issues you may need to deal with. With a rental property that requires more repairs, will you be doing the maintenance on your own? Are you close enough or will it take you an hour to reach the property? If being a handyman is not your thing, you can hire someone (more costly though) to do the work for you.
And, to get a higher yield on an older property, you will need to set aside extra money and time to improve the rental property.
5. Occupancy Rate
Occupancy rate is the percentage of a year that a property will be occupied. Ideally, you want the occupancy rate of a property to be 100%! Agents and property managers should be able to provide you with an idea if it’s low or high.
A high occupancy rate is very crucial, especially for short-term rentals, as having a property sit empty is a high expense for any landlord.
If you want a more stable and guaranteed occupancy rate, look for properties that are already leased out, and go for the long-term rental route as opposed to doing short-term rental. (More on Long-Term Rental vs Short-Term Rental)
6. RERA Service Charge & Associated Fees
Service Charges can range anywhere between AED 2 to AED 30 per sq.ft depending on property type, size, and community location.
Some communities have surprisingly low Service Charge (Dubai Land, for example), while other areas have exceptionally high rates (such as Palm Jumeriah). It’s important to include this fee when evaluating a property as it will affect your rental yield.
Service Charges by the property can be found directly on DLD’s website, or just ask the agent who’s representing the property. Oftentimes, it’s shown in the listing.
Note:
- For short-term rental, you will also need a holiday home license from DTCM. Registration fee is AED 1,520, and the annual permit ranges from AED 370 to AED 1,270 depending on property size.
- See post here for other associated fees when buying a property.
Part 2: How to Find Highest Rental Yield in Dubai
Step 1: Make a Community Evaluation
Alright, in Part 1, we talked about the top 10 best areas to invest in Dubai (as of Nov 2024).
| Area | Sold properties | Average price (AED) |
|---|---|---|
| Jumeirah Village Circle | 14,405 | AED 882K |
| Business Bay | 9,888 | AED 1.6M |
| Dubai Hills | 6,230 | AED 2.2M |
| Dubai Marina | 5,387 | AED 2.4M |
| Meydan One | 4,521 | AED 731.3K |
| Jumeirah Lakes Towers | 4,375 | AED 1.3M |
| Arjan | 4,246 | AED 900K |
| Dubai Sports City | 3,557 | AED 843K |
| Madinat Al Mataar | 3,428 | AED 3.1M |
| Dubai Land Residence Complex | 3,258 | AED 720K |
Next, to get an idea of the rental yield in Dubai in the top 10 areas, we have extracted the average rental gross yield for a “1 Bedroom Apartment” from Property Finder.
Keep in mind this is a ‘gross yield’ which means, community service charges and all other associated costs have not been factored in.
Average Dubai Property Yields in Top 10 Best Area to Invest in Dubai
| Rank | Community | Average Sale Price (1 Bedroom) | Average Rental | Average Rental Gross* |
| 1. | Jumeirah Village Circle | AED 800,000 | AED 75,000 | 7.40% |
| 2. | Business Bay | AED 1,250,000 | AED 100,000 | 5.90% |
| 3. | Dubai Marina | AED 1,400,000 | AED 110,000 | 6.70% |
| 4. | Dubai Hills | AED 1,285,000 | AED 100,000 | 6.50% |
| 5. | Meydan One | AED 935,000 | AED 72,999 | 5.80% |
| 6. | Dubai Maritime City | AED 1,800,000 | AED 115,000 | 6.10% |
| 7. | Jumeirah Lake Towers | AED 1,072,500 | AED 97,000 | 6.70% |
| 8. | Arjan | AED 798,000 | AED 73,000 | 6.80% |
| 9. | Dubai Sports City | AED 567,500 | AED 60,000 | 6.90% |
| 10. | Ras Al Khor Industrial First | – | – | – |
*Property Finder: Rental gross yield = Average annual rental price / Average sale ‘transaction’ price.
Step 2: Search & Compare Similar Rental Properties
As an investor, plan on investing in an area you are familiar with or near you. It will help you become an expert in your chosen area, and compare deals nearby, easier.
Once you have narrowed down an area (or two) you are comfortable with, start looking for properties on property websites that fit your list of criteria. But first, you need to be very clear on your criteria. This will prevent you from deviating and help maximize your potential rental yield in Dubai.
Stick to your criteria on how much ‘home’ you can afford.
Here are some criteria that should be clearly defined:
1. Maximum purchase price
2. Maximum mortgage payment
3. Cash-flow requirement
4. Cash on cash return
5. Maximum furnishing cost
Once you have narrowed down some potential properties in an area, you can review and compare the property building details (i.e. sale price, Dubai rental yields, rental history) at DXB Interact.
Step 3: Rental Yield in Dubai – Use ROI Calculator
Clearly, a strong return on investment (ROI) is the ultimate goal when investing in any property.
We have put together a ROI Calculator using Excel/Google Sheets. This calculator includes all the upfront and extra costs that come with buying a property in Dubai and the potential return on investment (ROI) of a given property.
Dubai Rental Yields Calculator
In short, assuming all other factors are equal, a property with a greater cash flow is the better investment.
Conclusion
When considering areas with the best rental yield in Dubai, it’s not just about dividing rental income by property purchase price. There is a lot more to it than only factoring in those two numbers, so make sure you take the time to research, dig in the facts, understand what you are getting into, and then build your plan around it.
Let’s be honest, you probably will not find that perfect rental property that checks all on your list, but at least now you will have the tools to do your own due diligence.
