Properties with Best Rental Yield in Dubai – How To Find Them (Part 1)
We all need a place to live, but owning a rental property is very different from owning your own home. The two have different approaches to bear in mind. So, what do we need to consider when selecting a ‘best rental yield’ potential property?
In Part 1, we will go through 6 important indicators that define an area’s strength which can impact your potential property’s rental yield.
In Part 2, we will show you step-by-step how to search for rental properties with the best return on investment (ROI).
6 Factors That Will Impact Dubai Rental Yield
As an investor, you will need to find communities that aren’t just good but highly desirable.
According to fäm properties, here are the top 10 best areas to buy properties in Dubai (as of Sep 2023):
|Rank||Community||Sold Properties||Average Price|
|1.||Jumeirah Village Circle||8,796||AED 746.7K|
|2.||Dubai Marina||7,019||AED 3M|
|3.||Business Bay||6,546||AED 1.4M|
|4.||Dubai Creek Harbour||3,925||AED 2.2M|
|5.||Jumeirah Lakes Towers||3,651||AED 1.1M|
|6.||Dubai Hills||3,178||AED 1.9M|
|8.||Sobha Hartland||2,730||AED 1.7M|
|9.||Town Square||2,211||AED 950.9K|
|10.||Palm Jumeriah||1,843||AED 3.9M|
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. Type of Property
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 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.