Gross Yield Is a Marketing Number. Net Yield Is the One You Live On

The number you are shown is the number before everything

Gross yield is annual rent divided by purchase price. That is the whole calculation. It deducts nothing.

It is a useful number for comparing two properties quickly. It is close to useless for deciding whether a property will pay you what you need, because every cost of owning it sits outside the formula.

Nobody is hiding this. The gross figure is quoted because it is the largest defensible number available, and because the buyer rarely asks for the other one.

What sits between gross and net

Seven things, in roughly the order they bite.

• Service charges. In Dubai these commonly run from AED 3 to AED 30 per square foot per year, and prime towers with extensive facilities sit above that range. The Dubai Land Department publishes the figure building by building.
• Management. Full service letting management typically takes a percentage of rent, and short let management takes considerably more.
• Vacancy. Six weeks empty removes roughly 12 percent of the year’s rent before anything else is deducted.
• Maintenance and renewals. Appliances, decoration and the periodic refit a rented property needs to keep commanding its rent.
• Insurance, and ground rent or equivalent where the tenure carries one.
• Financing. Where the purchase is leveraged, interest is the largest single deduction and the one most sensitive to rates.
• Tax, in the country where the property sits and potentially where you are resident.

A worked example

Take a Dubai apartment bought at AED 2 million on a quoted 7 percent gross yield. That is approximately AED 140,000 of annual rent.

Assume a 1,200 square foot unit at AED 18 per square foot of service charge, which is around AED 21,600. Assume management at 5 percent of rent, roughly AED 7,000. Assume three weeks of vacancy, about AED 8,000. Assume AED 6,000 for maintenance and insurance.

That leaves approximately AED 97,400, which against the AED 2 million purchase price is a net yield near 4.9 percent before any financing and before tax. Entry costs of around 7 percent for a cash buyer push the figure on total capital deployed lower again.

These are illustrative figures, not a quote. The point is the shape of the gap, not the precision of any single line.

The gap is a different size in every market

In Dubai the dominant deduction is the service charge, which varies enormously between buildings in the same district. In Portugal and Spain the dominant deductions are entry costs and disposal commission. In the United Kingdom, for an overseas buyer of an additional property, the stamp duty surcharges do most of the damage before the first month’s rent arrives.

This is why a gross yield comparison across markets is close to meaningless. A 5 percent gross in one market can beat a 7 percent gross in another once everything is counted.

The question that replaces what is the yield

Ask what reaches your account in year one, after every cost, on this specific building, at this specific purchase price.

Anyone who can answer that has done the work. Anyone who redirects to the gross figure has told you something useful about the quality of their advice.

Independent advice. Clear numbers. No pressure to buy.