How to Calculate Accurate ROI for Your Dubai Property Investment

 Having worked in Dubai’s real estate market for 15 years, I’ve seen investors make two common mistakes when calculating ROI (Return on Investment):

1. Overestimating rental income by not factoring in costs like service charges, maintenance, and vacancy periods.

2. Ignoring hidden expenses that eat into actual profits, such as transaction fees, mortgage interest, and property management fees.

To make informed, profitable decisions, you must calculate ROI correctly—down to the last dirham. 

Image source

This guide will walk you through the exact steps to calculate an accurate ROI, helping you avoid the mistakes I’ve seen so many investors make.

Let’s break it down properly.

Understanding ROI: The Real Formula Investors Should Use

Image source

Most investors use a basic ROI formula:

ROI (%) = (Net Annual Profit / Total Investment Cost) × 100

Sounds simple, right? 

But here’s where many get it wrong: they forget about hidden costs.

A more accurate formula that factors in real-world expenses looks like this:

ROI (%) = [(Gross Annual Rent - Expenses) / Total Investment Cost] × 100

The difference? 

This formula considers everything that reduces your real profits, not just the rental income.

Now, let’s apply it to a real example.

Step 1: Calculate Your Total Investment Cost

Your investment isn’t just the purchase price. You must factor in all upfront costs, including fees and necessary expenses.

Key Investment Costs for Property in Dubai:

1. Property Price (e.g., AED 2,000,000)

2. Dubai Land Department (DLD) Fees (4% of the property price)

3. Real Estate Agent Commission (2% of property price)

4. Furniture & Fit-Out (if applicable)

5. Mortgage Down Payment (if applicable)

Example Investment Breakdown

Let’s say you buy an AED 2,000,000 apartment in Dubai Marina. Your total investment looks like this:

Expense Category	Amount (AED)
Property Price	2,000,000
DLD Fees (4%)	80,000
Agent Commission (2%)	40,000
Fit-Out & Furniture	50,000
Total Investment	2,170,000

👉 Why It Matters: Many investors ignore these extra costs and assume their investment is just the property price. But missing these numbers means you’re overestimating your ROI from day one.

Luxury 1-bedroom apartments in Dubai offer stunning views, high-end finishes, and top-tier amenities in prime locations like Downtown Dubai, Dubai Marina, and Palm Jumeirah. Whether for investment or personal living, these properties promise unmatched lifestyle and value.

Step 2: Determine Your Net Annual Rental Income

Your rental income is NOT just the monthly rent multiplied by 12. You need to deduct expenses like service charges, maintenance, and vacancies.

Deductions to consider:

• Gross Annual Rent: AED 140,000 (assuming AED 11,666/month)

• Vacancy Period: One month per year with no tenant (lost rent)

• Service Charges: AED 15,000/year

• Maintenance & Repairs: AED 5,000/year

• Property Management Fee: AED 7,000/year (if using an agent)

Example: Calculating Net Rental Income

Income/Expense	Amount (AED)
Gross Annual Rent	140,000
Vacancy Loss (1 month)	-11,666
Service Charges	-15,000
Maintenance & Repairs	-5,000
Property Management Fee	-7,000
Net Annual Rental Income	101,334

👉 Why It Matters: Many investors assume they'll get the full AED 140,000, but actual income is usually 20-30% lower due to expenses. This is the difference between a profitable and a failing investment.

Step 3: Calculate ROI (Cash Purchase vs. Mortgage)

If You Bought in Cash

Using the corrected ROI formula:

ROI = (Net Annual Income / Total Investment) × 100

ROI = (101,334 / 2,170,000) × 100 = 4.67%

If You Used a Mortgage

Many investors finance properties with 70-80% mortgages, so let’s see how that changes ROI.

Mortgage assumptions:

• Loan Amount: AED 1,600,000 (80% of AED 2,000,000)

• Down Payment: AED 400,000

• Interest Rate: 4%

• Monthly Mortgage Payment: ~AED 7,600

• Annual Mortgage Cost: AED 91,200

Now, subtract mortgage payments from net rental income:

Income/Expense	Amount (AED)
Net Annual Rent	101,334
- Annual Mortgage Cost	-91,200
Net Profit (After Mortgage)	10,134

Now, calculate ROI based on the initial down payment (AED 400,000 + fees = AED 570,000 investment):

ROI = (10,134 / 570,000) × 100 = 1.78%

👉 Why It Matters: A mortgage can make it easier to invest with less upfront capital, but it significantly reduces short-term returns. However, over time, as the mortgage is paid down, ROI improves, and capital appreciation adds to overall gains.

Key Takeaways & Expert Tips for Maximizing ROI

1. Always factor in hidden costs—your “real” ROI is lower than the basic formula suggests.

2. Vacancy rates impact returns. Realistically assume 1-2 months of downtime per year.

3. Service charges in luxury areas can eat into profits. Check these before investing.

4. Short-term rentals (Airbnb) can improve ROI, but require more management.

5. Leveraging a mortgage lowers immediate ROI, but increases long-term gains if property values appreciate.

Experience a new level of sophistication with premium branded villas in Dubai, designed in collaboration with world-renowned luxury brands. 

Is Dubai Property Investment Worth It?

Yes—if you calculate ROI correctly. Many investors assume a 7-8% ROI but don’t account for all the hidden costs. Realistic ROI is 4-6% in stable long-term rental markets, while short-term rentals can push it higher with proper management.

Image source

If you’re looking for a high-performing property investment in Dubai, Mira Developments offers exclusive investment opportunities in some of the city’s top high-ROI locations.

Contact Mira Developments today to explore premium properties and maximize your investment returns.