Hello everyone

There have been a lot of questions lately on how to calculate returns on real estate investments—what to include, how to compare, and what terms like ROI or ROE actually mean.

As a broker who also invests personally in both the Singapore and Dubai property markets, I often break this down for my clients in a straightforward way. This isn’t financial advice—just a practical framework I use when analyzing deals for myself and my clients.

Rental Yield

Rental yield is focused purely on the rental income your property generates, relative to your property cost.

Net Rental Yield = (Annual Rental Income – Annual Costs) / Property Purchase Price

In Dubai, the key recurring cost is service charges. While furnishing is usually a one-time expense, I often include it in the overall calculation for a more conservative view.

Here’s what I typically factor in:

• Annual service charges
• DLD fee (4% of property value)
• For secondary units: agent commission (2%)
• Registration/admin fees (usually around AED 2,000–5,000)
• Optional: furnishing (as a one-time cost)

This gives a clearer picture of how much your property is yielding on an annual basis from rental alone.

ROI - Return on Investment

ROI measures your total return—capital gains plus rental income (assuming you rent it out)—against your total investment outlay.

Formula:
ROI = (Capital Appreciation + Net Rental Income) ÷ Total Investment Cost

Example: Off-Plan Property in Dubai

• Purchase Price: AED 1,000,000
• DLD (4%): AED 40,000
• Admin/Registration Fees: AED 5,000
• Furnishing Cost: AED 30,000
• Interest Paid (3 years): AED 35,000
• Total Investment Cost: AED 1,110,000

Income:

• Net Rental Income (2028–2030): AED 70,000 × 3 = AED 210,000
• Sale Price in Jan 2031: AED 1,300,000
• Capital Gain: AED 300,000
• Total Returns: AED 510,000

Returns:

• Total Returns: AED 510,000
• Total costs: AED 110,000
• Net Return After Costs (DLD, furnishing, etc.): AED 510,000 – AED 110,000 = AED 400,000

ROI = AED 400,000 ÷ AED 1,110,000 ≈ 36%

ROE – Return on Equity

ROE looks at how much return you earned based only on your cash invested (excluding the bank loan).

In the same example, your cash outlay is:

• Down payment: AED 500,000
• DLD: AED 40,000
• Admin: AED 5,000
• Furnishing: AED 30,000
• Interest paid: AED 35,000
• Total equity used: AED 610,000

Returns are the same: AED 400,000
ROE = AED 400,000 / AED 610,000 ≈ 66.4%

The reason ROE is higher is because of leverage. You’re using borrowed funds to amplify your return on cash. This is why real estate is a preferred asset class for many investors—it lets you stretch your capital further. But do note, you should only leverage what you can afford. Do not ever overstretch yourself, as that will land you in financial difficulties. That is why it is always good to speak to a trusted professional.

Anyway, this is just a very high level overview so please excuse the details which are left out.

Key Takeaways

Metric	What It Measures	Example Value
Rental Yield	Rental returns per year	7%
ROI	Returns over total investment costs	~36.5%
ROE	Returns over your own cash invested	~66.4%