Real estate in Dubai in figures: expenses and income expectations

Real estate in Dubai

Property in Dubai

If you have been researching about real estate brokerage companies in Dubai then you already know that there are plenty of various costs and payments that await you on every step of the deal and afterwards when you become a proud owner of a real estate in Dubai. In this article we will try to summarize all the expenses you will need to accumulate to purchase a property in Dubai.

Investing in real estate abroad

On average, one-time purchase costs are 7% of the property value, annual costs depend on the size of the property and the presence of a mortgage (on average, about 1.5–6% of the property value. Dirty income with an increase according to a conservative strategy can be about 3-7% per annum, with a mortgage on an aggressive strategy – 15-17% (and higher), says Kurt Walker, founder of Cream City Home Buyers.

As a result, a completely average profitability can be considered as follows: net income, taking into account local personal income tax, will be about 3.5-4% per annum, with a mortgage – about 5-6%. Taking into account the initial costs of 7%, we get 107% / 4% without a mortgage: the payback is more than 26 years, and with a mortgage – more than 17 years. But this is all a rough estimate, since in some countries the payback can be a little more than 10 years. Or you can take a heavily undervalued real estate with high growth potential in the short term.

There are many strategies, you can combine them or choose one specific for each country. It is important to take into account one thing: the total investment portfolio must certainly have a wide diversification, so that it does not happen that you have invested all your savings in an apartment, and even with a mortgage, and it is temporarily not rented, and you need to pay a loan.

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We recommend for one property, according to all the rules of diversification, to distribute no more than 15% of your total portfolio. In this case, even if your investment portfolio contains only real estate, you will still be insured in case some property does not rent or turns out to be a failure. In addition, use several countries so that you are not dependent on the political, economic and social situation in any of them.

Checklist and entry thresholds for real estate in Dubai

The thresholds for entry when investing in real estate depend on the country and city, but regardless of the budget, in order to assess the profitability of investments in foreign real estate, you need to know the following:

  • The amount of one-time costs for the purchase of the property.
  • Amount of annual expenses for maintenance, mortgage (if any), taxes, etc.
  • The amount of expected income (rent + expectation of price increase).

One-time purchase costs vary by country, but are generally summarized as follows:

  • The price of the real estate itself.
  • Stamp duty (tax on the registration of property rights) – about 1-2% of the value of the property.
  • Services of a lawyer, a notary who act in the interests of the buyer and help to realize the transaction – an average of 1-2% Services of a realtor (if any) – up to 5-6%, but sometimes cheaper.
  • Petty expenses for making an entry in the land register, registration of an encumbrance (if you take out a mortgage), etc. – up to USD 1,000–2,000 per facility.
  • Expenses for repairs, furnishing, etc. – USD 5,000-20,000.

Annual expenses:

  • Property tax: depends on the terms of the lease (up to USD 500 per year).
  • Tax on rental income: 20-40% on average, although there is room for improvement. For example, if you register as a non-resident in the UK, you will not be taxed on your annual income of GBP 10,000, but in return you will have to spend money on a tax consultant who will help you prepare your return.
  • Management company costs (up to USD 600).
  • Maintaining a bank account and management account (management company account for you) – no more than USD 30 per month.
  • Costs for a tax officer who prepares an annual declaration in the country of real estate (up to USD 1,000-2,000), as well as for a tax consultant in your country who will prepare a declaration on citizenship or residence, and also assisted with other additional reporting, if any assumed in your country due to having a bank account abroad, etc. Prices for your own internal taxman depend on the country, but this is also hardly higher than an additional USD 1,000-2,000.
  • Mortgage payments: as a rule, the interest on a loan for foreigners is not lower than 3.5% per annum (+1% of the debt amount per year, aimed at repaying the body of the loan). If at the end of the mortgage payment period the debt is not zero, then you can either sell the property and pay it off, or extend the mortgage.
  • Repairs during the operation of the property: an average of USD 5,000 per year. 
  • Property insurance: USD 500-1000 per year.
  • Utilities, condominium payments, etc. depend on consumption volumes and lease conditions: about USD 5,000-7,000per year.
  • Unforeseen expenses (such as legal fees if tenants have to be evicted by the courts). When choosing a real estate, be sure to request a certificate of its condition, the last overhaul, the state of load-bearing structures, ceilings, gas and electricity supply systems, etc., in order to avoid the risks of overhaul.
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Annual income:

  • Rent (before deducting all expenses): 5-10% per annum without a mortgage or 10-15% with a mortgage.
  • Expected price increase (only relevant if the investor plans to sell the real estate) – depending on the country, it can be 2–5% or more.

Real estate agency in Dubai

If all these calculations seem to be too complicated or you want to trust someone with the payment checks then contact Ax Capital agency. Their specialists will assist you starting from choosing a housing of your dreams to signing the deal.


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