1. Yield (Cash Flow Focus)
- Measures income from rent relative to property price.
- Example: AED 1,000,000 property rents for AED 70,000/year → 7% yield
- Does NOT include price growth (the property could rise or fall in value; yield only looks at rent).
Yield is the annual rental income a property generates relative to its purchase price.
Formula: Yield (%)=Annual RentProperty Price×100\text{Yield (%)} = \frac{\text{Annual Rent}}{\text{Property Price}} \times 100Example:
- Purchase price: AED 1,000,000
- Annual rent: AED 70,000
Yield=70,0001,000,000×100=7%\text{Yield} = \frac{70,000}{1,000,000} \times 100 = 7%YIELD Key Point:
- Focused on cash flow (monthly or annual income).
- Higher yield = better rental income relative to price.
2. Growth / Capital Appreciation
- Measures increase in property value over time. It is just the change in property value.
- Example: Property bought for AED 1,000,000 → sold for AED 1,200,000 after 3 years → 20% growth
- Often called “price growth” or “capital growth”.
- Focused on long-term wealth building , not immediate cash flow => only on price increase , not rental income.
Growth / Capital Appreciation Formula
Growth (%)=Current Property Value−Purchase PricePurchase Price×100\text{Growth (%)} = \frac{\text{Current Property Value} - \text{Purchase Price}}{\text{Purchase Price}} \times 100
Annualized Growth (optional, for multiple years): Annual Growth (%)=(Current Property ValuePurchase Price)1n−1\text{Annual Growth (%)} = \left(\frac{\text{Current Property Value}}{\text{Purchase Price}}\right)^{\frac{1}{n}} - 1Where n = number of years held.
Example
- Purchase price = AED 1,000,000
- Selling price after 3 years = AED 1,200,000
Growth=1,200,000−1,000,0001,000,000×100=20%\text{Growth} = \frac{1,200,000 - 1,000,000}{1,000,000} \times 100 = 20%
Annual Growth=(1.2)1/3−1≈6.27% per year\text{Annual Growth} = (1.2)^{1/3} - 1 \approx 6.27% \text{ per year}GROWTH Key Point:
- High-growth areas = better long-term wealth building
- Focuses only on price increase , not rental income
3. ROI (Total Return)
- Combines both yield (rent) + growth (price appreciation) , minus costs/fees.
- Example from above:
- Rent over 3 years = AED 210,000
- Price growth = AED 200,000
- Costs = AED 50,000
- ROI = (210,000 + 200,000 – 50,000) ÷ 1,000,000 × 100 = 36%
ROI measures the total return from an investment, including:
- Rental income
- Capital appreciation (price growth)
- Minus costs (fees, maintenance, taxes)
Formula (simplified): ROI (%)=Profit (Rent + Price Gain - Costs)Total Investment×100\text{ROI (%)} = \frac{\text{Profit (Rent + Price Gain - Costs)}}{\text{Total Investment}} \times 100
Example:
- Purchase price: AED 1,000,000
- Annual rent: AED 70,000 × 3 years = AED 210,000
- Property sold after 3 years for AED 1,200,000 → Gain = AED 200,000
- Costs (fees/maintenance): AED 50,000
ROI=210,000+200,000−50,0001,000,000×100=36% over 3 years\text{ROI} = \frac{210,000 + 200,000 - 50,000}{1,000,000} \times 100 = 36% \text{ over 3 years}
ROI Key Point:
- Includes both income and appreciation
- Gives a fuller picture of total investment performance
=> So ROI = Yield + Growth – Costs
Simple Way to Remember
- Yield = What the property pays you now (cash flow)
- Growth = What the property gains in value over time
- ROI = The total benefit of owning the property (cash + growth – costs)
In Dubai:
- JVC, International City → High yield, moderate growth → best for cash flow investors
- Dubai Hills, Palm Jumeirah → Moderate yield, high growth → best for long-term wealth
- Some investors combine both by buying multiple properties in different areas.
✅ Now you can see all three metrics in formula form :
| Metric | Formula | Measures |
|---|---|---|
| **Yield** | Annual Rent ÷ Purchase Price × 100 | Cash flow |
| **Growth** | (Current Value – Purchase Price) ÷ Purchase Price × 100 | Capital appreciation |
| **ROI** | (Rent + Growth – Costs) ÷ Purchase Price × 100 | Total return |
