Rental deal in Dubai: AED 2,386,000 purchase, AED 7,724/month — sanity check

I’m assessing a 4-bed new-build flat in Dubai at AED 2,386,000. Expected rent is AED 7,724 per month, giving a headline gross yield of roughly 3.9%. Using only eleven months’ rent reduces that to about 3.6% before management, routine maintenance, insurance and a larger-repair reserve. The building appears sound, although its energy performance and cooling costs could affect demand or expenses. Which Dubai-specific owner cost am I most likely missing, and what net yield would justify the vacancy and turnover risk?

The building service charge is the first figure I’d pin down. At this price and rent, the margin is already narrow, so even an ordinary recurring charge could materially change the result. Ask for the actual charge applicable to this unit and clarify which cooling costs fall on the owner. I wouldn’t choose a target net yield until those numbers are known.

How was AED 7,724 established: completed leases for comparable 4-bed units, or an asking-rent estimate for the new building? Your vacancy allowance is sensible, but it does not protect against the rent itself being optimistic. I’d also model a tenant change as a separate event, including management and any work needed before reletting.

I’m less convinced that energy performance is the main risk. If utilities are paid by the tenant, it may matter more to marketability than directly to your cash flow—though the lease and building arrangements need confirming. The bigger concern is starting from only 3.9% gross. Once service charges, insurance and management are deducted, there is very little room for surprises.

Before deciding, build three versions: the quoted rent, a lower-rent case, and one with a longer vacancy plus turnover work. Add the confirmed service charge and cooling responsibility rather than estimates. Also separate recurring owner costs from purchase costs, and have the Dubai tax and fee treatment confirmed locally instead of importing assumptions from another country. If financing is involved, test higher borrowing costs as well; a deal this tight can look quite different under debt.