Dubai Property Cash-on-Cash Return: A Worked Example

Learn how Dubai property cash-on-cash return differs from rental yield, with an example that includes upfront cash, operating costs and mortgage repayments.

What cash-on-cash return measures

Cash-on-cash return compares annual cash left after operating expenses and debt payments with the cash initially invested. It answers a different question from gross rental yield, which compares rent with the property price. Write down the definition before comparing two properties; the same percentage can conceal very different borrowing assumptions.

Build the cash invested figure

Imagine an apartment priced at AED 1,400,000 with a hypothetical AED 900,000 loan. The price less the loan is AED 500,000. Add an assumed AED 85,000 buying and setup budget, bringing initial cash invested to AED 585,000. This budget is an example allowance; obtain itemised transaction and furnishing quotations before relying on it.

Calculate annual cash flow

Assume annual rent of AED 105,000, vacancy of AED 5,250 and owner-paid operating expenses of AED 22,000. Net operating income is AED 77,750. If annual mortgage payments are AED 58,000, remaining cash flow is AED 19,750. Divide AED 19,750 by AED 585,000 to get approximately 3.38%. Keep any excluded taxes or exceptional costs visible.

Why mortgage principal needs separate treatment

The mortgage payment includes money that may reduce the loan balance. That repayment can build equity, but it is not cash available to spend. A property can therefore accumulate equity while producing modest or negative annual cash flow. Do not add principal repayments to cash flow and still label the result cash-on-cash return.

Stress-test the result

A further AED 10,000 repair would reduce annual cash flow to AED 9,750, or approximately 1.67% of initial cash. Test that possibility before committing your full liquidity buffer. For an unleveraged comparison, remove the loan and debt payments, then recalculate the cash investment rather than keeping the financed denominator.

When this metric is useful

Use cash-on-cash return when comparing how different deposits or financing structures affect cash income. Pair it with net yield, liquidity and an exit-cost estimate. It does not capture future resale value, timing of cash receipts or the risk of needing extra funds.

Put your own figures into our Dubai property calculator. Keep a base case and a cautious case so you can see which assumption changes the outcome most.

Prepared by Dubai Investment Tools. Educational analysis, not personalised financial, legal or mortgage advice. All worked figures are hypothetical planning assumptions, not market quotations or guaranteed returns.