Rental Yield is The New In

Rental Yield is The New In

Rental Yield is The New In

Yield is the income, such as interest and dividends that an investment earns. This income is taken in the context of a certain time period and then annualized. Investors have used instruments like bonds, equity, commodities and real estate to earn income.

YIELD VS RETURN

While both terms are often used to describe the performance of an investment, yield and return are not one and the same thing. Knowing what each measure takes into account and recognizing that each considers different time periods is key.

Return, also referred to as “total return”, expresses what an investor has actually earned on an investment during a certain time period in the past. It includes interest, dividends and capital gain (such as an increase in the share price). In other words, return is retrospective, or backward-looking. It de scribes what an investment has concretely earned. Yield, on the other hand, is prospective, or forward-looking. Furthermore, it measures the income that an investment earns and ignores capital gains.

REAL ESTATE INVESTMENT

In the context of portfolio investing, real estate is traditionally considered an “alternative” investment class. That means it is a supplementary investment used to build on a primary portfolio of stocks, bonds and other securities.

One of the main differences between investing in a piece of real estate as compared to stocks or bonds is that real estate is an investment in the “bricks and mortar” of a building and the land it is built upon. This makes real estate highly tangible, because unlike most stocks you can see and touch your property. This often creates substantial pride of ownership, but tangibility also has its downside because real estate requires hands-on management and is illiquid requires hands-on management and is illiquid. Though a home is one of the largest investments the average investor will purchase, there are other types of real   estate   investments   worth   investing   in.   The   most   common   type   is income-producing real estate. Large income-producing real estate properties are commonly purchased by high net-worth individuals and institutions, such as life insurance companies, real estate investment trusts (REITs) and pension funds.

Income-producing properties are also purchased by individual investors in the form of apartments or villas that are rented out to tenants.

RENTAL YIELD IN DUBAI

Dubai attracts Investors as it provides a high rental yield compared to other cities like London, New York, Singapore, Mumbai etc. Yields in Dubai range from 3% to 15%, this differs primarily due to the use, location, property price and annual service fees of the properties. Yields in Downtown Dubai are much lower than areas like JVC, Sports city or IMPZ as the price of the properties and AMC’s are high and the ongoing rents are not as high comparatively. Rental yields are high in the commercial and industrial sector; Labour camps and warehouses provide the highest return.


Bimal Lulla
Investment Manager
Deja Vu Real Estate Broker LLC

 

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