Every year you sit on a Dubai unit costs you real money. If you can’t list the line items, you don’t know your holding cost, and you can’t calculate anything useful about the investment.
Holding cost is the total annual expense of owning a property whether or not it’s generating income: service charge (the biggest line for most apartments), chiller bills if separately metered, home insurance, maintenance and AMC contracts on AC units, any building levies outside the standard service charge, mortgage interest payments, property manager fee if you’re using one, and — the line most buyers ignore — opportunity cost on the equity sitting in the property versus a risk-free alternative.
On a typical AED 1.5M Dubai Marina 1BR with a AED 1.1M mortgage, holding cost can stack up like this: service charge AED 22k, chiller AED 6k, insurance AED 2k, maintenance AED 3k, mortgage interest in year one around AED 57k. Total: AED 90k/year against a rent of roughly AED 100-105k. Net of holding cost, you’re running on 1-2% of the equity base before tax time.
A client earlier this year was proudly running AED 15k/month rental income. Once we added up the true holding cost, he was netting around AED 3,800/month.
Add it all up. All of it.
Related: Service Charge, Maintenance Fee, Cash Flow, Opportunity Cost.
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