When someone comes to us at R.B INVESTMENT and asks, "Is this property worth it?" — two seconds later we ask a simpler question: "What is a tenant actually paying?" Because the answer to the second question is what settles the first. "Worth it" is not a feeling or market gossip; it's a number you can calculate in five minutes.
Try it on yourself right now: if you paid EGP 3 million for an apartment today, how much will it bring back next year without you selling it? If your answer is "I don't know" or "the price will surely rise" — then you're not calculating an investment, you're hoping. This article gives you the formula and a worked example, step by step.
1) The formula: one number that tells the truth
Return on investment (ROI) answers a simple question: "How much does the money I put in give back each year?" The formula:
- ROI = net annual income from the property ÷ total purchase price (down payment + fees) × 100
- So if you paid EGP 3 million and your net annual income is EGP 180,000 ← 180 ÷ 3,000 × 100 = 6%.
- And if fees and expenses added EGP 150,000 on top of the price — divide by 3,150,000, not 3 million. That detail changes the result.
Gross yield vs net yield — what's the difference?
Gross yield is simply the advertised rent. Net yield is what reaches you after expenses — and it's the only number you can base a decision on. In Egypt the gap between the two is typically 1.5% to 2.5%, meaning if the gross is 7%, the net is usually 5% – 5.5%.
2) A worked example in pounds: a EGP 3 million apartment
Suppose you bought a 120 m² apartment for EGP 3,000,000 in an area of genuine demand, with expected rent of EGP 180,000 per year. Here's the math (illustrative estimates based on market observation; they vary by neighbourhood):
- Gross annual rent: 180,000 ← gross yield 6%.
- Maintenance and renewal reserve (about 1% of property value): 30,000.
- Vacancy between tenants: one empty month every two years ≈ 7,500 per year.
- Management/brokerage plus a month's rent deposit: 9,000.
- Insurance, fees, and documentation sundries: 6,000.
- Total: 52,500 ← net income = 127,500 per year.
- Result: 127,500 ÷ 3,000,000 = 4.25% net.
Which means: the property that looked like "6%" on paper becomes 4.25% in your pocket. That's still a respectable number in an inflationary market — but you should know it before measuring any other offer against it.
3) Hidden costs — the thing that eats the yield
Most people count the rent and forget the expenses that only show up once it's too late. Always budget for:
- Routine maintenance: plumbing, electrical, elevator and A/C servicing in new developments (plus annual maintenance fees where the project offers them).
- Vacancy periods: every time a tenant leaves you pay for empty rent plus marketing costs. In mid-range areas, vacancy averages 2 – 4 weeks a year.
- Management and brokerage: one month's commission or a month's rent, and sometimes a management company if the property is far from you.
- Renovation: painting, tiling, and refurnishing every 5 – 7 years.
- Taxes and fees: notarised documents, rental permits, powers of attorney — small amounts that pile up.
Real estate rewards those who count the hidden costs before celebrating the rent. Ask yourself: how much actually reaches you at year-end? Not what the contract says.
4) A worked example in dirhams: a property in Dubai
If you're considering Dubai, the same formula in dirhams. Suppose an apartment for AED 1,200,000 rents for about AED 70,000 a year (a realistic estimate for a mid-range area; advertised yields in Dubai run 5% – 7% depending on location):
- Gross yield: 70,000 ÷ 1,200,000 = 5.8%.
- Service charges in integrated communities take a visible bite out of the rent.
- Vacancy + management + furniture renewal ≈ a 0.7% – 1.2% deduction from property value.
- Approximate net: 4.5% – 5% — and since the dirham is pegged to the dollar, conversion isn't an issue.
The contrast between the two cases matters: Dubai's yield is relatively lower, but it's compensated by a more mature rental and finishing market and stronger documentation. Egypt's gross yield is higher, but so are the hidden costs. That's why the net is the benchmark, not the gross.
Should I calculate ROI on the down payment or the full price?
Both — and calculate them side by side. If you buy with a 30% down payment and installments, some people calculate yield on the down payment alone and celebrate a 20% return — that's misleading, because the rest of the price is debt you're servicing. Calculate ROI on the capital you actually paid (down payment + fees + first-year expenses) if financed, and on the full purchase price if cash.
Quick comparison: 3 properties (illustrative figures)
| Property (illustrative) | Purchase price | Annual rent | Gross yield | Approx. net yield |
|---|---|---|---|---|
| 120 m² apartment — Fifth Settlement | EGP 4.5 million | EGP 300 thousand | 6.7% | ≈ 5.2% |
| 100 m² apartment — mid-tier governorate | EGP 1.8 million | EGP 135 thousand | 7.5% | ≈ 6% |
| Retail unit — main street | EGP 5 million | EGP 400 thousand | 8% | ≈ 6.4% |
All of these are teaching estimates — not asking prices. The point is to notice the pattern: the shop unit has a higher yield but higher risk (longer commercial vacancy, less stable rent), and the apartment in a governorate beats the Fifth Settlement because the price is lower even though the rent is slightly less.
Practical steps before you pay a down payment
- Ask for comparable rental yields in the same neighbourhood for a similar unit — from at least three sources, not the project's sales sheet.
- Deduct from the rent: 1% maintenance, vacancy, management, insurance and fees. What's left is your net.
- Divide the net by your total cost (price + documentation fees + finishing if unfurnished).
- Compare against alternatives: a bank deposit, bonds, or even paying the developer's installments themselves. If the difference is under 2% for higher risk — think again.
- Calculate the payback period = 100 ÷ yield percentage. A 5% yield means 20 years of payback from rent alone.
- Check whether the property will sell quickly: in oversupply areas, payback takes longer than the math suggests.
If you want to see a full calculation for your situation, take a look at Cairo rental prices in 2026 and Egypt's best governorates for investment to compare the area you're considering. And for the full picture of another market, read our Dubai real-estate growth analysis — the same math applies in dirhams.
Over 12 years in the Egyptian and Gulf real-estate markets, specializing in ROI analysis and investment portfolio management.