The number people quote, and the number that stays

Ask an owner about their yield and you will get annual rent divided by purchase price. That is gross yield. It is a real figure, but it is not the one that reaches their account at the end of the year.

The number that stays is what is left after every line has taken its share. The trouble is that each line is small on its own, so each is easy to drop — until the gap adds up.

The lines that vanish

  • Vacancy. Nobody pays rent for the month you spend finding the next tenant. One month a year removes a visible slice of income before any other cost.
  • Planned maintenance. Air conditioning, plumbing, electrics, the lift if there is one. Expected and recurring, and still budgeted as if it were an exception.
  • Emergency maintenance. A leak, a sudden failure, damage found after a tenant leaves. It cannot be scheduled, but it can be reserved for.
  • A replacement reserve. Water heaters and AC units have finite lives. Replacing them is not an emergency; it is an appointment you have not written down.
  • Management fees. Explicit, easiest to remember — and often the only line anyone counts.
  • Registration and renewal fees. Small, and annual.
  • Utilities during vacancy. Power and water do not stop because the unit is empty.
  • Collection shortfall. Not every rent due arrives, and not everything that arrives is on time.
  • The cost of re-letting. Cleaning, paint, photography, marketing, and time.

A worked example — illustrative figures only

The numbers below exist to show the method. They are not market averages and not a promised return. Replace them with your own.

  • Gross annual rent: SAR 100,000.
  • Less one month vacant: −8,333.
  • Less management at an agreed rate: −5,000.
  • Less planned maintenance and replacement reserve: −7,000.
  • Less registration fees and utilities while empty: −2,000.
  • Net: SAR 77,667 — roughly a quarter below the headline.

Notice that none of these was a surprise. Every one was knowable, and every one was estimable before the purchase.

Building the number for your own asset

Start from rent actually collected last year, not rent contracted. Subtract each line above at its real value from your statements, not from memory. Then divide by the full cost of the asset — price plus fees plus fit-out — rather than by the price alone.

The figure that comes out is lower than the one you are used to, and it is the only one worth making a decision on: sell, raise the rent, or spend on an improvement that lifts the value.

What should reach you every month

  • Collected against due, and who is late and by how much.
  • Costs broken out by line, not as a single total.
  • Occupancy, and how long any unit has stood empty.
  • What was spent on maintenance, and what was deferred and why.

If that does not reach you in writing and on schedule, you are not managing the asset. You are being kept informed about it.