Return on cash is the metric that separates serious Dubai property investors from spreadsheet tourists. Sticker-price ROI counts money that isn’t yours.
Return on cash is annual net cash flow divided by the actual cash deployed — down payment plus all entry costs (DLD, agent, trustee, registration). It treats the mortgage-financed portion as not-your-capital and measures return only on what you wrote the cheque for. On a AED 1.5M unit with a 75% mortgage (AED 1.125M), the cash actually deployed is roughly AED 500k-510k once DLD and entry costs are added.
That same unit netting AED 45k/year after all expenses including the mortgage interest (but excluding principal repayment, because principal is forced savings, not cost) delivers a return on cash of around 8.8%. Same unit purchased all-cash nets maybe AED 90k/year on AED 1.58M deployed — a 5.7% return on cash.
The gap (8.8% vs 5.7%) is the leverage premium. It also comes with the leverage risk.
A client last year showed me two models: one all-cash “safe” at 5.5% return, one leveraged at 8.7%. He bought leveraged. Nine months later rates rose and his return on cash collapsed to 6.2%. Still positive. Not his spreadsheet.
Stress-test return on cash against +200 bps.
Related: ROI, ROE, Leverage, Net Cash Flow.