How to Calculate Net Profit from Property in Saudi Arabia: 2026 guide
Calculating net profit from a property in Saudi Arabia is simpler than it looks when you break it into a few clear steps: estimate income, subtract all recurring costs, account for financing and capital costs, then stress-test your numbers. This guide uses plain language, tables, and a worked example you can copy for apartments, villas, or small commercial units.
Helpful context as you plan: setting up a company can change how you record expenses and taxes—see this practical explainer on establishing a real-estate company for foreigners. Also consider forward planning using this tax planning playbook, and always verify ownership documents with this quick guide to checking a Saudi title deed.
The core formula (keep it simple)
Net Profit (annual) = Net Operating Income (NOI) – Annual Debt Service – CapEx Reserve – Taxes/Statutory Fees
Where:
- Gross Rental Income = Monthly Rent × 12 (minus free-rent periods)
- Vacancy & Credit Loss = % of potential rent you expect to lose (e.g., 5–8%)
- Operating Expenses = Service charges, maintenance, property management, utilities you pay, insurance, HOA, routine repairs, permits, advertising
- NOI = (Gross Rental Income – Vacancy) – Operating Expenses
- Annual Debt Service = Principal + Interest you pay on the loan (if any)
- CapEx Reserve = Money set aside for non-routine items (e.g., AC replacement, elevator overhaul, façade works)
Quick table: items to include (and where they sit)
| Line | Include | Goes in |
|---|---|---|
| Rent received | Base rent, parking/storage fees, pet fees, furnished premiums | Gross Rental Income |
| Vacancy & bad debt | Normal downtime between tenants, uncollected rent | Vacancy & Credit Loss |
| Management & leasing | Property manager fee, leasing commissions | Operating Expenses |
| Building charges | Service charges/HOA, common utilities, cleaning, security | Operating Expenses |
| Repairs & maintenance | Routine fixes, filters, minor equipment | Operating Expenses |
| Insurance & permits | Landlord policy, municipal fees, signage, licensing | Operating Expenses |
| Utilities (landlord-paid) | Water/electricity if not rebilled to tenant | Operating Expenses |
| Loan payments | Principal + interest | Annual Debt Service |
| Major replacements | AC compressors, roof, elevators, major interiors | CapEx Reserve |
| Taxes/fees | Statutory or filing/registry fees tied to income or ownership | Taxes/Statutory Fees |
Tip: keep operating vs. capital costs separate. Routine paint = expense (OPEX). Full kitchen replacement = capital (CapEx).
Worked example (apartment in a major city)
Assumptions (illustrative):
- Monthly rent: SAR 6,500
- Expected vacancy: 6% of potential rent
- Operating expenses: SAR 1,650/month (manager 8% of collected rent ≈ SAR 520, service charges SAR 700, insurance SAR 80, routine repairs SAR 350)
- Mortgage: SAR 1.1m at 6.5% interest, 20-year amortization → Annual debt service ≈ SAR 100,000
- CapEx reserve: SAR 6,000/year
- Taxes/statutory fees: SAR 2,000/year (illustrative placeholder; align with your structure and location)
Step 1 — Gross income
- Potential rent: 6,500 × 12 = SAR 78,000
- Vacancy (6%): 78,000 × 0.06 = SAR 4,680
- Effective gross income (EGI): 78,000 − 4,680 = SAR 73,320
Step 2 — Operating expenses
- Monthly OPEX 1,650 × 12 = SAR 19,800
- NOI = 73,320 − 19,800 = SAR 53,520
Step 3 — After financing & capital
- Minus annual debt service: SAR 100,000
- Minus CapEx reserve: SAR 6,000
- Minus taxes/fees: SAR 2,000
Net Profit (annual) = 53,520 − 100,000 − 6,000 − 2,000 = −SAR 54,480 (a loss after debt service)
What it means: income properties can be negative after financing even if NOI is strong. Many investors run two figures:
- Unlevered net (ignore debt): SAR 45,520 (NOI − CapEx − taxes)
- Levered net (with debt): −SAR 54,480
Use both to compare a cash purchase vs. a financed purchase.
Key performance ratios (to sanity-check your deal)
| Metric | Formula | Good rule of thumb |
|---|---|---|
| Gross Yield | Annual Rent ÷ Purchase Price | Quick screen only (ignore costs) |
| Net Yield | NOI ÷ Purchase Price | More realistic; compare submarket averages |
| Cash-on-Cash | Levered Net Profit ÷ Cash Invested | Target beats your personal hurdle rate |
| DSCR | NOI ÷ Annual Debt Service | ≥ 1.20 is safer for lenders |
| Expense Ratio | Operating Expenses ÷ EGI | Track trends; spikes = red flag |
Sensitivity test (vacancy and rate changes)
| Scenario | Vacancy | Interest Rate | Net Profit (annual) |
|---|---|---|---|
| Base case | 6% | 6.5% | −SAR 54,480 |
| Strong leasing | 3% | 6.5% | −SAR 52,140 |
| Refi improves | 6% | 5.5% | −SAR 43,680 |
| Both improve | 3% | 5.5% | −SAR 41,340 |
| Cash purchase | 6% | 0% | SAR 45,520 |
Takeaway: two levers matter most—vacancy and financing. Improving either can swing the result.
Make your own mini-calculator (5 steps)
- List income: monthly rent (plus parking, storage, furnishing premium).
- Apply vacancy: choose 5–8% unless you have signed leases.
- Total OPEX: manager fee, service charges, insurance, routine maintenance, landlord-paid utilities, permits.
- Add CapEx reserve: 0.5–1.5 months of rent per year is a practical range for apartments.
- Layer financing & fees: plug in your loan’s annual payments and any statutory fees tied to ownership/income.
Save it as a one-page sheet and update it each lease cycle.
Practical tips for Saudi assets
- Title first, money second: always confirm an electronic title deed and match parcel details before deposits. A quick checklist lives here: how to verify a Saudi title deed.
- Company vs. individual: some investors hold assets through a local company for banking, reporting, and scaling reasons—compare pros/cons with this guide to setting up a real-estate company.
- Plan ahead for taxes/fees: filing calendars, e-invoicing, and cross-border charges can affect net results; this simple tax planning playbook helps you build a clean evidence trail.
Common mistakes to avoid
- Counting gross rent as profit. Always subtract vacancy, OPEX, CapEx, and financing.
- Underestimating CapEx. AC and elevator overhauls can wipe out a year’s gains—reserve early.
- Ignoring small fees. Insurance, permits, listing costs, and landlord-paid utilities add up.
- No buffer. Keep 2–3 months of expenses in cash for surprises.
- One-year thinking. Model at least three years with conservative rent growth.
FAQs
1) What is the fastest way to estimate net profit?
Start with NOI (rent minus vacancy and OPEX), then subtract debt, CapEx reserve, and taxes/fees.
2) How much vacancy should I assume?
Use 5–8% unless you have firm lease terms and strong tenant history.
3) Are service charges part of operating expenses?
Yes. Building/HOA charges and common-area utilities are OPEX if you cannot pass them to the tenant.
4) Should I include depreciation?
For cash profit decisions, no. For accounting/tax reporting, follow your structure’s rules.
5) How big should the CapEx reserve be?
A practical range is 0.5–1.5 months of rent per year for apartments; adjust higher for older buildings.
6) How do I compare two properties quickly?
Compute Net Yield (NOI ÷ price) and Cash-on-Cash (levered net ÷ cash invested). Use the same assumptions for both.
7) What if I rent short-term?
Expect higher OPEX (cleaning, turnover, utilities) and a higher vacancy assumption.
8) Does forming a company change net profit?
It can affect banking, expense tracking, and compliance costs. Review this guide to forming a real-estate company.
9) How do taxes affect my number?
It depends on ownership and activity. Build a small line for taxes/fees and read this tax planning guide.
10) What should I do before paying a deposit?
Verify ownership and encumbrances using this title-checking guide: how to verify a Saudi title deed.
Conclusion
Your net profit comes from a few disciplined steps: project rent, subtract vacancy and real costs, reserve for big-ticket items, and test the impact of financing. Keep a one-page calculator, verify your title, and plan your structure and filings early so your numbers hold up over time. For ongoing guides, tools, and checklists, bookmark the Aqar Blog and follow Aqar on X for timely threads and market updates: @aqarapp.