How much yield can you make with a Condo apartment in Oman?
The short answer is: 13%
That’s what my condo is doing. However, there are many things to add.
First of all this is ‘gross yields’, not ‘net yields’, meaning that this number is before tax, repair costs, co-host or platform fees, Guest Wifi, and much more.
The second important thing to note is that my condo apartment is not in the capital city of Muscat. It’s in the south of Oman in a city called Salalah, potentially still a hidden gem.
In this blog post, I would like to highlight some of the factors that are important to know if you consider buying Omani real estate:
That’s what my condo is doing. However, there are many things to add.
First of all this is ‘gross yields’, not ‘net yields’, meaning that this number is before tax, repair costs, co-host or platform fees, Guest Wifi, and much more.
The second important thing to note is that my condo apartment is not in the capital city of Muscat. It’s in the south of Oman in a city called Salalah, potentially still a hidden gem.
In this blog post, I would like to highlight some of the factors that are important to know if you consider buying Omani real estate:
- Location, location, location
- How much did I invest?
- Supply and Demand
- Your own time
- The big unknown
- How to buy it?
1) Location
As always with real estate, the most important factor is the location. There is a major difference between the City of Muscat and the City of Salalah. While Muscat has all-year-round hot (very hot) weather, the city of Salalah is blessed with a Monsoon season that turns the entire region into a green Oasis. It’s actually a small natural wonder and a major tourist attraction for Arab Tourists from neighboring GCC countries like Bahrain, Qatar, Saudi Arabia, Kuwait, and the United Arab Emirates.
Although this season only lasts for 2-3 months, it can make a major difference for your rental yields since the occupancy during this period is almost 100%, at very high night prices.
After the Moonson season from July to September (called Khareef), occupancy rates and prices drop to fairly low levels only to spike again in November for the start of the winter season, which is popular for Western tourists. In recent years more and more European tourists discover the white sandy beaches of the Dhofar region. Salalah is sometimes referred to as the Caribbean of the Orient.
In general, when it comes to Omani real estate, we can say the biggest advantage Salalah has over Muscat is that Salalah has two main touristy peak seasons.
2) How much did I invest?
I invested 45,000 OMR (USD 110,000) for a 1-bed room Condo apartment on the second floor of an ITC (integrated tourism complex). The furniture added another USD 4,081, the title deed (3% of buying price) USD 3,300, while setting up costs, like fees, and taxes, brings the entire investment to around USD 119,881.
In the last 12 months (June 2022 to June 2023) I generated USD 15,565 in revenues. This brings the gross yields to 13%.
3) Supply and Demand
The next important thing to understand when investing in real estate is the market dynamics of supply and demand. In the case of Salalah, there was an economic boom that started a few years ago that to my knowledge has stopped during the Covid-19 pandemic (please fact check, as I couldn’t find data for Salalah specific).
However, if we look at the bigger picture we can see that Oman wants and needs to get away from its main revenue source of Oil and Gas and is therefore pushing to make their new “Oman Vision 2040” a reality. One core pillar of this Government master plan is to diversify the economy away from Muscat as the only major city contributing to the economy with multiple smaller cities in Oman focusing on their strengths and becoming more important for the country. The tourism industry and the strategically well-located seaport are the two most important assets of Salalah. The government is doubling down on it and has already invested millions in infrastructure, for example, the new airport, seaport, roads, and tourism infrastructure.
This means, even in the years to come, it can be expected that a lot of government money will find its way to Salalah. In other words, there might be short-term supply and demand imbalances when new real estate projects are launched in Salalah. However, long term I am confident that the region will get a lot more attractive thanks to the new infrastructure and the general growth of the city. Its location and the magical Khareef season make it a very special place. The prices per square meter will probably get closer to Muscat in the future, this gives me long-term confidence for this bet.
4) Your own time
As always in life you should also value your own time. How much time do you want to spend on a certain project? If you invest in a Condo apartment the most important thing to ask is WHY?
As for me, there are many reasons. The yields, no doubt, are the most important factor for the goal of getting many steams of passive income. However, Oman is also an amazing place to set up a home base, strategically well-located with amazing flight connections to Asia and Europe. This allows me to have my permanent residence in a low-tax country while earning high yields whenever I am not home in my condo.
However, please keep in mind that renting out your home comes also with a lot of work. Someone needs to do the handover of the key to short-term Guests, reply to their questions, clean the condo after each stay, and replace broken furniture. In my case, I give away some of my yields to a professional co-host who is permanently living in the destination. This gives me a certain piece of mind and enough time to do other things.
5) The big unknown
Prior to investing in a Condo apartment, I asked myself a lot of questions. For most of them, I found answers somewhere on the internet or when I talked to locals or expats that have been living there for many years already. However, to some of the questions I didn’t find any answer. Many people shy away from investing in unknown places. However, this was exactly the reason I did it anyways. Sometimes when it comes to investing, you have to take extra risks to get extra rewards.
Current booking data for the 2023-2024 season looks highly promising and I might be able to top the record and generate well over 13% gross yields this year. At the same time, I am doing a lot of experiments to cut costs to also increase the the bottom line numbers and net yield. For example, I try to get more direct bookings. In this way, I can save on platform fees ( booking.com / Airbnb / Agoda / ...).
However, the big unknown is always the future. For example, it’s not clear how politically stable the middle east will be in ten or twenty years when I plan to sell my Condo. It’s not clear how short and long-term tourism demand will play out, or if there is another pandemic that immediately ruins my yields. It’s not yet clear how often I have to buy new furniture or renovate the entire apartment.
With over 13% gross yields I can say this risk-investment is paying off though.
6) How to buy it?
If you are interested in knowing more about the real estate sector of Salalah or Oman, feel free to contact me. I might be able to guide you through the process for free, as I wish someone would have done it with me.
UPDATE, 24.02.2024: Results for FY 2023 showed a 19% gross yield. I'll release a new blog post soon.
Contact me for more detailed information.
As always with real estate, the most important factor is the location. There is a major difference between the City of Muscat and the City of Salalah. While Muscat has all-year-round hot (very hot) weather, the city of Salalah is blessed with a Monsoon season that turns the entire region into a green Oasis. It’s actually a small natural wonder and a major tourist attraction for Arab Tourists from neighboring GCC countries like Bahrain, Qatar, Saudi Arabia, Kuwait, and the United Arab Emirates.
Although this season only lasts for 2-3 months, it can make a major difference for your rental yields since the occupancy during this period is almost 100%, at very high night prices.
After the Moonson season from July to September (called Khareef), occupancy rates and prices drop to fairly low levels only to spike again in November for the start of the winter season, which is popular for Western tourists. In recent years more and more European tourists discover the white sandy beaches of the Dhofar region. Salalah is sometimes referred to as the Caribbean of the Orient.
In general, when it comes to Omani real estate, we can say the biggest advantage Salalah has over Muscat is that Salalah has two main touristy peak seasons.
2) How much did I invest?
I invested 45,000 OMR (USD 110,000) for a 1-bed room Condo apartment on the second floor of an ITC (integrated tourism complex). The furniture added another USD 4,081, the title deed (3% of buying price) USD 3,300, while setting up costs, like fees, and taxes, brings the entire investment to around USD 119,881.
In the last 12 months (June 2022 to June 2023) I generated USD 15,565 in revenues. This brings the gross yields to 13%.
3) Supply and Demand
The next important thing to understand when investing in real estate is the market dynamics of supply and demand. In the case of Salalah, there was an economic boom that started a few years ago that to my knowledge has stopped during the Covid-19 pandemic (please fact check, as I couldn’t find data for Salalah specific).
However, if we look at the bigger picture we can see that Oman wants and needs to get away from its main revenue source of Oil and Gas and is therefore pushing to make their new “Oman Vision 2040” a reality. One core pillar of this Government master plan is to diversify the economy away from Muscat as the only major city contributing to the economy with multiple smaller cities in Oman focusing on their strengths and becoming more important for the country. The tourism industry and the strategically well-located seaport are the two most important assets of Salalah. The government is doubling down on it and has already invested millions in infrastructure, for example, the new airport, seaport, roads, and tourism infrastructure.
This means, even in the years to come, it can be expected that a lot of government money will find its way to Salalah. In other words, there might be short-term supply and demand imbalances when new real estate projects are launched in Salalah. However, long term I am confident that the region will get a lot more attractive thanks to the new infrastructure and the general growth of the city. Its location and the magical Khareef season make it a very special place. The prices per square meter will probably get closer to Muscat in the future, this gives me long-term confidence for this bet.
4) Your own time
As always in life you should also value your own time. How much time do you want to spend on a certain project? If you invest in a Condo apartment the most important thing to ask is WHY?
As for me, there are many reasons. The yields, no doubt, are the most important factor for the goal of getting many steams of passive income. However, Oman is also an amazing place to set up a home base, strategically well-located with amazing flight connections to Asia and Europe. This allows me to have my permanent residence in a low-tax country while earning high yields whenever I am not home in my condo.
However, please keep in mind that renting out your home comes also with a lot of work. Someone needs to do the handover of the key to short-term Guests, reply to their questions, clean the condo after each stay, and replace broken furniture. In my case, I give away some of my yields to a professional co-host who is permanently living in the destination. This gives me a certain piece of mind and enough time to do other things.
5) The big unknown
Prior to investing in a Condo apartment, I asked myself a lot of questions. For most of them, I found answers somewhere on the internet or when I talked to locals or expats that have been living there for many years already. However, to some of the questions I didn’t find any answer. Many people shy away from investing in unknown places. However, this was exactly the reason I did it anyways. Sometimes when it comes to investing, you have to take extra risks to get extra rewards.
Current booking data for the 2023-2024 season looks highly promising and I might be able to top the record and generate well over 13% gross yields this year. At the same time, I am doing a lot of experiments to cut costs to also increase the the bottom line numbers and net yield. For example, I try to get more direct bookings. In this way, I can save on platform fees ( booking.com / Airbnb / Agoda / ...).
However, the big unknown is always the future. For example, it’s not clear how politically stable the middle east will be in ten or twenty years when I plan to sell my Condo. It’s not clear how short and long-term tourism demand will play out, or if there is another pandemic that immediately ruins my yields. It’s not yet clear how often I have to buy new furniture or renovate the entire apartment.
With over 13% gross yields I can say this risk-investment is paying off though.
6) How to buy it?
If you are interested in knowing more about the real estate sector of Salalah or Oman, feel free to contact me. I might be able to guide you through the process for free, as I wish someone would have done it with me.
UPDATE, 24.02.2024: Results for FY 2023 showed a 19% gross yield. I'll release a new blog post soon.
Contact me for more detailed information.