Cairo 5-bed condo: is 5.4% gross enough margin?

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emery_hope

Landlord
I’m deciding whether this Cairo condo is worth taking into full due diligence. It is a 5-bed at EGP 7,920,000, with expected rent of EGP 35,860/month. That produces the advertised gross yield of roughly 5.4%.

Demand appears credible and the building looks sound, but the margin becomes less convincing after vacancy, management, routine maintenance, insurance and a larger-repair allowance. Building reserves are the biggest unknown in my model. Which local ownership cost am I most likely underestimating, and what net yield would justify the risk for you?
 
I would concentrate on the building’s recurring service charges and how major common-area work is funded. A sound-looking building can still have expensive planned work or weak reserves.

Also, one vacant month reduces annual collected rent from EGP 430,320 to EGP 394,460. That is already about a 5.0% yield before management, maintenance, insurance or tax, so 5.4% gross does not leave much room for surprises.
 
How was the EGP 35,860 rent established: an existing lease, comparable signed leases, or asking prices? For a 5-bed, I would also want to know the likely tenant profile and expected turnover. Broad demand for Cairo rentals does not automatically establish demand for this particular size and price point.
 
One more missing piece is financing. Are you evaluating this as an all-cash purchase? Property-level net yield should be calculated before debt, then cash flow after financing should be tested separately. Otherwise a change in borrowing cost or repayment structure can obscure whether the condo itself is producing an acceptable return.
 
I would not reject it solely because the gross yield is modest. If the rent is well supported, turnover is low and the building’s reserves are genuinely adequate, predictability may matter more than chasing a higher headline number elsewhere.

Before deciding, I’d ask for the service-charge history, reserve balance, planned building works and evidence of actual rent collection. Insurance and any applicable property tax should be based on written figures for this unit rather than broad estimates.
 
The cleanest model would show three layers: scheduled rent, collected rent after vacancy, and net operating income after owner costs. Keep routine maintenance separate from irregular capital work, and include turnover costs even if management is already included.

A useful sensitivity point here is that every EGP 79,200 of annual cost equals one percentage point of the purchase price. That makes it easy to see how quickly service charges, repairs and vacancy can move the net yield.
 
There is no universal net yield that compensates for the risk without comparing it with the buyer’s alternatives and currency needs. I would at least require a meaningful margin after realistic vacancy and reserves, not a result that depends on twelve perfect rental months. If the investment objective is measured in another currency, the EGP cash flow should also be considered separately from the property’s operating performance.
 
Valentina’s caveat is fair: a lower yield can still be rational if the income is unusually dependable. But nothing posted yet proves that dependability. My next step would be to replace the expected rent and estimated building costs with verifiable figures, then run normal, one-month-vacancy and major-repair cases. If the deal only works in the first case, the 5.4% headline is doing too much of the selling.
 
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