Investing in Sharm El Sheikh property: how to calculate the return honestly

The phrase 'investment property by the sea' appears in listings more often than a real calculation behind it. The buyer hears about an annual return, multiplies the nightly rate by 365 and gets a number they like. A year later the summer has passed without guests, the service charge has risen, the management company has taken its share and the air-conditioning needs replacing. This article exists so that does not happen: the order of calculation, the list of costs people forget, and how our calculator works.

Three different incomes from one flat

Before calculating, decide what you expect from the property. Letting income is the regular money from guests or tenants. Capital growth is the difference between the purchase price and the sale price years later — realised only at the sale and dependent on a market nobody forecasts honestly. Own use is the holiday you do not pay a hotel for; it is rarely included, although for many buyers it is the main point. Mixing the three into one number is the first mistake.

The full cost of entry

People plug the listing price into the yield, but the real sum you invest is larger. It includes the costs of completing the deal, compound entry payments, furniture and appliances if the flat comes without them or with worn ones, the first renovation if needed, and the cost of money if you take developer instalments. Each item depends on the property and the contract; their make-up is covered in the article on the real cost of buying. The rule: the return is calculated on the full cost of entry, not the listing price.

Gross income: how not to fool yourself

Gross letting income is the nightly or monthly rate multiplied by real occupancy. The mistake is to take the high-season rate and assume it holds all year. In Sharm, European demand drops markedly in summer; off-season rates are lower; there are empty days between guests; some weeks you may live there yourself. An honest calculation takes three scenarios — cautious, middle, optimistic — and shows all three, not one.

Where do occupancy and rates come from? Not from the property's marketing. Look at real listings of similar flats in the same complex on short-let platforms, their availability calendars and monthly rates; ask neighbours who let; ask the management company for a year's report on comparable flats. If there is no data, that is information too: you are buying without confirmed demand.

Ownership costs: the list people forget

• The compound service charge — paid regardless of guests and usually rising. How it works is in a separate article.
• Utilities: electricity (air-conditioning in summer is the main line), water, internet, gas.
• Management: the management company's or platform's commission, cleaning and linen between guests, meeting guests.
• Repairs and replacement: air-conditioning units, the water heater, mattresses, appliances — the seaside climate shortens their life.
• Vacancy: weeks without guests or tenants are not a zero cost — the charge and utilities run on.
• Insurance, if you take it, and the owner's trips to check on the property.
• Taxes and fees on ownership, letting and resale — they depend on the contract and your status; confirm them with a lawyer and an accountant, not the seller.

Net yield and payback

Net annual income is gross income minus all ownership costs for the year. Net yield is net income divided by the full cost of entry. Payback is the full cost of entry divided by net annual income. Those three numbers are the answer to 'is it worth it', and they must come in three versions — one per occupancy scenario. If the cautious scenario does not satisfy you, the property is not an investment, however good the optimistic one looks.

Capital growth: what can and cannot be said

Property prices in Sharm, as everywhere, have moved both ways with the tourist flow, exchange rates and events in the region. No seller knows what they will be in five years, and neither do we. What can be done: look at how a specific property's price has moved (the property page in the catalogue shows a price history when one exists), compare listings in one complex across years, and calculate the return without growth — if it satisfies you, growth becomes a bonus, not a condition.

Risks to write next to the calculation

• Currency: income in pounds or dollars, costs in pounds, your capital in a third currency.
• Construction: delivery date and quality depend on the developer; how to check one is in a separate article.
• Complex rules: a ban on nightly letting can close the scenario entirely.
• Tourist flow: depends on events you do not control.
• Liquidity: selling a flat in Sharm quickly and at the wanted price does not always work; it is a buyer's market with negotiation.
• Remote management: without a reliable person on the spot, vacancy and repairs eat the income.

How to use the Dommare calculator

1. Open the investment calculator and enter the full cost of entry — the property price plus deal costs, furniture and renovation.
2. Set the nightly or monthly rate and occupancy for three scenarios based on real listings and calendars of similar flats.
3. Enter the ownership costs: service charge, utilities, management, a repair reserve.
4. Read the net yield and payback for each scenario. The calculator adds no demand or growth figures of its own — it only computes yours.
5. Save the calculation and compare it with another property by entering its numbers: the difference between complexes is often larger than between areas.