Short-term vs long-term rentals in Dubai
Understanding the pros and cons of short-term & long-term rentals in Dubai is crucial. Our guide will help you select the right type of rental for your needs.
Rental market in Dubai
The Dubai real estate market is in high demand and very dynamic, always changing and shifting with the sands. However, during the pandemic and the subsequent drastic increase in property prices, Dubai real estate prices remained stable and even undervalued, while other areas around the globe still continue to climb ever closer to the proverbial bubble. The price per square meter varies depending on the location of the property but currently ranges from $2250 to $5000. Most of the properties in Dubai are luxury apartments or villas with numerous high-quality amenities, located in high-end skyscrapers or sprawling communities. Because of that, interest from European investors and buyers has increased significantly since 2021.
Most investors are opting for a buy-to-let scenario when purchasing a property in Dubai. This option allows them to cover the monthly installments of their mortgage while still gaining some profit from their new investment by renting it out. Depending on their goals, investors have 2 main options to choose from when it comes to the property rental plan. The two options are short-term and long-term rental plans. Each plan has its own benefits as well as drawbacks for both the owner and the tenant, which we’ll touch on in the following sections.
Short-term rentals
Short-term rentals in Dubai are properties leased to tenants for short periods of time, 90 days or less, offering payment options on a monthly, weekly, and even daily basis. These are typically popular among business professionals and tourists looking to visit Dubai seasonally either for work or pleasure. These properties are usually fully-furnished apartments, villas, vacation homes, or hotel condos, which include utilities, parking, and cleaning services. Short-term rentals are generally favored by non-residents as it gives them the flexibility to leave or move if they need to, and pay on a monthly basis.
Short-term rentals have some advantages and disadvantages for homeowners as well since they rely on market fluctuations and seasonal occupancy. There are various benefits and drawbacks but the most important ones are listed below.
Advantages of short-term rentals
Higher short-term returns (20-40% more compared to long-term)
Flexible - allowing frequent rent increase
Owner can use the property when needed
Accelerated returns during boom periods
Disadvantages of short-term rentals
Seasonal/unstable income
Higher maintenance costs
Higher wear and tear usage
Possibility of lower yields during downturns
Long-term rentals
Long-term rentals in Dubai are properties leased for a period of one year or longer. This option typically requires payment of the entire year’s worth of rent including additional costs and fees. This has changed in recent years, allowing tenants to pay on a quarterly basis. These apartments or villas can be furnished or not, and furnished properties will have an additional premium included in the rent. Some properties let the tenants supply their own furnishings. The long-term tenants will also need to activate the utilities with the local providers on their own.
Homeowners of long-term rental properties also enjoy some benefits and have certain drawbacks when choosing this rental plan. The main advantages and disadvantages, in this case, are listed below.
Advantages of long-term rentals
Stable - annual lease with a single tenant
Predetermined regular income throughout the year
Lower wear and tear usage
Lower maintenance costs
Disadvantages of long-term rentals
Limited room for rent increase
Owner has no access to the property while in use
Bound to the current tenant by the conditions of the contract
Might take a while to find a long-term tenant
Annual vs monthly rent
Typically, in the past, long-term rent used to be paid on an annual basis. This meant preparing a large sum of money to cover the entire year’s worth of rent and all accompanying costs and fees. Compared to the short-term rental plan this annual amount seems like an exorbitant sum that most foreign nationals are not comfortable with handing over in advance, so short-term rental options would seem safer and more affordable. However, recently many rental agencies and homeowners have started offering their tenants quarterly payment options instead. This makes the lump sum for long-term rentals much more manageable and a more attractive option for non-resident renters.
Short-term rental model example:
Annual occupancy | 65% | 75% | 80% | 85% | 90% | |
|---|---|---|---|---|---|---|
Days | 365 | 238 | 274 | 292 | 311 | 329 |
Net rental income | ADR 2,000 | 476,000 | 548,000 | 584,000 | 622,000 | 658,000 |
Agency fee | 30% | 142,800 | 164,400 | 175,200 | 186,600 | 197,400 |
Owner income | 333,200 | 383,600 | 408,800 | 435,400 | 460,600 | |
Expected long-term | 250,000 | 250,000 | 250,000 | 250,000 | 250,000 | |
Gain from short-term | 83,200 | 133,600 | 158,800 | 185,400 | 210,600 | |
% gain over long-term | 25% | 35% | 39% | 43% | 46% |
Going forward
Now that you have a better understanding of the Dubai real estate and rental markets, and you know your options when it comes to the rental plan, you can make an informed decision about which path is right for you and your investment goal. If you need more information you can find all you need to know in our blog about the
home-buying process in Dubai. If you are interested in gaining residency through investment check out our blog on the Dubai Golden visa.
Once you’re ready we can help you find the right property. Our partnership with all of the major real estate developers in Dubai and a growing portfolio of over 5000 properties (buildings, apartments, and villas) are at your disposal.
If you are looking for a way to finance your investment, we can help with that as well. Our in-house
mortgage experts and close relationships with all major banks in Dubai enable us to help our clients find the best mortgage offers available on the market. We specialize in helping expats in the UAE, UAE nationals, and
non-residents alike. Check out our mortgage calculator to estimate your total loan amount, monthly payment, and rental income. We are here to make the process of buying and financing your investment in Dubai easy and hassle-free. Sign-up to get in touch today.
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