Merits and demerits of short- and long-term rentals in UAE

There are two options for accommodation in the UAE – long-term or short-term. In the UAE, short-term is anything that is less than one year (with option to keep renewing) and long-term is above a year. Also, unlike in other countries short-term rentals are fully regulated, via the Department of Tourism and Commerce Marketing.

There are pros and cons to both, from a property owner’s perspective and from that of the tenant/guest. It all depends on what you are seeking.

Owner
As a property owner, short of flipping your property, you can earn money off your asset via a long-term tenant or multiple short-term guests. So which one should you go for?

(1) Return
Generally, owners earn much higher returns doing short-term versus long-term – it can range between 20-40 per cent depending on location, size and interior design. Guests will always pay a higher fee than tenants, so even accounting for extras that owners need to provide such as WiFi and electricity – owners will still make more money. Also, short-term returns are constant whereas long-term returns are fixed over a contract period. This means that over a three-year period for example, short-term will make you money consistently, while via long-term, you can have empty gaps between contracts, making no money while searching for a new tenant.

(2) Cash Flow
Due to the nature of short-term rentals and seasonality, returns vary month to month. In the UAE, for example, the returns will be higher in December than in May. Long-term returns, however, are fixed based on the contract time period. Owners who don’t like varying returns, will prefer locking themselves into a fixed contract with a long-term rental.

(3) Flexibility
Short-term always wins here. The entire concept of renting out a property short-term centers around being able to use it for any purpose whenever you want. As an owner, you can always use your own property and rent it out to guests when you wish. Also, you can always switch to long-term or sell the property at a moment’s notice. There is no flexibility with a long-term tenant. Once they are locked in for a period, you are not able to legally do anything with your property.

(4) Hassle
There is more setup when it comes to short-term rentals. You must furnish the property and turn on all utilities. So there are initial costs and work to consider, before you can get guests. However, with the increase of property management companies, owners don’t need to do any of this themselves. In contrast, long-term tenants handle all utilities and their own furnishings.

Tenant / Guest

(1) Price
For a tenant, the price of a long-term rental always beats a short-term rental. There is a premium that tenants/guests need to pay for all-inclusive and fully furnished homes. Tenants who are looking to stay in the UAE for a few years, will generally choose the long-term option and not have a renewable short-term rental contract.

(2) Flexibility/Hassle
Just as owners, tenants/guests have full flexibility in a short-term rental. Guests can book and move into a fully furnished and fully equipped property all in the same day. Guests do not need to activate any utilities or go through any red tape to move in – they simply need to pay and provide passport details. Guests can also shorten or extend stays depending on their situation. Tenants looking at long-term do not have any flexibility after moving in and are locked in for that year.

Both short-term and long-term options are essential for a healthy property market and with the growth of short-term rentals in the UAE over the past few years – we are beginning to see this great balance.

Anna Skigin is the CEO of Frank Porter, a Dubai-based holiday homes company