UAE property rentals: short term versus long term

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?

Returns: Generally, owners earn much higher returns with short-term versus long-term leases. The difference can range between 20–40 per cent depending on location, size and interior design of their listing. 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.

The benefit of long term leases is that it’s a guaranteed, stable source of income. However, the downside is that it is at a contractually fixed rate that is unable to increase to reflect market changes such as during festive periods or major events in your city. Short term leases however can yield an increased return to reflect any increase in demand at different times of the year.

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.  Something to keep in mind for long-term agreements is that it can take time to find an appropriate tenant which could leave you without an income for a period of time if there are gaps between contracts. Owners who don’t like varying returns based on seasonal factors will prefer locking themselves into a fixed contract with a long-term rental.

Flexibility: Short-term always wins here. The entire concept of renting out a property short-term centres 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’ll not able to legally do anything with your property.

Hassle quotient: There is more to set up 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.

As a tenant looking for a long-term rental or a guest who prefers a short-term stay, here’s what should be considered:

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

Flexibility and hassle quotient: Just as owners, tenants or 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.

Limited contact: Since the beginning of the pandemic, short-term rentals have continued to be popular with guests. Having access to a private residence and all the amenities makes guests feel safer and therefore they have never been more in demand. They have control over their environment, and don’t need to worry about sharing hallways and spaces with strangers.