Short-Term Rentals vs Long-Term Leases in Dubai: Which Strategy Yields Better Returns?
Investing in Dubai’s real estate market continues to be a strong financial move, thanks to the city’s growing population, booming tourism industry, and investor-friendly environment. One of the most common decisions property owners face post-purchase is whether to lease their property on a short-term basis (such as holiday rentals) or commit to a long-term tenancy. Both strategies have their merits, and choosing the right one depends on the investor’s financial goals, property location, and preferred level of involvement.
What Are Short-Term Rentals?
Short-term rentals refer to letting out a property for a few nights or weeks through platforms such as Airbnb, Booking.com, or local holiday home operators. This model thrives in prime tourist locations like Downtown Dubai, Dubai Marina, and Palm Jumeirah, especially during the high season from November to April.
Advantages of Short-Term Rentals
- Higher per-night income during peak tourist seasons
- Flexibility for owners to reserve the property for personal use
- Frequent cash flow with weekly or bi-weekly payments
Challenges of Short-Term Rentals
- Lower occupancy during summer months
- Requires regular cleaning, check-ins, and guest management (often outsourced to a management company charging 15–25% of income)
- All utilities, Wi-Fi, cleaning, and Dubai Tourism fees are borne by the property owner
Financial Overview
A well-located short-term rental property in Dubai can generate a gross ROI of 10–15% annually. However, after deducting operational costs and management fees, the net ROI typically falls between 6% and 9%.
What Are Long-Term Leases?
The long-term leasing model involves renting the property to a single tenant for a period of one year or more. This traditional approach provides consistent income and lower operational complexity, making it a preferred choice for investors seeking stable returns.
Advantages of Long-Term Leases
- Fixed rental income throughout the lease period
- Tenants typically cover DEWA, internet, and service charges
- Minimal property management and maintenance required
Challenges of Long-Term Leases
- Rental increases are regulated by RERA and may not match rapid market growth
- Rent cannot be revised until renewal, subject to official rental index guidelines
- Eviction processes, if necessary, can be time-consuming
Financial Overview
Long-term leases in Dubai generally offer a gross ROI of 6–8%, with a net return averaging around 5–6% after basic property expenses.
Key Considerations for Property Investors
- Occupancy Rate: Short-term success heavily depends on maintaining high occupancy, especially during off-peak months. In contrast, long-term rentals typically ensure 100% occupancy for the lease term.
- Operating Costs: Short-term rentals incur higher overhead due to utility bills, management fees, tourism taxes, and regular cleaning. Long-term rentals pass most of these costs onto the tenant.
- Location: Short-term rentals perform best in tourist hubs with strong seasonal demand. Family-oriented residential communities are better suited for long-term leases.
Quick Comparison: Short-Term vs Long-Term Rentals in Dubai
| Feature | Short-Term Rental | Long-Term Lease |
|---|---|---|
| Duration of Stay | Few days to a few weeks | 1 year or more |
| Target Audience | Tourists, short-term visitors | Residents, families, long-term tenants |
| Gross ROI | 10% – 15% | 6% – 8% |
| Net ROI | 6% – 9% | 5% – 6% |
| Occupancy Rate | Seasonal (40%–95%) | Consistent (usually near 100%) |
| Utilities & DEWA | Paid by landlord | Paid by tenant |
| Management Effort | High (frequent guest turnover) | Low (basic property upkeep) |
| Suitable Locations | Marina, Downtown, Palm Jumeirah | JVC, Arabian Ranches, Springs |
Conclusion: Which Rental Strategy Suits You?
Both rental strategies in Dubai offer attractive returns depending on your objectives.
✔️ Choose Short-Term Rentals if:
- You want higher annual yields
- Your property is in a tourist hotspot
- You are willing to manage or outsource guest services
✔️ Choose Long-Term Leases if:
- You prefer consistent, low-maintenance income
- Your property is in a family-friendly community
- You want minimal involvement
Ultimately, choosing the right model requires a careful evaluation of the property’s location, expected occupancy rates, and associated costs.
Get Expert Help from Bizmaker Real Estate
Still unsure which model suits your goals?
At Bizmaker Real Estate, we specialize in helping investors make informed decisions aligned with market trends and personal goals. Contact us for personalized guidance on rental strategies, ROI optimization, and more.
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FAQs
Which rental model is more profitable in Dubai in 2025?
Short-term rentals typically generate higher gross ROI, especially in tourist hotspots. However, net profitability depends on property management efficiency and seasonality.
Is it legal to offer short-term rentals in Dubai?
Yes, but property owners must obtain a holiday home license from Dubai’s Department of Economy and Tourism (DET). Failing to register can lead to fines.
What is the best location for short-term rentals in Dubai?
Downtown Dubai, Dubai Marina, JBR, and Palm Jumeirah are among the top-performing areas for short-term holiday homes due to consistent tourist demand.
How is rent increase regulated in long-term leases?
RERA regulates rental increases through a rental index. Landlords can only increase rent within limits set by this index during renewal.
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