Why short-term leases could be a profitable option for property investors

On the table are better returns, a steady source of revenue and more flexibility than traditional long-term tenancy contracts

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Investing in property is nothing new but when UAE laws changed to allow short-term lets, the landscape got a lot more interesting and more lucrative.

If you were to purchase an investment property before the regulation changes, it was usually a home you would lease long term to a couple of tenants. This has its advantages, including the security of regular rent payments and less effort involved in keeping the property tenanted.

However, a dynamic market such as the UAE offers inspiring opportunities for investors looking for something a little different.

Having a short-term rental property in your portfolio offers benefits you just can’t get from a long-term lease. The most obvious is the higher return on your investment — about 20 per cent to 30 per cent more than a long-term rental.

People will simply pay more to stay at a fully furnished property. Even taking into account the costs, a short-term let will earn you more money.

It is also constant money because there are limited gaps between guests (unlike with long-term tenants, where you can have months of no revenue as you search for a new tenant).

But this is only the start. Tourism in the UAE is on a positive trajectory, especially after Expo 2020 showed the world just how vibrant a destination it is.

More and more families are coming to the Emirates on their holidays and they’re looking beyond hotels for accommodation. Short-term rentals, which offer more space than a hotel and an array of family friendly amenities, are the perfect choice for these visitors.

While exploring the region’s unique experiences, they have a comfortable and cost-effective home away from home as their base. With the middle class on the rise globally, it increasingly becomes the only affordable and comfortable way for families to travel.

There are, of course, still business visitors to consider. They may be in town for a month or two and are another key demographic for short-term rentals. A furnished apartment with space to work and relax makes for a far more enjoyable stay than a small hotel room.

The Covid-19 pandemic has a part to play here as well — as the line between home and work has become more blurred.

The flexibility of short-term letting also takes away any obligation to hold on to a property if you’re ready to sell. There is no long-term contract to honour, so you’re free to do as you wish with your investment. This flexibility is one of the biggest advantages of short-term lets — you feel in control of your investment, especially in uncertain times.

If you live abroad but travel to the UAE for holidays, owning a short-term leased property means you always have somewhere to stay, and it’s as simple as blocking out dates for your own use.

A holiday home will pay for itself as tourism rebounds post-pandemic and visitors venture out to explore the world again.

Living close to your investment property offers other possibilities if meeting new people from different places is something that interests you. Instead of simply being numbers on a page, your investment becomes a little more human. Adding a personal touch to a stay brings a delightful element of connection to what is essentially a financial transaction.

Attractions for UAE tourists - in pictures

There are obviously different expenses and challenges associated with short-term rentals compared with longer-term tenancies.

The property needs to be furnished to create a standout guest experience and be well equipped with high-end amenities to wow your guests. Tenants need to be screened and your property must be impeccably cleaned and maintained between visitors. Seasonal variations can mean there are periods when your income fluctuates. In the UAE, for example, summer is the season when earnings dip.

There are also monthly costs associated with a short-term let, such as bills and maintenance costs. These have to be considered when discussing revenue. Of course, there are property management companies that can assist with everything — those fees need to be considered as well.

Investing in a short-term lease property makes a lot of sense today as the market continues to grow and develop. It’s profitable and flexible — two vital elements for any investor.

But as with all investments, it needs to be approached with the right expectations. There are some initial costs and effort involved that pay back over time.

Considering the growth and demand of the market, and the UAE’s position as one of the best places to do short-term lets, the benefits far outweigh the costs.

Anna Skigin is the chief executive of Frank Porter

Updated: June 07, 2022, 4:00 AM
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