An investor's guide to short-term and annual property rentals
As an investor, you might be thinking about Dubai’s property market, given the market is currently performing at its highest, and isn’t planning to slow down anytime soon. In fact, according to our latest report, Dubai saw the second-highest market activity ever recorded in July!
But have you considered the difference between short-term rentals and annual property rentals?
Did you know that in short-term rentals, you can earn up to 30% higher in returns? In annual property rentals, you are looking at a low-risk, consistent return on your investment, with a safe and trusted entry to the Dubai property rental market.
So, if you’ve got the battle of the odds in your mind - let us help you understand which one is best suited for you as an investor…
Understanding short-term rentals - What are they?
Short-term rentals refer to renting of residential properties for short periods, typically ranging from a few days to a few months. These rentals are often used by travellers, business professionals, or anyone needing temporary accommodation without committing to a long-term lease.
The main thing to know is - short-term rentals are controlled by the landlord, meaning they are completely independent contracts and can be dissolved at any time. The longest a short-term rental can be rented out for is 6 months at a time, anything longer than that is considered an annual rental.
What is the appeal of short-term rentals for investors?
There is a rising trend for short-term rentals, and this trend comes in line with many people who are considering moving to Dubai or vacationing here.
To match this, the appeal of investing in STRs is…
1. Higher income potential
Short-term rentals often command higher nightly rates compared to traditional long-term rentals. Depending on location and demand, this can lead to significantly higher income, especially in tourist-heavy or popular urban areas.
Investors also have the freedom to adjust pricing based on demand, such as during peak tourist seasons, holidays, or local events. This flexibility allows for maximisation of income during high-demand periods. And investors can see returns of up to 30%!
2. Flexibility
Unlike long-term rentals, short-term rentals allow investors to use the property for personal vacations or stays when it’s not booked by guests. This dual-purpose use can be a major advantage for those looking to enjoy their investment.
Short-term leases mean the property is not tied up with long-term tenants, offering the owner flexibility to sell, renovate, or reoccupy the property without waiting for a lease to expire.
3. Diversification
Short-term rentals provide a diversified income stream that can be less dependent on local economic conditions. The ability to attract tourists, business travellers, and temporary residents creates a broader market for the property.
Especially in times of economic downturns or market shifts, short-term rentals can sometimes be more resilient, as people still need temporary housing for various reasons, even during challenging times.
4. Property appreciation
Did you know that a well-maintained and popular short-term rental can increase in value over time, especially if the property is located in a growing or desirable area? Enhancements made to attract guests can also contribute to the property’s overall appreciation.
Should the investor decide to sell, a property with a successful short-term rental history can be attractive to other investors looking for a ready-made income-generating asset.
5. Improved cash flow
Short-term rentals generate more frequent rental payments, which can improve cash flow compared to traditional rentals. This can be particularly beneficial for investors needing more liquid income for other investments or expenses.
Regular collection of security deposits from short-term renters can help cover damages and reduce financial risk, ensuring that the property remains in good condition.
6. Enhanced control over property
With shorter stays, property owners have more frequent opportunities to inspect the property, address maintenance issues, and ensure it remains in good condition. This helps in maintaining the property's value over time.
Short-term rental platforms often provide guest ratings and reviews, giving owners better control over who stays in their property. This can lead to fewer issues with problematic tenants.
7. Growing market demand
The rise in popularity of platforms like Airbnb has led to increased demand for short-term rentals. Investors can capitalise on this trend by positioning their property on these sites, which can be done with the help of our in-house Holiday Homes company.
On these websites, investors can quickly attract a growing crowd of visitors who are planning trips to Dubai, and with these sites giving you the correct market values for your property, you know you are getting the right income as well.
8. Reduced risk of vacancy
Due to the flexible nature of short-term rentals, the risk of long-term vacancies can be reduced. Even if the property isn’t booked for a week or two, it’s easier to find short-term tenants than to fill a long-term vacancy, which can take months.
Opting for short-term rentals with Allsopp & Allsopp:
At Allsopp & Allsopp, we offer investors and landlords a full range of property management services taking care of every aspect of property booking and management. Some benefits that investors can expect from working with Allsopp & Allsopp are:
Property listing and marketing: Creating custom marketing plans that give your home the best possible chance of being seen and booked by potential guests (including professional video and photography assets)
Guest booking and reservations: Our team will manage every aspect of the guest booking process including setting seasonal rates, accepting payments, and communicating with guests on all aspects ahead of the booking start.
Guest services: From welcome baskets to airport transfers and concierge services. Our team can help you make the best possible impression on your guests
Property maintenance and repairs: You never have to worry about the condition of your home. Our team can manage all the maintenance and repairs, so you don't have to. Providing peace of mind knowing that your home is being taken care of.
If you want to learn more about Allsopp & Allsopp short-term rental and property management services, get in touch with our experts!
Annual rentals, what are they?
Annual rentals are your traditional rentals, these refer to rental agreements where a property is leased out to tenants for an extended period, typically one year or more.
This type of rental arrangement is common for residential properties, such as apartments, villas, and houses, as well as for commercial spaces like offices and retail units.
What are the benefits of opting for annual rentals?
1. Steady and predictable income
Annual rentals provide a regular, predictable income stream, typically paid monthly. This consistent cash flow makes financial planning easier for investors, allowing them to cover mortgage payments, property maintenance, and other expenses.
Unlike short-term rentals, which can experience fluctuations due to seasonal demand, annual rentals offer stable income throughout the year, reducing the risk of income gaps.
2. Lower vacancy fluctuations
With an annual lease, tenants commit to staying in the property for a full year or more, significantly reducing the frequency of vacancies compared to short-term rentals.
Fewer vacancies mean fewer instances of having to market the property, clean, repair, and prepare it for new tenants, which in turn lowers turnover costs.
3. Lower management effort
Annual rentals typically have fewer turnovers, which reduces the amount of time and effort needed to manage the property, find new tenants, and address move-in/move-out processes.
Long-term tenants are often more responsible for routine maintenance, such as lawn care and minor repairs, reducing the day-to-day management burden on the investor.
4. More Reliability
Because the lease term is longer, investors often conduct a screening of potential tenants, leading to a higher likelihood of reliable, stable tenants who pay rent on time and take care of the property.
The long-term nature of the lease allows for the development of a stronger, more cooperative relationship between tenant and landlord, which can lead to better communication and fewer disputes.
5. Stable property value
Long-term rental properties are less affected by short-term market fluctuations compared to properties used for short-term rentals. This stability can lead to more predictable property value appreciation over time.
Investors in annual rentals benefit from broader, long-term market trends rather than short-term demand spikes, making their investments less risky.
6. Potential for rent increases
Many long-term rental agreements include provisions for annual rent reviews or increases, allowing investors to adjust rent in line with inflation and market conditions. In areas with rising property values and rental demand, investors can periodically increase rents to maximise returns while still retaining long-term tenants.
7. Fewer maintenance and renovation costs
Long-term tenants are often more invested in maintaining the property in good condition, reducing the need for frequent, costly repairs.
With fewer tenant turnovers, the property undergoes less wear and tear, reducing the frequency of major renovations or repairs.
Why choose Allsopp & Allsopp to manage your annual rental property?
Proven Dubai rental experience: Our talented agents are community experts with 15 years of experience in the Dubai rental market, helping investors/landlords to get the best rental returns from qualified rental tenants.
**Professional marketing support: **Our in-house marketing team creates professional video and photography assets that showcase your property in the best possible light, ensuring maximum exposure across social/digital channels. Targeted marketing campaigns will place your property in front of more qualified tenants looking for similar properties than anyone else.
Managed from end-to-end: Our heroes in our property management team will ensure no time is wasted in helping your tenants move in, from Ejari to DEWA - we’ll assist you with it all.
Which one did you pick?
Want to know more about how we can help you find the right long-term tenants to rent your property in Dubai?
Check out our guide to letting with Allsopp & Allsopp.
Are you interested to know more?
Did you know that property prices across many communities in Dubai are currently at their highest?
If you’d like some assistance on your next investment or a property valuation, contact our team!