Difference Between Short-Term Rentals And Long-Term Leases

The best part about Dubai’s real estate market is its diversity, as shown by the provision of a range of options for both short-term and long-term rentals. These options help cater to the needs and preferences of renters, as well as investors looking to build a heterogeneous real estate portfolio. If you are considering investing in rental properties, you’ve come to the right place!

In this article, we will explore the fundamental differences between the two rental formats in the Dubai market, while also breaking down their benefits and potential drawbacks.

🔍 What are Short-term Rentals?

While long-term leases are attractive given the predictable income over a prolonged lease period, short-term rentals are also quite lucrative for novice and experienced property investors. It involves renting out units on a more transient basis (usually in the form of nightly stays) via booking platforms like Airbnb, thus presenting more potential to earn a higher ROI. It’s always said that while short-term rentals present slightly higher risks, they offer higher rewards in return.

Benefits of Short-term Rentals

Some of the benefits investors can expect from a short-term rental property include:

• Higher rental rates than long-term rentals, leading to higher returns on investment.
• Increased occupancy due to a higher turnover of tenants, resulting in more rental income as the unit is occupied for a greater portion of the year.
• Ability to take advantage of peak seasons when demand for rental properties is high.
• Reduced impact of low seasons, as higher income during peak periods compensates for dips.
• Diverse tenant base including tourists, business travelers, and those seeking temporary accommodation—often leading to positive property reviews.

Drawbacks of Short-term Rentals

However, there are some drawbacks that investors and property managers should consider:

• Short-term rentals are more subject to occupancy dips during low seasons, which can affect income flow.
• Higher property management fees and booking fees compared to long-term leasing.
• Frequent tenant turnover may lead to increased costs associated with marketing, cleaning, and maintenance. Holiday Home Management companies typically manage these services to keep costs down.
• Potential tenants may not undergo screening or background checks, which can lead to untrustworthy or unreliable renters.

Short-Term Rentals at Stake

At Stake, the term “holiday home” encompasses short-term rentals, typically for tourists or business travelers. We offer three types of short-term rental scenarios:

1. Ready-furnished units, prepared to receive guests.
2. Unfurnished units, requiring design and furnishing to create an appealing space for visitors.
3. Properties managed by Holiday Home Management companies, ready to be rented out immediately.

We work with two types of property managers:

• Established service providers managing large portfolios, maintaining relationships with booking platforms and minimizing fees.
• Niche providers that partner with travel agencies, multinational firms, or events, helping to source more rental income and reduce vacancy rates.

Testimonial from Short-Term Property Manager, "Guestready"

"We developed a great mutual partnership with Stake, and their dedication to bringing out the most from Short-Term Rentals is evident in all aspects. We appreciate their attention to detail and creative approach to driving growth mutually."

What About Long-term Leases?

For investors seeking more stability, long-term leases are a popular option. These leases offer predictable income, as the property is rented out for a year or more to a single tenant.

Benefits of Long-term Leases

• Stability and security as rent is guaranteed over a longer period.
• Popular among expatriates and families seeking permanent accommodation.
• May include an option for lease renewal, providing an extended rental period.
• Typically involves negotiable rental rates.
• Lower management fees and fewer marketing and turnover costs.

Drawbacks of Long-term Leases

• Lower rental rates compared to short-term rentals, leading to potentially reduced income.
• Limited flexibility, as the property is tied up in a long-term agreement.

So, Which One Should You Choose?

Ultimately, the best option depends on your individual circumstances, tastes, and risk appetites. For those looking for stability, a long-term lease may be the ideal choice. For those seeking flexibility and higher potential returns, a short-term rental might be more suitable.

TL;DR: Short-term Rentals vs. Long-term Leases

Making informed decisions is key when investing in real estate. Below is a quick comparison of short-term and long-term rentals.

Interested in reading more about why people are interested in investing in Dubai's real estate market, read here