Revealed: Dubai long-term rentals up to 60% more profitable than short-term leases – Arabian Business

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Renting out apartments in Dubai on a long-term lease basis can earn as much as 40 to 60 percent higher returns for owners than short-term rentals, a new market study revealed.

Besides, owners of stylish apartments can increase rental prices by 30-40 percent, according to research by Colife Dubai, a global property management and rental services company.

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“Many apartment owners believe that renting out their property for short periods, like 1-2 months or even weekly or daily, is the most profitable. However, in reality, short-term rentals are only lucrative during peak seasons,” Ilnara Muzafyarova, CEO of Colife, told Arabian Business.

“If we consider annual profit, it’s more advantageous to lease the apartment for 6-11 months to ensure it remains occupied even during the lowest season, which in Dubai is the excessively hot summer,” she said.

Muzafyarova, however, said finding tenants for 6-11 months for an apartment in Dubai can be challenging for owners, as many people come to the city to comfortably spend the winter and then return home.

Many apartment owners believe that renting out their property for short periods, like 1-2 months or even weekly or daily, is the most profitable

According to a few other Dubai-based rental experts, modern city dwellers are willing to pay significantly more for a trendy apartment setting because they appreciate the beauty and functionality of their surroundings.

Rental strategy

Industry insiders said achieving above-market rental rates involves several “smart measures” such as strategic renovation, thoughtful investments and tenant-centric management.

This is also reaffirmed by the Colife study, which said “emphasis on cost-effective renovations, interior design, and a holistic approach to tenant services contributes to the success of renting out apartments at premium rates.”

Classy but ‘budget-friendly innovations, stylish interiors and furnishings and right selection of property management firms are listed as the essential factors which help apartment owners to earn market-beating rentals.

“A lot depends on the apartment’s renovation: the better it is, the higher the rental price,” Muzafyarova said.

She, however, pointed out that many owners are mistaken when they think that “better” means expensive.

“That’s not the case at all. You can always create a stylish and modern interior while keeping it budget-friendly,” Muzafyarova said.

Classy yet budget-friendly innovations, stylish interiors and furnishings, and the right selection of property management firms are listed as essential factors in earning market-beating rentals

The Colife study and industry insiders said it is easier to rent out a fully or semi-furnished apartment that has essential items such as a refrigerator, stove, washing machine, dishes, and utensils.

Stylish decors with hanging paintings or posters, cozy textiles such as blankets, pillows, curtains, besides candles and potted plants add to faster letting out chances and also commanding higher rentals.

“All of this will help attract long-term tenants. Our years of experience in renting out apartments confirm that tenants are willing to pay more for a space where they feel comfortable and cheer,” the Colife chief executive said.

Additionally, they [prospective tenants] tend to view such living spaces as their own home, leading them to care for it and preserve its beauty, she said.

Experts at Colife said typically, their renovation costs are around AED25,000 – AED32,000 for a studio, AED35,000 – AED40,000 for a 1-bedroom, and AED45,000 – AED55,000 for a 2-bedroom, which will include furniture, appliances, kitchenware, decor, and essential items for tenants.
“That’s a really low price for such a large amount of work,” they said.

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Dubai’s long-term leasing challenges

The study said owners of income-generating apartments in Dubai face a myriad of challenges in every step of the way to find ‘dependable’ tenants, especially for long-term leases, the main ones being high competition and pricing.

Social media adverts and reviews, data based on inhabitants of co-living spaces in other countries and taking help of rental management companies are the routes often used by Dubai apartment owners to find tenants for long-term leases.

“At Colife, we focus on long-term rentals. Using our social media presence and client base, including those from our coliving spaces in other countries, we secure long-term lease agreements with individuals who have moved to Dubai permanently or for periods ranging from six months to a year,” Muzafyarova said.

She said their company specifically aims to sign agreements with tenants for a period of 6-11 months to avoid downtime during the summer.

“As a result, during the off-season, properties that are rented out on a daily or even monthly basis will remain empty 60-70 percent of the time, while our apartments will be occupied.

“As a result, owners will receive income above the market – 10-12 percent above the market rate in all Dubai neighbourhoods – and tenants will pay a little less in peak season,” she said.

Industry insiders said the choice of a management company not only impacts the owners’ profit and the preservation of the property but also the well-being of tenants.

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