Short-term rental guide: what homeowners and tenants need to know

While real estate investors in Dubai already benefit from high rental yields, the city has opened more opportunities in the short-term rental or holiday home segment. Dubai offers property owners and even tenants the possibility to earn even better yields, while having more flexibility to use or sell the property. If you want to take up the short-term rental route, here are essential things to know.

What are the laws governing the short-term rental market?

The short-term/holiday rental market is emerging as a growing industry regulated under Decree No 41 of 2013. All short-term rental properties need to be registered with the government. The guest must also be registered. The Department of Tourism and Commerce Marketing (DTCM) has established detailed legislative guidelines for operators of holiday homes.

“The regulations ensure easy classification, grading and for maintaining certain standards of service, including cleanliness, services and safety,” says Manu Midha, region head — Middle East, for Oyo Hotels and Homes.

I have a property and I want to let out for short term. What should I do?

There are two ways to do this in Dubai. You can obtain the services of a holiday home operator or register the home directly with DTCM as an operator. “First register your property with DTCM,” says Mark Kennedy, co-founder and CEO of Kennedy Towers. “The property must be furnished according to DTCM’s standards, and there will be regular property inspections. Dubai prides itself on its incredible hospitality industry, so you must be able to provide a similar level of service to what you see in the major hotels in the city.”

The short-term rental landscape is extremely competitive, hence Kennedy says investors should know revenue management techniques. “For maintaining occupancy across the year, you will need to advertise with local property websites and conduct multiple property viewings every week when sourcing bookings,” he adds. “It is generally recommended to use a licensed holiday home management company that has the experience to provide the hotel standard of service and generate significant income and take care of your asset.”

What is the cost of obtaining a permit from DTCM?

When you do not want to use an agency, a tourism licence will cost Dh1,570 per year. “You must also ensure that you have the proper insurance policies covering the risk that may occur to a guest, property or building,” says Reem Al Khatib, country manager at GuestReady. “Once you have everything set up, you can start listing your property on booking sites such as Airbnb, HomeAway and Booking.com.”

Can I stay in the same property and let it out as a vacation home?

You can only rent out entire units, and that can’t be shared with the property owner or other guests, says Al Khatib.

Personal usage of the property by the owner is permitted when relevant government fees are paid during the stay. “If you are a tenant and want to lease your property during a limited period, it is possible, but you need to apply for a limited time permit, must have the approval of the property owner, and must comply with the regulations set by DTCM,” says Kennedy.

How do I benefit from short-term renting?

One can expect a premium for short-term rental over long-term rental. “The size of this premium depends on the supply-demand dynamics,” says Kennedy. “In Dubai, we typically see around a 50 per cent premium in terms of gross annual income over long-term rental. While operating expenses do increase, the net rental yield increase remains substantial.”

A unit can be placed on the market for as little as 14 days and up to 365 days. “Only 26 per cent of short-term rentals in Dubai are available full time,” says Al Khatib. “With short-term rental you can enjoy high average daily rates across the year — an average of Dh797 in high season and Dh478 in low season. The yield is usually higher for a one-bedroom unit than a two-bedder, if they sleep the same amount of guests.”