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Pros and Cons of Long Term Rental For Dubai Landlords

 

Thinking about jumping into Dubai’s long-term rental game?

You’re definitely not alone.

Dubai’s rental market is booming, and according to the Dubai Land Department —  in 2023 alone, prices jumped 20%. It’s no wonder why you may be curious — if long term rental in Dubai is the way to go for maximum returns — or not.

Whether you’re eyeing a cozy apartment in Downtown Dubai or in Marina, we’ve got you covered.

In this guide, we’ll:

  • Break down the pros and cons of long-term rentals in Dubai
  • Help you understand Dubai’s long term rental market
  • Give you insider tips to boost your rental income

Shall we?

 

TL;DR

  • Dubai’s rental market has seen significant price increases, with some areas experiencing up to 25.8% growth in the last two years.
  • Long-term rentals offer stability for landlords but come with challenges like limited flexibility.
  • The RERA calculator impacts permissible rent increases, affecting mostly landlords.
  • Consider factors like investment goals, property location, and management preferences when choosing between long-term and short-term rentals.

 

But First…What Should You Know About Dubai’s Long Term Rental Market?

Without doubt, Dubai’s appeal as a global business spot and tourist destination drives its real estate market.

Image showing the Burj Khalifa - a major tourist spot in Dubai.

Photo by: Aleksandar Pasaric

The city attracts a diverse mix of expatriates, tourists, professionals, and investors, creating steady demand for rental properties.

But what does this actually mean?

3 major factors that show potential for the long-term rental market in Dubai include:

  1. Expatriate Workforce: About 85% of Dubai’s population consists of expatriates, many which are on multi-year work visas. Definitely, folks like these ain’t looking for a quickie quick stay in a short term rental.
  2. Economic Diversification: Dubai’s focus on sectors like finance, technology, and tourism attracts professionals seeking extended stays.
  3. Infrastructure Development: Ongoing projects like the Dubai 2040 Urban Master Plan, influences rental trends in different areas.

Long story short, these factors inevitably create high long term rental potential for you.

 

Benefits of Long Term Rentals For Dubai Landlords

Long-term rentals in Dubai typically involve leases of one year or more. This setup offers advantages for both landlords and tenants. Yet, let’s explore why you should consider yearly tenancy as a landlord.

Image showing a couple moving into a long-term rental in Dubai.

Photo by: Ketut Subiyanto

1. Stable Income

Long-term leases are like a steady paycheck for your property. With consistent occupancy, you know that come rain come shine, there’s some schmoneyy waiting for you at the end of the month.

Instead of worrying about finding new tenants every few months, you know exactly what’s coming in each month. It’s like putting your rental income on autopilot. This stability lets you plan ahead and budget with confidence.

2. Low Marketing Costs

More like…what marketing costs?

Say goodbye to the constant merry-go-round of advertising. Long-term rentals mean you’re not always on the hunt for the next guest. You can take a break from crafting the perfect listing or paying for ads. Your time and money stay where they belong – with you.

3. Less Furnishing Investment

All you need is an empty space and you still make bank every month. Long-term tenants often bring their own stuff. This means you don’t have to shell out for that fancy coffee maker or that 100-inch TV. Your tenants get to make the place feel like home, and you save on furnishing costs. It’s a win-win.

4. Easy Property Management

Managing a long-term rental is generally smoother sailing. You’re not constantly cleaning between guests or coordinating check-ins. There’s also less wear and tear from frequent moves. And you build a relationship with your tenants, making communication easier. This makes things simple and stress-free.

 

Challenges of Long Term Rentals For Landlords In Dubai

Okay we started with the good. Now let’s give you the bad ugly. Here are five key issues you should be aware of as a long term rental landlord in Dubai.

Image of a man frustrated by managing his long term rental in Dubai

Photo by: Andrea Piacquadio

1. Rent Control Regulations

Dubai’s rental market is subject to strict regulations. The Real Estate Regulatory Agency (RERA) sets limits on rent increases, which can restrict your ability to adjust rents in line with market trends and demands. This means you might miss out on potential income during periods of rapid market growth.

Hmmn maybe hello short term rental?

2. Tenant Rights and Eviction Difficulties

Long-term tenants in Dubai have strong legal protections.

Evicting a problematic tenant can be a lengthy and costly process, even if they violate lease terms. You may find yourself stuck with a difficult tenant for longer than you’d like, potentially facing property damage or lost rental income.

The key here is to screen your tenants properly. But as the saying goes, you never know who you’re getting into bed with – until you live with them (okay that might not be a real saying but you get the point?)

3. Property Wear and Tear

With tenants staying for extended periods, your property may experience wear and tear — that goes by unnoticed. Unlike short-term rentals where you can regularly inspect and maintain the property, long-term tenants have more privacy rights. This can lead to higher maintenance and renovation costs when the tenant eventually moves out.

4. Market Fluctuations

Dubai’s real estate market is volatile.

If you’re locked into a long-term lease during a market upswing, you will miss opportunities to increase your rental income. Conversely, if the market dips, you could end up with a tenant paying above-market rates who might then seek to renegotiate or terminate the lease early.

5. Limited Flexibility for Property Use

Image showing an open door

Photo by: PhotoMIX Company

When you commit to a long-term rental, you’re tying up your property for an extended period. This limits your ability to sell the property quickly, use it for personal purposes, or switch to more profitable short-term rentals if market conditions change. You’ll have less control over your property’s use and fewer opportunities to adapt to market shifts.

 

Top 5 Areas for Long Term Rentals in Dubai

Okay so…if you’re at this point, it means you’re lowkey considering going the long term rental route. So if you are, what are the best areas to look out for?

Here are the top five areas that consistently draw tenants looking for extended stays:

1. Dubai Marina

Dubai Marina remains a hotspot for long-term rentals. Its waterfront lifestyle, abundance of restaurants, and easy access to public transportation make it highly desirable. The area attracts young professionals and families alike. Rental yields here average 6-7%, with high occupancy rates throughout the year.

However, it costs a big fat chunk to get properties in this area.

2. Downtown Dubai

Home to the Burj Khalifa and Dubai Mall, Downtown Dubai is perfect for tenants who want to be in the heart of Dubai. It’s popular among business professionals and luxury seekers. While rental yields are slightly lower at 5-6%, the prestige of the area still brings consistent demand.

3. Jumeirah Village Circle (JVC)

JVC has a family-friendly environment and more affordable rental prices. It offers a mix of apartments and villas, attracting a diverse range of tenants. Rental yields here are attractive, often reaching 7-8%.

4. Dubai Hills Estate

This newer development is quickly becoming a go-to for long-term renters seeking a quieter, more suburban feel. With its golf course, parks, and high-end amenities, Dubai Hills Estate is particularly appealing to families. Rental yields are solid, typically around 6-7%.

5. Business Bay

Adjacent to Downtown Dubai, Business Bay is a hit with young professionals and entrepreneurs. Its proximity to key business districts and growing selection of lifestyle amenities make it ideal for long-term stays. Rental yields here average 6-7%, with strong potential for future growth.

Every of these areas offers unique benefits for long-term rentals. Your choice will depend on your target tenant demographic and investment goals. Remember to stay updated on market trends in these areas to maximize your rental potential.

 

Laws and Regulations for Long Term Rentals in Dubai

Now that you understand the pros and cons, but also the best areas for long term rentals in Dubai – what rules should you watch out for?

Here’s what you need to know:

1. Tenancy Contracts

Image of a man signing a long term rental in Dubai contract

Photo by: Matthias Zomer

All long-term rentals must have a written tenancy contract registered with Ejari, Dubai’s official rental system. This contract should detail the rent amount, payment terms, and duration.

2. Rent Increases

RERA (Real Estate Regulatory Agency) sets strict rules on rent increases:

– No increase allowed in the first two years of tenancy

– After two years, increases are capped based on current rent compared to market average:

  • 0% if rent is within 10% of market average
  • Up to 5% if rent is 11-20% below market average
  • Up to 10% if rent is 21-30% below market average
  • Up to 15% if rent is 31-40% below market average
  • Up to 20% if rent is more than 40% below market average

3. Notice Periods

You must give 90 days’ notice for any changes to the contract, including rent increases or non-renewal. On the flip side, your tenant(s) must provide 60 days’ notice if they don’t wish to renew.

4. Evictions

You can only evict tenants under specific conditions, such as:

  • Non-payment of rent (after 30 days’ notice)
  • Using the property for illegal purposes
  • Illegal subletting of the apartment by your tenant
  • If you wish to sell the property (12 months’ notice required)
  • If you or a close family member wants to occupy the property (12 months’ notice required)

Staying informed about these laws helps you avoid disputes and manage your rental property effectively. Remember, regulations can change, so it’s wise to regularly check for updates from RERA.

 

Calculating Expected Rental Yields From Dubai’s Long Term Rentals

Let’s talk money, shall we? After all, that’s why you’re in the rental game.

A woman analyzing profit from long term rental in Dubai

Photo by: Nataliya Vaitkevich

Understanding your potential rental yield is key to making smart investment decisions. Simply put, rental yield is the annual return on your property investment. It tells you how much cash your property is generating compared to its value.

Here’s how to figure it out:

Annual Rental Yield = (Annual Rental Income / Property Value) x 100

Sounds simple, right? But there’s more to it. You need to consider a few things:

  1. Gross vs. Net Yield: Gross yield is the simple calculation above. But net yield? That’s where it gets real. You’ll need to subtract all your expenses – think service charges, maintenance costs, and maybe property management fees. This gives you a clearer picture of your actual returns.
  2. Location is everything. A studio in Dubai Marina might yield differently than a villa in Arabian Ranches. As of 2023, areas like JVC and Dubai Sports City often show higher yields, sometimes reaching 7-8%. Meanwhile, premium areas like Palm Jumeirah might show lower yields but offer better capital appreciation.
  3. Property Type: Apartments typically yield higher than villas, but they also come with more turnover. A 2-bedroom apartment in Dubai Marina might yield 6-7%, while a villa in Emirates Hills might be closer to 4-5%. But remember, villas often appreciate more in value over time.

 

Managing Your Rental Property In Dubai

When it comes to handling your rental property in Dubai, you’ve got two main paths: self management or hiring a property management company. Let’s break them down.

1. Self-Managing Your Rental Property

Taking the reins yourself means you’re in full control of your property. You’ll handle everything from finding tenants to fixing pipes. This hands-on approach can save you money on property management fees and give you a direct connection with your tenants. You’ll know exactly what’s happening with your property at all times.

Image showing a man fixing maintenance issues in a tenant's house

Photo by: Ksenia Chernaya

However, it’s not all smooth sailing. Self property management demands a significant time investment and a thorough understanding of Dubai’s rental laws.

  • Pros: Lower costs, direct control, personal relationship with tenants
  • Cons: Time-consuming, requires local knowledge, can be stressful

If you’re leaning towards self-management for your long term rental, here are some key tips:

1. Get Familiar With Paperwork

Dubai’s rental market comes with its fair share of paperwork. Get familiar with tenancy contracts, Ejari registrations, and maintenance records. Set up a system to keep all documents organized and easily accessible. This diligence not only keeps you compliant with local laws but also provides a clear paper trail for financial planning and potential dispute resolution.

2. Build a Reliable Maintenance Network

As a self-managing landlord, you’ll need a trusted team of service providers on speed dial. Take the time to vet and build relationships with reliable plumbers, electricians, and general handymen. Having go-to professionals means you can address issues quickly, keeping your tenants satisfied and your property in top condition.

3. Stay on Top of Market Trends

Make it a habit to research your area’s market conditions consistently. This knowledge puts you in a strong position when it’s time to negotiate lease renewals or consider selling your property.

2. Using A Property Management Company

Handing over the keys to a professional management company is definitely a weight off your shoulders. These experts handle the day-to-day operations, from marketing your property to managing repairs. They bring local market knowledge and a network of service providers to the table.

Image showing professional cleaners in a rental property

Photo by: Tima Miroshnichenko

For many landlords, especially those living abroad or juggling multiple properties, the peace of mind is worth the property management fees. However, you’ll have less direct control over decisions, and there’s always the risk of choosing a company that doesn’t meet your standards.

  • Pros: Saves time, professional expertise, handles legal issues
  • Cons: Additional costs, less direct control

 

Outro Thoughts On Long Term Rentals in Dubai

Long-term rentals in Dubai can be a good investment.

As we wrap up this blog, it’s clear that there are opportunities and challenges — for both experienced landlords and new investors.

To succeed, you need to understand the rules, know your costs and income, and be ready to adapt.

Yet, whether you manage your property yourself or use a company, it’s important to keep up with market changes, take good care of your properties, and work on building good relationships with your tenants.

With the right approach, you’ll earn consistent returns while helping to provide homes in Dubai. Use what you’ve learned here, do your research, and move forward with confidence.

We’re rooting for you :))

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