Short-Term Rentals vs Long-Term Leases: Which Offers Better Returns in Dubai?

So, you have bought or are thinking about buying a property in Dubai. It's a great move, but leads to a big question: Should you rent your property out for the short term, like a holiday home, or go for a traditional long-term lease? It's a common debate among investors here, and there's no one-size-fits-all answer. We are going to break down the realities of each strategy to help you figure out which path offers better returns for your investment.

Short Term Rentals

Short-term rentals in Dubai mean renting your apartment on platforms like Airbnb or Betterhomes. Guests stay for a few days to a few weeks, and you charge them per night. This market thrives on the constant flow of tourists, business travellers, and people looking for a temporary place to stay.

In prime areas like Dubai Marina, Palm Jumeirah, or Downtown Dubai, daily rates during peak season (November to April) can be much higher than a standard monthly rent. Landlords earn up to 15% ROI (return on investment) through short-term rentals.

Pros

• Per night rates are high; for instance, a studio in Dubai Marina may cost AED 350 per night, whereas the same unit rented long-term could fetch AED 5,500 per month.
• You can block dates for personal use or pay a higher price during events like the Expo or New Year's Eve.
• Payments come in weekly, and you see money coming in regularly.

Cons

• During peak seasons, you might be fully booked, but summer can be slow.
• You need to handle cleaning, check-ins, maintenance, or pay a management company (who usually charge around 15-25% of your rental income).
• DEWA, Wi-Fi, cleaning, and Dubai Tourism fees are on you.
• If your property sits empty for just a few weeks during the low season (summer), the potential high yield drops quickly.

Why the Numbers Look Good

Suppose you have an apartment in JBR. A long-term lease might give you a yield of 7%. But if you can keep that same apartment booked for 20 days a month at a premium rate during the winter, your annualised yield might be higher. 

This strategy is effective due to Dubai's massive tourism industry. In 2024 and early 2025, Dubai experienced record numbers of visitors. In 2024, Dubai welcomed 18.72 million international visitors, a 9% increase compared to the previous year. This growth continued into early 2025, with 7.15 million international tourists visiting between January and April, a 7% increase year-over-year. The sustained demand has kept occupancy rates high for popular short-term properties.

The Long-Term Lease

A long-term lease is the classic approach. It means you rent your property out for a year or more to a tenant who pays monthly or quarterly. You find a tenant, sign a contract for a year (or more), register it with Ejari, and collect rent. This model is all about stability and consistency.

Dubai's population is always growing, which means the demand for long-term homes is strong. A long-term lease guarantees income for the duration of the contract. You know exactly what you are getting paid and when.

Average long-term yields in Dubai usually sit between 6% and 8%, depending on the area. While this might sound lower than the potential of short-term rentals, it's a reliable return.

Pros

• You get a consistent payment, month after month, without worrying about daily rates or occupancy.
• You don't deal with guest turnover, constant cleaning, or furnishing replacement.
• Tenants pay their own DEWA and internet.

Cons

• The annual rent caps your returns.
• Once the lease is signed, you can't increase rent until renewal, and even then, you are limited by RERA's guidelines.
• If you get a bad tenant, it's tough. Eviction processes can take time if things go south.

One important thing to know in Dubai is that the rental market is regulated by RERA (Real Estate Regulatory Agency). RERA sets a rental index that controls how much you can increase the rent each year. It is great for tenants, but it limits how quickly you can raise your prices, even if market rents are rising fast. If you have a good tenant, you might be locked into a lower rent for a while, potentially missing out on market increases.

Which Strategy is Best?

Short-Term Rentals yield around 10-15% annually (gross), but this can drop to 6-9% net after management fees, utilities, and maintenance. Long-Term lease yields 6-8% annually (gross), with lower management costs, so your net may end up around 5-6%.

Example:

A one-bedroom in JLT might rent long-term for AED 80,000/year (AED 6,600/month). The same unit on short-term rent at AED 350/night, with an average occupancy of 70%, could bring in AED 7,350/month (350 x 30 x 0.7), or AED 88,200/year.

It sounds better, but subtract 25% for management and utilities (AED 22,000), and you are left with AED 66,000 net, which may end up slightly below long-term leasing unless your occupancy is higher. Short-term rentals can outperform, but only if your occupancy stays strong and you manage costs tightly.

Let's look at the factors that determine your bottom line.

Occupancy Rates

For short-term rentals, occupancy is everything. An average short-term property needs to be booked around 65% to 75% of the time to cover costs and match a decent long-term yield. In Dubai, occupancy varies widely by season.

Peak Season (Winter): Occupancy can hit 85% to 95% in popular areas.

Low Season (Summer): Occupancy can drop to 40% or lower.

If your property is empty, you are losing money every day.

For a long-term lease, your occupancy rate is 100% for the duration of the contract (minus the time between tenants, which is usually short in Dubai's current market). You have stable income, regardless of the season.

Expenses and Fees

Short-term rentals have higher overhead. 

Management Fees: 20% - 25% of revenue.

Utilities: All included for the guest, so you pay the full DEWA bill.

Tourism Dirham Fee: A fee per night (AED 10 - AED 15) that must be paid to the government.

Cleaning and Maintenance: Constant costs for upkeep.

Long-term rentals have much lower operational costs. The tenant pays for their utilities, and you only deal with maintenance occasionally.

Location Matters

The decision boils down to the location of your property. Due to the high demand from tourists, popular tourist destinations like Downtown Dubai, Dubai Marina, and Palm Jumeirah are ideal for short-term rentals. Long-term leases are best suited for family communities like Arabian Ranches, Springs, and JVC, especially for residents looking for stable living conditions and good schools. It usually doesn't work out well to operate a short-term rental in a quiet residential neighbourhood.

Short-Term Rentals vs. Long-Term Leases: Comparison

Conclusion

If you are an investor who likes a hands-on approach, enjoys the hospitality side, and is ready to deal with the ups and downs of tourism, the short-term route might be for you. If you prefer passive income, stability, and don't want to worry about daily operations, stick with a long-term lease. In Dubai, both strategies can be highly profitable. The "better return" is simply the one that aligns with your financial goals and your tolerance for effort. Before you decide, look closely at your property's location and run the numbers on occupancy rates and management costs. That's the only way to understand what you are getting into.

f you are still weighing your options or aren't sure which strategy fits your property best, we can help. Our team knows the Dubai market inside and out and specialises in helping investors find the right balance between profit and peace of mind.

Contact us today and book a free consultation with a Dubai real estate expert.