Why it’s better to rent out your unit as a holiday home
Additionally, a tourism dirham fee of Dh10 or Dh15 per bedroom is payable, depending on the classification (standard or deluxe), per night of occupancy. Dubai Tourism inspects the registered homes to classify them as ‘standard’ or ‘deluxe’, depending on the offerings.
Bigger units (especially, 2 and 3-bedroom) do not compete with small-sized hotel rooms, which are targeting a different set of travellers. Including some holiday home units within a residential portfolio could help diversify the overall risk beyond regular residential demand. Even residents who frequently travel for business can utilise the empty periods for making extra income on the property. This would require preparing the apartment from a guest perspective such as offering a neutral palette décor and functionality in terms of kitchen and bathroom essentials, television, etc. Buildings with superior amenities are likely to attract more travellers.
The search for such buildings can begin through a review of listings of existing properties available for guests on websites such as Booking.com, Expedia, etc. Investors should focus on purchasing apartment units in locations with limited upcoming supply and proximity to public transport and tourist destinations, such as Dubai Marina, Palm Jumeirah, Jumeirah Beach Residence and Downtown Dubai.
The typical costs for the apartment would include service charges, annual maintenance fees, utilities (Dewa, WiFi connection, insurance, supplies, DTCM and building management fees, holiday home operator fees (20 per cent of rental), furnishing and white goods cost, as well as marketing costs. Taking these costs against the expected rate per night at occupancy levels of 60 to 65 per cent, the net income for the apartment is expected to be higher as a holiday home versus annual rent as a regular residential unit. The calculation would vary for each building and apartment type and should be evaluated closely before purchasing an apartment for short-term rental purposes against operating it like a regular residential unit offering annual lease terms.
The writer is associate partner, strategic consulting and research at Cavendish Maxwell. Views expressed are her own and do not reflect the newspaper’s policy.