The prospect of investing in Dubai’s real estate market for the purpose of short-term rental income sounds attractive, but you might still be sitting on the fence. Perhaps there’s a bunch of contradictory advice on the internet, as well as people telling you that it’s too “high risk” or “not worth the effort”.
So, for your ultimate peace of mind – we’ve collated the most common questions, and concerns raised by potential investors and addressed them in this article for Dubai real estate investing.
In our experience, once investors have had these common questions addressed, they go on to have a smooth and profitable partnership journey with Luke Capital Group – having built the trust with us beforehand.
Let’s get started.
What happens if there’s another Covid lockdown?
As we continue to operate through turbulent and unforeseen times, it’s understandable for you to have concerns about another lockdown in Dubai. Rest assured, this is highly unlikely – as it has only happened twice in Dubai; and this was at the peak of the pandemic.
However, in the unlikely event of another COVID lockdown, we will still need to ensure that rent and bills are paid – as would be the case across any other country and industry. Our team will work hard on any negotiations and support you as you commit to pending financial commitments.
While we cannot predict the future, our support is guaranteed.
What are the exact set-up costs for real estate investing in Dubai?
Understandably, every investor wants to know how much money they’ll need to fork out upfront in order to start getting involved with Dubai’s real estate market. We’re as transparent as humanly possible with all our investors and lay out all the numbers from the get-go.
Your first rent cheque will depend on your property. In Dubai, landlords typically ask for 1 rent cheque for the year, paid upfront. We’re now beginning to see landlords becoming more flexible with this; however, do expect rent for properties to be paid quarterly.
There are some set-up costs to settle with utility companies as well. These companies usually ask for deposits in Dubai to get up and running (around 2000 AED), after an agreement has been made with them.
Naturally, your properties will need to be furnished to the right standards for guests, which is all organised and carried out by Luke Capital Group. Our team will confirm any costs with you before moving forward; in our experience, a full fit-out for a property can range from anywhere from 10,000 AED upwards – depending on the property size.
Lastly, you’ll need insurance and DTCM licences to trade in Dubai. Again, this is taken care of by Luke Capital Group and we simply invoice you after it’s all been settled (costs range from around 360 AED).
As with any other short-term rental business, do bear in mind that ongoing bills and such will need to be settled as well. This includes things like water, electricity, WiFi and air conditioning – the latter always being expected in the Middle East. Other day-to-day operational costs will include things like linen, Welcome Packs, cleaning etc. As a partner of Luke Capital Group, you will not have to worry about managing any of this, it will simply be billed to your property every month – and we’ll take care of the rest.
How are real estate investors paid by Luke Capital Group?
Our hands-off approach means that after you register as an investor, Luke Stays (our management team) will simply provide you with a statement at the end of each month, after managing all the operations for you.
It’s as easy as ordering a Michelin star meal at a restaurant (except, in this case, you make money from it).
Your statement will clearly outline what our team has generated for you against the costs paid on your behalf. We will deduct our minimal management fee from this figure as well as any bills, and you will receive the net amount to pay your property’s rent.
Where fluctuations in exchange rates are considered, note that all money received in Dubai must be for the exact AED amount on your invoices. Any monies paid into your nominated account will leave our company account in AED and the rate will be as per our bank charges. International payment fees will be deducted from the investor.
Remember that even if we achieve higher than the estimated projections, our management fee stays at 10% plus VAT (currently 5% in the UAE) – on the gross revenue. So, even if we overperform, we just collect our fee, and the lion’s share of the revenue goes straight to your pocket.
What exactly is rental arbitrage, and is it legally allowed in Dubai?
If you’ve not heard of “rental arbitrage” before, you might be assuming that it’s some shady, undercover practice that makes investors lots of money in Dubai.
Rest assured, this is 100% NOT the case.
Rental arbitrage is simply an industry term to describe when a property is being rented on a long-term lease and then listed on booking platforms such as Airbnb, VRBO and Luke Stays for short-term rental purposes. (For nightly rental rates).
One of the common misconceptions is that rental arbitrage involves going behind a landlord’s back; or that it simply “isn’t allowed” – especially in the UAE. We can 100% guarantee that this strategy is a legal, ethical, safe and creative way of making money and we only carry it out after we have received the landlord’s permission.
Every landlord is clear from the get-go that their property is going to be used by us for short-term rental purposes – and they’re always very happy with this as we’re effectively maintaining their property for them. Sub-letting is perfectly legal if you have acquired the landlord’s permission.
The Short Term Rentals Process: How do the Bookings Work and Who are the Properties Marketed to?
Once your property is ready to host guests, our experienced management team will list it on over 60 booking sites for you. This includes photography, writing the listings and managing the entire booking from start to finish.
During this time, you’ll be able to view your property listings on every booking site and track its performance in real-time, if you wish.
In Dubai, we target several markets that we know will be interested in your property through experience. This includes expats relocating to the Emirates for business (the Dubai population in the upscale areas of the city is currently 90% expats), tourists looking to holiday in Dubai (millions per year); and, of course, corporate professionals who are in the city for a few months at a time for projects.
What kind of a contract do investors need to commit to?
In order for us to make the most out of these investments, commitment is required from both sides.
As an investor in Dubai’s real estate market for short-term rental purposes, you’ll be asked to commit to a minimum of 12 months’ rent with a 3-month notice period before the end of a fixed term.
In our years of experience, we find that most investors wish to renew their contracts after the first 12 months – but if you do not wish to renew yours (and you’re under no obligation to do), we kindly ask that you give us 3 months notice.
If you are serious about starting investing in Dubai’s Real Estate market, we have the best investment deals for you. We will do all the work and operations, and you have to enjoy your profitable ROIs. Start investing in Dubai’s Real Estate Market.
Bonus Insights
Dubai is the fourth most travelled place in the world, so as an investor, you’re putting your money in a city that’s in high demand and has incredible plans for the future. Our experience in this market enables us to predict peak seasons for short-term rentals for you (mid-October to the end of March) as well as quieter times of the year, which is normally from June to the end of August.
This Arabian city’s plans for 2024 give us confidence that the short-term rental market is going to vivaciously expand and provide greater opportunities for investors who are serious about making their money work harder. We simply would not be pushing this initiative as much as we are now if we weren’t confident. To get started on your investor journey in Dubai’s real estate market, simply make an enquiry on our designated deals page, and a member of our team will be in touch with you in no time.
