Vacation rentals are becoming increasingly common in the hospitality industry, and Dubai is at the forefront of this development. With the resurgence of the travel industry and the emergence of new traveler demands and expectations, the serviced apartment (also known as Holiday Home) sector has been thriving in the hospitality industry. The market for this type of lodging accounts for 12 percent of the total addressable international residential market, which Euromonitor estimates to be worth $101 billion in 2023. Short-term serviced apartments are just one example of the types of alternative accommodations that have exploded in popularity over the past decade, as noted in a new report from real estate services firm JLL. According to the report’s findings, the term “alternative” needs to be updated because it no longer accurately describes the role it plays in the industry nowadays.
The number of tourists and hotel guests in Dubai has increased recently. A total of over 24 million people attended Expo Dubai 2020, and 5.1 million people visited the emirate during the first quarter of 2022, an increase of 203% from the corresponding period in 2021. The city has a healthy supply of vacation rentals, with estimates ranging from 10,000 to 30,000 available properties. Modern travelers’ needs for tech-enabled, flexible, and stylishly designed accommodations are on the rise, and Dubai has responded quickly by meeting those needs.
In this piece, Mr. Hamad Alwazzan, an investor in real estate in several countries, most notably the GCC, explains the merits of capitalizing on the rising demand for vacation homes.
The Holiday Home as a Financial Asset
Buying a home to rent out during the vacation season is a popular investment strategy that you may not have considered before. A potential source of passive income that requires little time or effort to maintain! Mr. Hamad Al Wazzan has provided several arguments for why you should think about making this your first investment in real estate, as we list the benefits below.
DUAL-USE PROPERTY OWNERSHIP
If you’re a newbie to the real estate investing world, you’re probably debating which strategies will yield the best results. A primary residence that also generates income as a vacation rental is a clear advantage of this investment strategy. You and your loved ones can enjoy the place during the holidays, and for the rest of the year, you can earn some extra money by renting it out to other vacationers. People who buy a rental property with the intention of renting it out on a long-term basis rather than a short-term basis do not have this option.
You have a private retreat, perhaps in the countryside or by the water, to which you are free to travel whenever you please. You can even work from your vacation spot, which will be right outside your door each night. Having the freedom to come and go from the property at will is a major perk.
This lessens the requirement for forethought and frees up time for those spur-of-the-moment getaways.
CREATE RENTAL PROFITS
Having a reliable income stream is a major perk of real estate investing in general and of investing in rental properties in particular. How? in the form of rent payouts. Your second residence can generate income by being rented out to visitors when you’re not using it. There is no requirement to purchase an “investment property” for you to make money. After all, the vacation home serves as your secondary residence. This is a side business that happens to be profitable. Your bond and other costs, such as local taxes, insurance, servicing, repair, and maintenance, for a vacation home you own and rent out on the side can be covered by the income you receive from short-term rentals.
Furthermore, the financial factor is one of the primary reasons why the owner of the vacation home decides to rent it out. You can use the money from the rent or mortgage payment, for example, to invest in home improvement projects or to pay for the property’s ongoing maintenance costs. It’s important to note that the profits from short-term rentals are significantly higher than those from longer-term leases, but that you still need to rent the property out for a certain number of nights every month to make a profit.
INFLATE YOUR WEALTH VIA APPRECIATION
Both the short-term and the long-term, particularly the latter, offer opportunities to profit from the ownership of a vacation rental property. There is a general tendency for the value of the real estate, including a second home, to increase as time passes. The value of most vacation rental properties rises over time, which positions you to make a profit whenever you choose to sell one of your holdings. The most amazing thing about it is that you don’t even have to make any effort at all; it’s completely passive. The situation is going to be rectified as a result of the property’s inherent appreciation in value. Increasing the value of your vacation rental property by making renovations and upgrades can increase its resale value and, as a result, your profit when you eventually decide to sell it. This is referred to as “forced appreciation.”
LESS DANGER, BETTER RESULTS
When compared to the risk associated with purchasing a primary residence, the risk associated with purchasing a vacation rental property is significantly lower. To begin, vacation rental homes typically are situated in extremely popular tourist areas. This makes it simple to attract a large number of guests, accomplish a high occupancy rate, and charge a high rental price. When added up, they amount to a sizeable amount of revenue from rental properties. The income collected from tenants is where investors in rental property actually make their money. Your risk will be reduced even further if you choose a location and a property that are versatile enough to serve either as a long-term or a short-term rental. If you discover that your occupancy rate is low, your rental income is low, and your vacancy rate is high, you have the option of switching tactics and becoming a conventional landlord.
STUDY THE INS AND OUTS OF REAL ESTATE
No matter how many books you have read or how many classes you have attended, you will never learn everything there is to know about real estate investing until you actually buy an income property and manage it. This is true regardless of the number of classes or books you have studied. When compared to other real estate investment strategies, such as becoming a full-time landlord, fixing and flipping properties, wholesaling, and so on, purchasing a vacation rental home can be a stress-free way to get your feet wet in the market.
RENTAL HOLIDAY HOMES ARE SIMPLE TO MAINTAIN
While some people make managing vacation rentals their full-time job, this is not necessary for you to start making money from real estate. Owning a vacation rental property can be done as a side hustle that doesn’t require a great deal of your time if you employ the services of a rental management company. The management of a vacation rental property is a major source of anxiety for unpracticed investors, and for those with no prior experience, it can become a living nightmare. Imagine working a 9-to-5 job in addition to having to clean your property between each guest, wash the towels and sheets, and restock the toiletries, sometimes several times a week.
The vast majority of homeowners simply do not have the time to do so. They’re having property managers or vacation rental management companies take care of all the tedious details instead. Then they can manage their vacation rental however they like, including interacting with guests, suggesting activities, and handling financial transactions.