Airbnb rental arbitrage is a business model where you rent a property for long term and then sublease it for short-term rentals, such as vacation stays, through platforms like Airbnb. Unlike owning a property, you don’t have to buy it, which lowers your upfront costs and investment. In Dubai, many property owners live abroad, opening up a big opportunity for rental arbitrage business.
In this guide, you’ll learn all about starting an Airbnb arbitrage business in Dubai. We’ll walk you through the steps of getting the required licenses, including DTCM approval, and registering on other platforms like Dubai Municipality for paying fees. We’ll also discuss license cost and the external approvals you need to get started. Let’s dive in!
What Is Airbnb Rental Arbitrage Business?
Airbnb rental arbitrage is a method where you rent a property and then list it on Airbnb for short-term rentals, making a profit from the difference. Imagine you rent a beautiful apartment in Dubai Marina area for a year. Instead of living in it, you rent it out to tourists for short stays, charging a daily rate that’s higher than the monthly rent you pay. For example, if you’re paying AED 130,000 annually (around $35,000), and renting it out for $200 per night, you’re making a nice profit each month!
How Is Rental Arbitrage Different from Subletting?
Subletting usually means renting a property to someone else for a long term stay. Rental arbitrage, on the other hand, involves short term vacation rentals like those you find on Airbnb. Here’s a simple example: You rent an apartment, and then re-rent it to tourists on a short-term basis through platforms like Airbnb. The goal is to profit from the daily rental rates, which are higher than monthly rent when you calculate.
Is Rental Arbitrage Allowed in the UAE?
Yes, rental arbitrage is allowed in the UAE! But it’s important to have permission. Your tenancy contract must specifically state that you’re allowed to rent out the property as a holiday home or short-term rental. If your contract allows this, you’re good to go!
Is Rental Arbitrage Profitable in Dubai?
Absolutely! Let’s say you rent a property in Dubai Marina for AED 130,000 per year, which is roughly $35,000. You then convert it into a holiday home and charge $200 per day. Even with an 80% occupancy rate, you’d make about $5,000 per month, which adds up to $60,000 per year. With good management and a great apartment, the profit potential is huge! Some of our clients are managing up to 20 apartments and earning very well.
The Good Part of Rental Arbitrage
Here’s the best part: You don’t need to pay the full rent upfront. You can get a rental agreement in six or four cheques, meaning you only pay 1/6th of the total rent every two months. This means your initial investment is lower, and your next rental payment can come from your profits instead of your pocket. Isn’t that great?
How to Start Airbnb Rental Arbitrage Business in Dubai
Every business in the UAE must be officially registered. You can choose between a Freezone or Mainland license.
At CSPzone, we recommend a Mainland license for Airbnb arbitrage because it offers more flexibility. Contact us to learn more!
Steps to Start Rental Arbitrage Business :-
1. Decide the business activity
In this case, your business would be categorized as a property management company. There are different activities you can include, but first, we’ll need to understand your full business plan. For instance, will you supply Airbnb essentials or create your own booking platform? Based on these details, we’ll add the appropriate business activities to your trade license.
2. Decide the legal structure
This is a key step, as your legal structure will impact your business operations and liabilities. Whether you choose to form a sole proprietorship, LLC, or another structure, it’s important to choose wisely.
3. Apply for your trade name approval
Select a business name and ensure it follows Dubai’s naming conventions.
4. Get initial approval
After deciding your business activity and legal structure, the next step is to apply for initial approval. This is required before you can move forward with your business setup.
5. Pay the fees and get trade license
Once approved, you’ll need to pay the required fees to obtain your trade license. This is the final step to officially start your rental arbitrage business in Dubai.
We have step by step process on how to register a company in Dubai.
Getting External Approvals & Registrations
Starting a rental arbitrage business in Dubai also requires external approvals from various departments, such as Dubai Municipality and DTCM (Dubai Tourism and Commerce Marketing). Let’s go over them one by one:
Tourism Dirham Fee and DTCM Permit
The Tourism Dirham Fee is a charge collected by DTCM for each overnight stay in holiday homes. You’ll need to register for this and obtain your DTCM permit.
Dubai Municipality Fee
This fee applies to properties and businesses that sell goods or services, such as hotels, guest houses, or restaurants. It’s essential to register with Dubai Municipality to pay the appropriate fees for your business.
Destination Fee
This is a fixed charge of AED 15 per night and goes toward promoting tourism in Dubai.
Don’t worry! With the right expert consultation, like CSPzone, we can help you register on all these portals with the proper documents.
Cost of Starting Airbnb Rental Arbitrage
Starting a rental arbitrage business in Dubai involves a few essential costs. The trade license itself will cost around AED 15,000 (approx. $4,500) if you don’t need a visa. Other major expenses include the first rental cheque for your apartment, which varies depending on the location you choose.
For example, renting in Dubai Marina will cost more than other areas. You’ll also need to invest in furnishing, cleaning supplies, and essentials like towels and toiletries for your holiday home. Keep in mind that you only pay 1/4th or 1/6th of the yearly rent upfront, which lowers your initial investment!
Location Is Key in Airbnb Arbitrage Business
In real estate, location is everything! To succeed in Airbnb arbitrage, you need properties in high-demand areas like Dubai Marina, Downtown, or Palm Jumeirah. Tourists are willing to pay more for properties with great views and close proximity to attractions, so choose wisely!
Know About the Peak Season for Holiday Homes in Dubai
Dubai’s peak season for vacation rentals is from October to May, thanks to the pleasant weather. During this period, you can expect higher demand, so plan your pricing and availability accordingly.
CSPzone Expertise
At CSPzone, we have over 15 years of experience in business consulting in Dubai. Whether you’re just starting or scaling your rental arbitrage business, we’ll handle all the paperwork, approvals, and registrations. Get in touch today!
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