Master Lease & Subleasing: The Investment Strategy Sweeping the Saudi Market.. High Returns or Dangerous Trap? Everything You Need to Know in 2026

In the name of Allah, the Most Gracious, the Most Merciful. All praise be to Allah, Lord of the worlds, and peace and blessings be upon the noblest of prophets and messengers. Imagine this scene: A 30-year-old Saudi man stands on a Riyadh sidewalk in front of a luxury residential building with 10 apartments. He doesn't own a single riyal of its value. Yet within a few hours, he will be the person deciding who lives there, how much they'll pay, and when. How? Through a 100% legal method, registered on the Ejar platform, and approved by the Saudi Central Bank. It's called " Subleasing " — known internationally as the " Master Lease Strategy " — one of the fastest-spreading investment waves in the Saudi real estate market today. In this article, we open the black box of this strategy: How exactly does it work? How much do you earn? Why do some landlords lose millions of riyals because of it? And how do you protect yourself if you decide to enter it — whether as a landlord or a middle investor . Buckle up, because what you read here may change your view of the Saudi real estate market entirely. The Game Simply: How Does It Work? Imagine buying at wholesale prices and selling at retail. That's exactly what happens in subleasing, but instead of merchandise, the subject is residential buildings and rental units . The idea in 3 simple steps: Step One — The Big Deal with the Owner: The middle investor agrees with a building owner to lease the entire building (e.g., 10 apartments) at a discounted aggregate price, paying him a single annual payment or a large upfront payment. For example: leasing a single apartment for SAR 20,000 annually instead of the market price of SAR 25,000. Why does the owner accept? He receives a large sum upfront (SAR 200,000 cash in the above example) He gets rid of the headache of finding tenants for 10 separate apartments He doesn't deal with late-paying tenant problems Guaranteed rental income with no vacancy periods Step Two — Retail Re-leasing: The investor then leases each apartment individually to individual tenants at the real market price (SAR 25,000) or higher if he furnishes them and converts them to furnished apartments. He collects rent from end tenants over two or four annual payments . Step Three — The Difference Is the Profit: The difference between what the investor pays the owner (20,000) and what he collects from tenants (25,000) = SAR 5,000 × 10 apartments = SAR 50,000 net annual profit . That's from one building only! Imagine if he manages 3, 5, or 20 buildings. Why Has This Strategy Spread in Saudi Arabia Right Now? This question is very important, because its answer reveals when this strategy succeeds and when it fails. Six factors have driven this wave in Saudi Arabia: Crazy Rental Demand: Riyadh alone welcomes thousands of new employees and residents every month due to regional HQ relocations and company expansions. Vision 2030 and Major Events: Riyadh Season, Expo 2030, FIFA World Cup 2034, massive tourism events = exploding demand for short-term apartments. Clear Legal Framework: The Saudi Central Bank and Ejar platform have made the matter transparent and regulated (we'll detail this). Shifting Landlord Behavior: Many building owners now prefer aggregate leasing to free themselves for other investments. Availability of Short-Term Booking Platforms: Airbnb, booking, and others have opened the furnished market unprecedentedly. Rental Inflation: The gap between traditional and furnished rents has reached 40-60% in some areas. The Real Numbers: How Much Do You Actually Earn? Let's do a realistic calculation with current Riyadh market numbers: Scenario 1: Leasing a Residential Building (10 Apartments) with Traditional Leasing Cost of leasing entire building from owner: SAR 200,000 annually (average SAR 20,000 per apartment) Re-leasing revenue: SAR 250,000 annually (SAR 25,000 × 10) Operating expenses (maintenance, management, vacancies): SAR 25,000 Net profit: SAR 25,000 annually Return on Investment (ROI): 12.5% (excellent) Scenario 2: Converting the Building to Short-Term Furnished Apartments Cost of leasing building: SAR 200,000 Initial furniture cost: SAR 150,000 (amortized over 3 years) Short-term revenue (Airbnb + corporates): SAR 450,000 annually Operating expenses (cleaning, marketing, management, maintenance, services): SAR 100,000 Net profit: SAR 100,000 (year one) or SAR 150,000 (after furniture recovery) Return on Investment: 50-70% (very high but with higher risks) Now you understand why some companies lease 20, 30, and 40 properties at once ? Because the model is scalable : same system, same team, same profits × number of buildings. The Bright Side: Benefits for Each Party Benefits for the Middle Investor (Original Tenant): Entering real estate market without purchasing: You don't need huge capital to buy a SAR 5 million building; SAR 250,000 to lease it is enough. Strong monthly cash flow: Stable income as soon as units are leased. Rapid expansion potential: You can grow your portfolio from one building to 10 buildings within two years. Exit flexibility: If the project fails, the contract ends and you leave, without losing purchase capital. Learning the market before major investment: Golden opportunity for those planning to buy properties later. Profit margin between 20-30% of total value. Benefits for the Owner (Original Landlord): Large upfront payment: Receives a huge amount in one payment instead of installments over months. Vacancy guarantee: Stable income whether apartments are rented or not — obligation falls on original tenant. Relief from tenant management: No calls, no complaints, no maintenance, no late payments. Saving time and effort for other investments: Instead of managing apartment by apartment. Reduced tenant turnover: One long-term contract is better than 10 short ones. Property protection: Middle companies care about maintenance because property quality = income quality. The Dark Side: Deadly Risks for Each Party Before you get excited and dive into this, read this section very carefully. Because everyone who ignored these risks, lost. Owner Risks (The Most Dangerous): The biggest risk — Middle tenant default: The biggest nightmare facing the owner. If the investor fails to lease units or manage the project, he stops paying rent, and the owner discovers his building has 10 legal sub-tenants, a correctly executed contract, but no one paying him. (This is exactly what happened to Sonder in 2024-2025, and it collapsed after being huge). Property misuse: Some companies convert the property to uses not agreed upon (commercial activities, unlicensed short-term rentals, housing dozens of workers). Damage and neglect: Many short-stay tenants accelerate property deterioration. Complex legal eviction: If you want to terminate the contract early, there are 10 sub-tenants with legal rights. The case may take months. Reputation: If the company defaults and negative sub-tenant stories spread, the building's market reputation is damaged. Middle Investor Risks: Fixed obligations with variable risks: You're obligated to pay rent to the owner monthly whether units are leased or not. No asset ownership: After 5 years of work, you leave with no equity, only operating profit. Operating risks: Broken heater, water leak, tenant complaints — all eat your time and profits. Market change: If rental prices drop, you're locked in at a higher price with the owner. This is exactly what killed Sonder. Increasing competition: The more companies in this field, the lower the profit margin. Double legal liability: You're responsible to the owner on one side, and to sub-tenants on the other. The Saudi Legal Framework: What Does the System Say? Here comes the essential point that many landlords are unaware of. According to Article 25 of the Saudi Central Bank (SAMA) Rules : "The tenant may operationally lease the leased asset or part of it to another tenant, provided compliance with the procedures applied in the electronic network for rental services, without requiring the landlord's approval , while the tenant remains fully and directly responsible for his obligations under this contract toward the landlord." This sentence deserves a red underline! The tenant can legally sublease even if the owner doesn't explicitly authorize it , as long as he complies with the Ejar platform system. But — here's the good news for landlords — there are powerful protection mechanisms built into the Ejar platform itself if used wisely. How to Protect Yourself as a Landlord from the Nightmare Scenario? If you're a building owner considering accepting a company's offer to lease your building entirely, here's the fortress you must build before signing any paper: 1) Enable or Disable the Subleasing Feature Directly in Your Ejar Contract This is the most important protection step, and the surprise is that many landlords don't know it exists! The Ejar platform provides an official feature to enable or disable subleasing when signing the contract with the real estate broker. If you refuse to allow the tenant to sublease the property, ask the broker not to activate this feature in the contract, and then subleasing becomes legally prohibited and the tenant cannot execute it. If you agree to subleasing, you can activate the feature while setting your conditions (such as requiring your prior approval for each sub-tenant). This solution is far stronger than any traditional paper clause. 2) Request a Bank Guarantee Worth 3-6 Months Rent A bank guarantee is one of the strongest protection tools for the landlord. If the original tenant defaults, you cash the guarantee immediately from the bank without going to court. Serious companies won't object to providing a bank guarantee worth 3-6 months rent. The bank guarantee is a legally approved instrument in the Saudi system and considered one of the best forms of financial assurance. 3) Use the "Security Deposit Custody" Service via Ejar Platform This official service launched by the General Real Estate Authority is the smart legal solution protecting both parties' rights. (Important legal note: using a cheque as a guarantee is considered a practice violating the Saudi Commercial Papers Law — a cheque is a payment instrument, not a security instrument, so avoid this dangerous traditional practice). The Security Deposit Custody service works as follows: Upon contract documentation, the deposit is automatically reserved from the tenant's electronic wallet in the Ejar platform The Ejar platform holds the amount as a neutral third party throughout the contract period After the contract ends, the property handover form agreed upon by both parties is referenced If there are damages, the amount (in full or in part) is automatically transferred to the landlord as compensation If the property is handed back in good condition, the amount returns to the tenant as available balance in their wallet The golden advantages of this service: no courts needed, no disputes over who holds the deposit, complete protection for both parties, and dramatic reduction in disputes. Ask the real estate broker to activate this service when documenting the contract. 4) Explicit Penalty Clause in the Contract Write a clear clause in the contract: "In case of tenant's late payment for more than 15 days, the landlord has the right to immediately terminate the contract with a penalty of X riyals." This clause is legally considered and supported by the Saudi Civil Transactions Law. 5) Sub-lease Contract Automatically Terminates with Original Stipulate — and this is your legal right — that every sub-lease contract with end tenants states that the contract automatically terminates if the original contract with the middle investor terminates. This protects you from eviction chaos and ensures you recover your property with all its units in case the main tenant defaults. 6) Document Everything Through Ejar Platform This is the golden point. A contract documented through the Ejar platform gains the status of an "executive instrument" . What does this mean? It means if the tenant is late, you don't need to file a case in the general court (which may take years!). You go directly to the Execution Court , which can: Seize the tenant's bank accounts immediately Suspend government services (Absher, travel) Force eviction of the property Claim the full amount with penalties The difference between a documented and undocumented contract is the difference between 3 months and 3 years to recover your rights. This difference alone may save your entire investment. 7) Verify Commercial Registration and Financial Status Before signing, ensure: Valid commercial registration Fal license for real estate brokerage if they manage properties Company history and actual number of properties managed Market reputation (ask owners currently dealing with them) Financial statements if possible 8) Activate the Integrated Insurance Service via Ejar Platform In addition to the Security Deposit Custody service, the Ejar platform provides an integrated insurance system that regulates the relationship between parties and preserves the landlord's rights. This official service eliminates the need to search for external insurance companies and provides: Electronic insurance deposit within the official government system Reliance on receipt and handover forms available on the Sakani platform (legally standardized) Reduced likelihood of disputes about property condition upon receipt and handover Fast dispute resolution in case of damages Full integration with the rental disputes system This feature is considered the digital security fortress for the landlord, as it is backed by an official government entity (General Real Estate Authority) and legally binding on both parties. How to Create a Legally Protected Sublease Contract via Ejar Platform? The Ejar platform, affiliated with the General Real Estate Authority, is the backbone of legal protection in the Saudi real estate market. Steps to create a documented contract: Create contract electronically via Ejar network through a licensed broker or approved platform Enter both parties' data (national IDs, mobile numbers, addresses) Enter complete property data (deed, location, number of units, areas) Specify rental value, payments, start and end dates Decide on the subleasing feature: Enable or disable according to the landlord's preference Activate the Security Deposit Custody service and specify its value Add special clauses (penalty clauses, automatic termination conditions) Electronic signature from both parties via Nafath Contract issued as officially approved executive instrument Here precisely lies the power of modern smart real estate platforms . The Raghdan Real Estate platform is preparing very soon to launch a direct integration service with the government Ejar platform, allowing owners and investors to create their documented lease contracts (whether original contracts or sublease contracts) with a single button click from within Raghdan , without needing to visit a broker or real estate office, with all smart protection features available in Ejar (subleasing feature lock, security deposit custody, penalty clauses, automatic termination). This service will create a qualitative leap in protecting landlords from dangerous subleasing scenarios. Global Market Lessons: The Sonder Fall Story To understand the danger of this model when poorly applied, take this true story: American company Sonder Holdings was one of the largest applications of the Master Lease model globally. It leased thousands of apartments in dozens of global cities and re-rented them as short-term furnished apartments. Its market value reached over $1.9 billion in 2021. But in 2024-2025, when the market changed and short-term rental prices dropped, Sonder found itself committed to paying very high rents to thousands of landlords , while its customer revenues weren't enough. The result: near-complete collapse, thousands of employees laid off, contracts canceled with landlords worldwide. Landlords who didn't protect themselves lost months of rent. The lesson? The model is excellent when it works, but very fragile when the market changes. And the smart landlord protects himself before getting involved. When Does This Strategy Succeed? When Does It Fail? Succeeds When: The market is in high stable demand The location is attractive (near business, universities, events) The middle investor has real operational experience Profit margin between original and re-leasing rent is at least 25% Reserve funding available for at least two months Fails When: Complete dependence on short-term revenues (Airbnb), which fluctuate Rapid expansion without administrative infrastructure Narrow profit margin (less than 15%) No financial reserve Sudden regulatory change in the market Location saturation with furnished units Golden Tips for the Owner Receiving an Offer Today Don't sign in the same session: Take the offer, read it calmly, consult a lawyer. Verify tenant identity: Request ID copy, commercial registration, and sample of previous contracts. Request a tour of their other properties: A serious company is proud of its work and takes you to see managed properties. Compare more than one offer: Don't accept the first offer. List your property and compare. Digital guarantees before signing, not after: Ensure activation of the Security Deposit Custody service on the Ejar platform, and disabling of the subleasing feature (if you don't agree to it), before signing anything. Document everything via Ejar platform: Don't accept paper or undocumented contracts. Agree on periodic review mechanism: Stipulate right to visit property every 6 months to check its condition. Read every clause: Especially eviction clauses, penalty clause, and subleasing feature settings. Tips for the Middle Investor Starting Now Start with one building: Don't expand before mastering the model. Choose guaranteed locations: Near universities, hospitals, events, business. Calculate numbers with deadly precision: Set aside 20% reserve for unexpected expenses. Sign a contract of at least 3 years: Less than that doesn't justify initial investment. Specialize: Either long-term rental for employees, or furnished for tourism. Mixing is costly. Professional accounting systems: Every riyal in and out documented. Comply with Ejar platform procedures: Any subleasing outside the platform is exposed to invalidation and loss of all rights. Reputation before profit: A satisfied customer brings 10 customers. An angry one drives you out of the market. Is Subleasing a "Suspicious Activity" as Some Claim? The direct answer: No, it's a legitimate and legally regulated investment activity . The activity becomes suspicious only if: Done without official documentation via Ejar platform Used for tax evasion Used for illegal activities (housing without permits, monopolization) Violates the original contract settings (e.g., subleasing despite the feature being locked) But if done with transparency and documentation within the system, it's a smart investment activity that contributes to activating the real estate market and provides higher quality services to end tenants . Conclusion: Your Decision with Knowledge, Not Enthusiasm Subleasing (Master Lease) is a highly intelligent investment game, combining golden opportunity with major risks . It's not a "no-capital project" as some promote, nor "fraud and manipulation" as others warn. It's an internationally recognized real estate model that works excellently when applied wisely, and causes disasters when applied negligently. For the owner: Don't fear accepting such offers, but don't sign anything before building the complete protection fortress through the official Ejar platform tools (locking the subleasing feature + Security Deposit Custody service + penalty clause + official documentation + bank guarantee). If you do this, this model may be the best real estate income you can get : stable, guaranteed, hassle-free. For the middle investor: Start small, calculate precisely, choose locations carefully, and provide strong cash reserves. The model is excellent for those with operational mindset and patience, but deadly for those seeking "quick profit without work." For both parties: Documentation via Ejar platform is not an option, it's the first and last line of defense . With platforms like Raghdan Real Estate , preparing to provide direct Ejar platform integration in the coming days, creating smart documented contracts has become easier than ever. Follow us, and be among the first to use this feature upon its launch. The Saudi real estate market is evolving rapidly, and the smart investor is one who understands the game before entering it. Will you be that investor? 🏢💼📈

Tags: Subleasing, Master Lease, Rental Arbitrage, Saudi Arabia Real Estate Investment, Building Leasing, Ejar Platform, Real Estate Lease 2026, Landlord Protection, Property Management Companies, Saudi Real Estate, Real Estate Investment Without Capital, Furnished Apartments, Real Estate ROI, Vision 2030