Did you know that more than 100 million Americans rent their home? That makes investment real estate a potentially profitable gig to get into.
If you've bought your property and are getting set up, you may be asking yourself an important question. Should you offer a long term or short term lease? Which is the best option for your rental property?
There is no one solid answer as there are pros and cons to both. Let's take a look at them to help you decide.
Short Term Lease
A short term lease is generally seen as any lease for 6 months or less. In popular tourist destinations, it is also common to see rentals available on a weekly or even nightly basis.
Are there any advantages to you as a property owner to offer short term leases? Let's take a look at the pros and cons to find out.
Tenants expect to pay a higher price for a short-term lease so you can charge a higher rent.
Plus, in an area where prices are rising, you can bump up your price with each tenant change. And if your current tenant requests an extension you can raise the rent without having to pay the costs of readying the space for a new tenant.
You also have more flexibility with a short-term lease. If you need to vacate the premises for any reason, it's easier to free up the space. The tenants will either already be moving out on their own or you can ask them to move out without having to wait several months for their lease to expire.
You have to be on the lookout for new tenants more often. Although in an area with a high demand for housing it typically isn't too hard to find a new tenant.
As each tenant moves out, however, you'll have to put more time and money into repairs. This can get expensive and time-consuming.
Long Term Lease
Perhaps the most common long term lease is a 1-year lease. However, they can range from 6 months to 2-3 years.
Let's take a look at the pros and cons of this type of lease.
You have more security because you know how much money you're getting every month. You don't have to be on the hunt for new tenants all the time. Plus, you won't have to be making repairs every few months.
You can't charge as much for long term leases so you'll have to take a smaller check each month.
Plus, delinquent tenants become a bigger problem with long-term rentals. It is much harder to get them out once they've entrenched themselves in your property.
Which One Should You Use?
There is no clear winner to the long vs short term lease debate. It boils down to your goals as an investor and the local market.
Want to find out how we can help your rental management process? Contact us today! We can help you find vetted tenants to occupy your property without doing all the work yourself.