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Lease Terms: How Long (Or Short) Should You Go?

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Marina Shlomov - Tuesday, June 9, 2020

Lease Terms: How Long (Or Short) Should You Go? 

When it comes to drawing up the lease between you and your future tenant, when will that lease expire?

Sure, if you ask most landlords how long their average lease is, there is a good chance that most will state that their properties are leased at 12-month intervals. But year-long leases are not necessarily set in stone, right? The length of leases offered to tenants can range from shorter 3- or 6-month leases to 2-year leases and longer. In fact, some simply offer a month-to-month lease.

With so many options, how do you determine what is the best choice for you and your potential tenants? Is there a downfall to renting your property for extended periods of time? How about those short-term leases – are they beneficial?

Let’s take a look.

Short-Term Leases

Generally, short-term leases are often referred to as anything 6-months or less. This could mean a lease for 6-months, 3-months, or even month-to-month. While they are not extremely common, landlords may consider renting their properties for the short-term if there is a surplus of renters in the community because this ensures that there will be renters available once the short-term lease expires. Another reason for short-term leases is that, when rent is on the rise, you can have the opportunity to increase the rent with each new lease.

Of course, as with everything, there are also downfalls to utilizing short-term leases, including:

  • The ability to truly locate a new tenant after the lease expires.
  • The time and attention required to look for a new tenant often.
  • The desire to constantly repair and revive a rental space after each move-out.

And then, you definitely want to make sure you understand why the tenant wants a short lease. For instance, are they facing some difficult financial future that may make default likely?

Long-Term Leases

The most common lease option is 12-months. This is your average one-year lease that most tenants plan to sign. And, while it gives tenants the confidence that they will have a place to call home for at least a year, it also makes things a bit easier on the landlord – that’s you – too. Here’s why:

  • You will have greater security when it comes to income from your property. You have a tenant for a least a year and won’t have to worry about experiencing vacancies during that time.
  • No need to have to constantly revive the property every couple of months due to a move-out.
  • Experience less hassle with having to find new tenants regularly.

Long-term tenants plan on, well, staying longer. This means that there is a greater chance that they will work to treat your rental property as their own, rather than some temporary stomping ground. All in all, by going long-term, you will have your vacancy filled and the assurance of money coming in.

Oh, lease terms: how long (or short) should you go? Well, short-term leases often come at a higher price, but they also come with a higher risk – and a greater chance of vacancy. However, you don’t find these risks with long-term leases. Because of that, if you are trying to determine which lease option is the best for you as a landlord, definitely consider long-term options of one-year or longer.


 
Marina Shlomov, a managing partner at ALH|Podland Rental Homes Property Management is the author of many articles on Landlording, Property Management, and Real Estate Investing. A residential builder in the state of Georgia since 1999, Marina is an investor herself. Her property management company is intended “For Investors” and “By Investors” for a simple reason – she knows what investors’ goals are and she works hard to reach their goals. In her spare time, Marina likes to spend time with her family, friends, garden, read and travel. Check her out at www.alhpodland.com. You can find Marina’s articles and comments at @rentalhomesatl on Twitter, on FacebookGoogle+, Blogger. and YouTube,Bigger Pockets and REI CLub and LinkedIn.


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