You may be wondering whether you should rent your property out for the short term or if you should stick with long term leases. We get this question a lot, and today we’re talking about the pros and cons of each type of lease.
At SJA Property Management, we are leaders in the property management industry serving the Puget Sound area including Redmond, Bellevue, Kirkland, Seattle, and the surrounding cities.
Pros & Cons of Short-Term Leases
One of the benefits of renting your property out with a short-term lease is that it gives you more flexibility if you’re planning to move back into the home. It allows you to give notice and have the option of moving in when the need arises. You can usually get a little more money for the property if it’s rented for a shorter term. A lot of landlords do really well renting their property out as Airbnb homes, and they generate a really good cash flow. The rate that they are charging is much higher than what you can charge for a standard 12-month lease.
However, one drawback to renting your property out for a short term is that it’s more labor intensive. You must be committed to staying involved in finding new tenants and getting them in and out every few days, weeks, or months. You’ll have to handle the rental agreements and make sure the property is in good condition during each turnover. If you cannot commit to the intense ongoing maintenance and care of your property, a short-term lease might not be best.
You also have the potential for more vacancies. The property won’t always be occupied, so you’ll need to constantly look for tenants. When you take all that vacancy you’re incurring over the long haul, it will add up to a lot of money that you would have saved had you locked someone in for a 12-month term. Every month of vacancy equals about 8 percent of the revenue that you would have received that year.
Long-Term Lease Agreements
One of the benefits to renting a property for the standard 12-month term is that these are the homes a majority of the tenant pool is seeking. They want that stable property that they know will be their home for at least a year. You’ll usually find tenants who are hoping to stay for longer than 12 months.
With our long-term leases, our average tenant stays in place for two years or more as long as we’re providing great service and keeping the home well-maintained. Long-term tenants add some stability to your investment.
Preparing for the Rental Market
If you decide to go with short-term rentals, prepare to be involved, and dedicate the time that you need to make sure you keep the property occupied and generating income. If you can do that and treat it like a small, part-time job, you can do very well with your short-term rental. It’s not something we would choose to manage, as it doesn’t fit into our business model. But, you can do it yourself and be a proactive, savvy landlord.
If you’re looking for predictable and stable income, we can help you. Our team manages long-term leases for landlords and investors who don’t want to handle the tenant screening, marketing, rent collection, maintenance, and lease enforcement on their own. Occasionally, we’ll take on a property with a six-month lease if the circumstances warrant it, but typically all our leases are at least 12 months.
Please be sure to contact us at SJA Property Management if you have questions or need help with your investment property.