Written by: In the Community

Benefits and Drawbacks of Long-Term Leases

Choosing whether to offer your tenants a short or long-term lease can be difficult, but we’re here to help. Here are the pros and cons of long-term leases.

Benefits and Drawbacks of Long-Term Leases

While many landlords offer short-term, month-to-month leases (these can be as long as six months), you also have another option when renting out a property: a long-term lease. This refers to any lease that exceeds six months, usually a year or years-long agreement. Let’s take a closer look at the benefits and drawbacks of long-term leases.

Long vs. Short: At a Glance

There are some key differences to consider when dealing with short and long-term leases (aside from the obvious length difference). With a short-term plan, you can change your rental rates after a tenant’s lease is up. You can do the same with a long-term lease, but you’ll need to wait longer between rate increases.

Short-term leases also prioritize flexibility—if you want to lease the property for a few months to gain capital, invest that money into renovations and upgrades, then charge more money, it’s easy enough. Long-term leases require you to wait a year or more before you can make those changes.

Benefits of Long-Term Leases

With those differences in mind, let’s discuss the benefits of long-term leases. The most appealing is consistency. If this is your first rental property, a short-term lease could result in months of vacancy and missing out on money you were counting on. A long-term lease guarantees income for at least a year, and you’ll have more time to find new renters before the lease is up.

In the same vein, a long-term lease also results in less paperwork than several short-term ones. If you don’t have a property manager, you’ll need to find new tenants every few months, screen them, and get them set up in your rental. With a long-term lease, you’ll get to relax much longer before needing to repeat the process.

Finally, tenants who sign a long-term lease are usually more likely to renew the lease when their 12 months are up. A year or years-long lease attracts tenants looking for stability, so if you’re lucky, you might be able to enjoy several years without paperwork and with consistent income. Finding the perfect tenant isn’t easy, but it’s worth your time.

Drawbacks of Long-Term Leases

We’ve already touched on the lack of flexibility and the inability to raise your rates as quickly, but there are some other factors to consider, too. If your screening process lets through a lousy tenant, you’re going to need to deal with them for longer. A renter who’s consistently late with their payments and makes frequent demands could be a factor for a matter of years, as opposed to a few months.

That brings us to the final drawback: you need to put much more thought into who you’ll rent to. If a problem tenant slips through the cracks with a short-term lease, it’ll be annoying but brief. A long-term lease demands perfection in your search and screening process.

Now that you know the benefits and drawbacks of long-term leases, weigh your options and decide what’s right for you!

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Last modified: January 14, 2022