Should You Offer Short-Term Leases? How to Decide

By Alicia Geigel on November 28, 2021

As a property manager, you may still be trying to effectively manage your rental business amidst the difficulties of the pandemic. Between renters financially struggling to pay rent to dealing with making your property safe and clean for residents, there is a lot to deal with. An additional responsibility that is especially important is ensuring that you can rent out your properties, whether it is through a long-term or short-term lease. While long-term leases are more common and utilized by property managers, short-term leases have their own appeal, particularly during the pandemic.

Are you a property manager? Looking for ways to manage your business during the pandemic? Consider looking into the pros and cons of short-term leases, detailed below!

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Pros

Shorter Period of Time for Lease Terms: Being a property manager, there are always a handful of not-so-easy tenants to deal with amidst the good ones. Of course, if your tenants don’t pay rent, damage your property beyond repair, or cause any issues that interfere with the safety of you or your other tenants, you have the right to evict them, but it’s not always as severe as this. If you have a problem tenant but don’t have the grounds to kick them out, a short-term lease could work to your advantage. A short-term lease means, simply put, a shorter time for lease terms. The shorter the lease terms, the shorter your tenant’s lease can be up and you can decide not to rent to them again, leaving you without another headache and them out of your hair.

Short-Term Lease Can Mean More Money: As short-term leases typically mean a greater chance of tenant turnover, which can leave you in a tough position at points, charging more money for rent is not only normal in the industry, but it is also necessary. Short-term leases, as they are usually for less than six months, mean that you have to fill vacancies quickly, which can leave you pinched for finding the right tenant. As a result, charging more for short-term leases is a definite plus to considering short-term leases. Though there is a higher risk of tenant turnover, you can add more money to your pocket in the process. Additionally, each time the lease needs to be renewed, you can change the price depending on market trends or necessary fixes needed.

Greater Chance of Filling Occupancy: Sometimes people are in a desperate situation, and cannot necessarily afford what a long-term lease offers, or they simply aren’t going to be in a specific location for longer than six months. Because of this, you can have a greater chance of filling occupancy for your property units, as people will be attracted to the flexibility of a short-term lease. More people means more money, which can only help to bolster your rental business more.

Cons

Tenant Turnover Rates Can Be High: When you have a long-term lease agreement with a tenant, you can, for the most part, relax and know that they are locked into a contract with you to pay a fixed amount of money over a certain period of time, no ifs, ands, or buts. With short-term leases, however, the likelihood of your present tenants renewing their lease can be unpredictable, making for greater tenant turnover, and leaving you to scramble and find potential tenants to occupy the current vacancies. Rick Smith of the Patch writes, “A shortage of space today that is to your advantage could turn into a surplus in a few weeks, and the next tenant could pay you less than the current one.”

Guaranteeing Rent Payments Can Be Tricky: Part of the attractiveness of being open to short-term leases is the variability of income, meaning, in one renal period you can make more money than your previous rental period. This benefit can also be a disadvantage, as your income is dependent on your ability to fill vacancies and collect rent money. Alyssa Adams of Bay Property Management Group notes, “Unlike a traditional lease where the tenant is locked into a monthly rate for at least one year, income in short-term rentals is variable. Depending on the occupancy rate, a landlord’s income could vary greatly from one month to another.”

Fixing Potential Damages/Cleaning Has to Be Done Quickly: Regardless of how good or bad a tenant is, they will always leave some kind of sign that they have once lived there, whether it’s dirty appliances or floors, paint, holes in the walls, etc. As this is usually the case, you, as the property manager are responsible for taking care of this before the next tenant moves in. The problem? If you are doing short-term rentals, you have a shorter amount of time to fix these damages or clean up the place, which can leave you overwhelmed and potentially unable to complete your other necessary responsibilities.

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Image via Pexels

As a property manager, you are always looking for ways to guarantee rentals and get tenants into your units. While long-term leases are the most common, consider evaluating the pros and cons of short-term leases to help expand your business and bring in new customers.

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