At Powell & Co. one of the first things we discuss with you as the homeowner is if you are looking for short or long-term tenants. Both options have their benefits, but understanding the key differences can help you figure out what option will suit you and your property the best.
A short term tenancy agreement typically runs for less than six months and is ideal for people who want to rent out their property on their temporary basis only. This is perfect for seasonal rentals or properties that you the owner want to live in part time.
Key Benefits of Short-term Agreements:
- Increased Flexibility: With the ability to rent out your property on a temporary basis, you do not have to commit to a long-term lease, creating the space and time needed for any renovations you might want to do, or even to live in the property part-time yourself.
- Higher Rental Rates: Tenants are typically more willing to pay more for the flexibility and convenience of a short-term lease, allowing you to charge higher rates than long-term leases.
- More Frequent Inspections: You/your property manager can conduct inspections more frequently with short-term tenants, helping to ensure that the property is well-maintained and in good condition.
Things to consider with Short-term Agreements:
- More Work: Short-term tenancy agreements can require more work on the part of the owner/property manager as they will need to find new tenants more frequently and therefore perform more inspections and maintenance checks.
- More Risk: There is a higher risk of vacancy between tenants, which can result in a loss in rental income.
- Less Stability: There is often less stability for the owner as tenants can come and go quickly, making it harder to plan for the future.
Long-term tenancy agreements, on the other hand, tend to run for a year or longer and are ideal for landlords who want to rent out a property on a more permanent basis. It is the perfect option for owners who want a stable, reliable income stream from their rental property.
Key Benefits of Long-term Agreements:
- Stable Income: You can count on a reliable rental income for the duration of the lease, which can help you plan your finances more effectively.
- Lower Vacancy Rates: Tenants are much more likely to stay in a property for a longer period of time, which reduces the need for owners/property managers to find new tenants on a regular basis. Therefore, long-term tenancy agreements tend to have much lower vacancy rate rather than short-term agreements.
- Less Turnover: With long-term tenancy agreements, there is less turnover and therefore less wear and tear on the property. This can help landlords save money on maintenance and repairs in the long run. People who are staying for longer are also more likely to care for the property, further reducing the costs of maintenance and repairs.
Things to consider with Long-term Agreements:
- Less Flexibility: Because the longer-term agreement means you are committed to renting the property to the same tenant for at least a year, there is less flexibility if your situation changes.
- Lower Rental Rates: Long-term tenancy agreements generally command lower rental rates than short-term agreements, which can result in less income (although it can be more stable for the long term).
- Harder to Terminate: It can be harder for owners/property managers to terminate the lease if they need to for any reason. This includes things such as selling the property or moving into it themselves.
In conclusion, both short-term and long-term tenancy agreements have their pros and cons. As a professional property manager, it’s important to evaluate your rental property and your specific goals in order to determine which option is best for you. If you’re looking for flexibility and higher rental rates, short-term tenancy agreements may be the way to go. If you want a stable income stream with less turnover, long-term tenancy agreements may be the better option. Ultimately, the decision will depend on factors such as location, property type, rental market, and your own personal preferences.