As a property investor, you have options when it comes to the length of the lease you ask your tenants to sign. The aim of the game is to get the highest return from your rental property and choosing the right type of lease can make a bigger difference than you think.
There are three main types of leases - short-term leases, long-term leases, and month-to-month leases. You might be surprised to learn that there is a growing trend towards long-term leases, and for good reason.
Here are five key benefits of choosing a long-term lease for your rental property.
1) Reduced Wear and Tear
Long-term tenants are more likely to treat your property with care, as they have a vested interest in maintaining its value over the course of their lease. This means less wear and tear, and lower costs for you in the long run.
2) Less Leasing Fees
When you have a longer lease, you don’t have to fork out extra money when your tenants leave after only 12 months, and then again after another 12, and so on. You’ll save on marketing and re-letting fees, not to mention the time you’ll save on finding the right tenants again. The ones who you trust to look after your property.
3) Better Property Maintenance
When a tenant intends to stay in a property for an extended period, they are more likely to take better care of the property and invest in the property themselves such as making improvements at their own cost that will benefit both them and you.
4) Increased Rental Returns
With a long-term lease, you can be sure of a steady stream of rental income over the course of the lease. Long-term rentals have less vacancy, meaning you won't have to worry about lost rental income due to a vacant property.
5) Rent Increases Built into Leases
Just because you have a long term lease doesn't meant you can ‘t take advantage of annual rent increases as the market changes. Your long-term leases can allow for rent increases to be built into the agreement. This way, if market rental rates increase, you won't miss out on the opportunity to increase your rental income.
So, what exactly is a long-term lease? It's a rental agreement that lasts for one year or more, usually two, three, or even five years. This type of agreement gives both you and the tenant the security and stability of a long-term commitment. Use the first year of the tenancy to make sure your tenant is a good fit, and if all goes well, consider offering a long term lease from the second year.
We’re all over the management of any rental property, with any lease length, but typically we've found that properties with long leases in place tend to have tenants in them that really do care about the property. They’re easier to manage, they do what they can to sort small maintenance problems out themselves and generally take pride in the property because they just want to call it their home for as long as they can. These tenants are gold, and when you have them, you do whatever you can to keep them.
We’ve vetted thousands of tenants to ensure they are a great fit and will look after the property. Chat to us if you wat to make sure you’ve got the right people looking after your place, both the tenants and the property managers.
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