Long-Term vs. Short-Term Lease Agreements: What To Know

Osprey Property Management   |   date October 2021

Property owners often have questions about using long-term lease agreements vs. short-term lease agreements. Of course, both have advantages and disadvantages (depending on your goals), but understanding the distinctions can assist you in making the best decision for your rental property.

Today the best property management Portsmouth offers guides you through what to think through with each type of lease agreement and how to pick the best one for your rental property and investment goals!

What Is a Short-Term Lease Agreement?

A lease that is less than six months long is referred to as a short-term lease. However, it’s important to understand that short-term leases differ from a month-to-month lease arrangement.

Signing a contract or agreement

Short-term leases can be a good option for properties in high-demand and low-inventory areas when investors prefer more flexibility to raise rental rates. Short leases can also help investors who are more selective about the tenants living in a rental property. If a tenant isn’t a good fit, the property owner is only committed to the tenancy for 3-6 months. 

Benefits of a Short-Term Lease

A short-term lease agreement offers more flexibility for both the tenant and the landlord. For example, tenants don't have to commit to a year-long deal if they don't think they'll need to be in the rental home that long. This also gives renters the flexibility to try a rental house for a few months to make sure it’s a good fit before renewing or moving on to another property that might be better suited for their needs. 

A short-term lease is often more flexible when adjusting rental prices. Property owners can raise or lower the monthly rent amount more often, as market research indicates, to stay competitive. Short agreements also help investors use a property for multiple reasons, including as a vacation home for a few months each year. They can rent out the property according to a short-term lease, then use the property for personal reasons in between tenants. 

There are many reasons why a short-term lease might be preferable to a long-term one, but it's essential to consider all of your options before making any decisions, though!

What Is a Long-Term Rental Agreement?

In contrast to a short rental agreement, a long-term residential lease agreement is a contract that is usually signed for longer than six months. This type of lease agreement allows the landlord and tenant to continue their arrangement with less turnover for longer periods of time. 

Landlords often prefer long-term leases because they offer more stability and predictability for income. However, whether using short-term or long-term leases, landlords must screen tenants thoroughly to ensure they are a good fit for the residential property.

Benefits of a Long Term Lease Agreement

Property owners who prioritize a long-term lease agreement experience fewer vacancies and more consistent monthly income. This is because property owners lock in the rent and resident for an extended time. 

Tenants who sign a long-term lease agreement help investors save money because it’s not necessary to market and make-ready a rental property as often as when dealing with short-term leases. Often, renters that commit to longer lease terms also build more ties to the community, which can encourage them to renew leases for more than a year when the first term expires. 

When considering your next lease term, consider the benefits of having a long-term lease agreement compared to a short-term agreement.

When Should Short-Term Leases Be Offered?

Should property owners only use long-term leases? While the benefits of longer lease terms often outweigh the cons, in some instances, a short-term lease on a rental property makes the most sense.

long term versus short term concept

A property manager can tell you that shorter leases can be beneficial for a few reasons, including:

  • A home renovation: A renovation project may a good way for a home owner to improve property values, but it can be stressful. A short-term lease can help homeowners rent your property while their home isn’t livable during a renovation that takes several months. 
  • Relocating for a new job: Some renters may need to relocate to the Portsmouth area for a new job. While waiting for permanent housing, a short-term lease in your rental property can be a good option for them until they buy a new house or find a long-term rental.
  • Tourists visiting for an extended visit: Provide short-term lease options for people who visit the area for several months at a time. 
  • Visitors in the area for business: As more businesses provide entirely remote roles, more workers travel for work for brief periods. Offering a short-term lease allows employees from other cities to rent out your property until they decide to move on.

Regardless of whether or not you choose to offer short-term leases, it's important to remember that you still need to follow the same rules and regulations that apply to long-term leases. For example, you must maintain the property's condition and provide utilities. In addition, you'll need to charge tenants for any damages that occur during their stay.

Create the Best Lease Agreement With Osprey Property Management

Leasing a rental property can be complicated, especially when choosing between short-term and long-term lease agreements. Osprey Property Management has years of experience working with landlords and tenants and leasing options. Contact our Portsmouth property management team today to learn more about our services and how we can help you choose the best lease agreement for your needs!

Learn more about lease agreements in our free download, the “How To Create a Custom Lease Agreement Checklist!”

 

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