As a property owner and landlord, what's the best type of lease agreement to offer tenants? Overall, you want a lease agreement that's simple and easy to understand but protects you as the owner of the property.
As a property owner you’ll need to create a rental agreement that attracts tenants, not pushes them away to other properties. Most property owners prefer long term leases, while others favor short term leases. Each type has several benefits and downsides, and both attract different types of people for various reasons. Therefore, there are several factors to consider before deciding on which type of lease you want.
First of all, you need to determine what types of tenants you prefer and then tailor the lease that best accommodates them. But at the same time, you need to make sure these people fit in with your property, community, and your personality. Are you seeking quiet tenants, couples, students? Will you allow pets and children? To attract the clientele you desire, your advertisements should make these expectations clear and should be posted around pertinent areas. For example, if you want students, then advertise in the proximity of a college or places frequented predominantly by students such as coffee shops, trendy cafes, or near the homes of parents whose children are old enough to move out on their own.
Deciding on your clientele will narrow your options regarding the terms and length of the lease agreement. Listed below are the pros of short and long term leases and the types of people that will most likely be attracted to each.
- These attract a greater amount of tenants, usually first-time renters, because there is no long term commitment involved. College students, transferring renters, travelers, and renters who loathe long term contracts are attracted by shorter leases.
- If, by chance, you do end up with a problem tenant, the shorter lease agreement will ensure that you will be free of them relatively quickly.
- When you have a set lease period, you cannot raise the rent until that period is over. However, by leasing month-to-month, or by every three months, you will not have to wait as long.
- You can charge more for monthly rents. For some people, higher rates can compensate for the lack of commitment.
- Because you appeal mainly to short term renters, your high turnover rate will maximize your success in certain areas and actually decrease your vacancy rates and enjoy a steady flow of revenue.
- Probably the main benefit to long term leases is the financial security provided by a reliable flow of money.
- You won’t have to worry about advertising as frequently whenever you have a vacancy.
- Vacancies are less common, and as a result, you won’t have to make repairs and improvements as often.
- More reliable people tend to be drawn to these types of leases. Families, people with pets, the elderly, and couples generally seek out long term leases. This not only affords them the security of a place to live but it also saves them some money, as opposed to short term agreements.
- When you raise the rent, the terms are bound to the contract and must be paid.
Regardless of the terms of the lease, you’ll always want to protect your interests by having a properly written agreement.
Check with an attorney who is well trained in landlord/tenant law to assist you in determining your legal rights in various situations that have the potential of happening. Here are some other points and tips that can help you develop a lease that will please both you and tenants:
- Be flexible with tenants. Sometimes, you will have to compromise or offer incentives in order to maximize your occupancy rate. For example, if you ordinarily offer long term leases, maybe you can work out a short term lease if the situation ever calls for it. Or charge a little extra if someone wants a pet (or ask for a pet deposit to pay for potential damages).
- Set rules for guests, such as how many are allowed at one time, how long they can stay, where they can park, etc.
- Offer discounts for long term leases.
- Have your lease stand out. Offer wireless services or other incentives that will attract more people and create more reasons for them to stay.
- Compare leases of properties surrounding your property.