I'm currently rehabbing a house to move to and plan to rent out my old house. I was planning on only doing leases for a year at a time but someone wants to rent the house for 3-6 months and said they are willing to pay over the amount I have the property listed for to get in there.
My question is, since this is my first time renting a house should i avoid short term leases for the time being? Also if i were to decide to rent short term and have them pay more what would be a reasonable amount, $100-200 extra a month?
@Jon Swift Vacancy is a really profit killer. You are guaranteed a vacancy with this tenant, so for me to take that tenant, I would have to make at least another months rent over the term, as you will likely have one month vacancy after they move out.
Now you might have other reasons, i.e. the shorter term gets you into a better renting season (summer) or some other good reason.
It is often hard to find a short term rental, especially less than 6months, so they will end up paying more regardless of where they find.
I personally would not take a short term tenant, and I am used to yearly turn over in my rentals.
I'd be much more concerned with the security deposit on a short-term rental.
3x monthly rent would be a good start. Do you really want to think about how much it would suck to have to put $1500 back into the property after just a 3 month rental? The guy brings a goat in and it craps all over the carpets and destroys them all... laugh, it's happened before...
What's your cost once he moves out again, in other words how long will it take you to rent it again after the guaranteed short rental? 30 days? 60 days? you will need to factor that into the monthly.
Hey @Jon Swift this is a good question. We have relationships with a few companies that place families in homes on a short term basis after a fire or flood. Now is the perfect time to take these types of tenants on. We typically see the rents being 120%+ when the insurance company is involved. @Mike Wood is right, you will be guaranteed a vacancy, but here in illinois, not a lot of people choose to move in the winter. You could be looking at an extra 30 days in market time anyway. If you get an extra 20% in rent and have the tenant for 6 months then have a 30 day vacancy, the way I see it - you won. Anything that will get you into a summer leasing season is great.
Take a 2 month security deposit to cover damages and get into June. There are other factors I'm sure but on the surface, seems like the smart play.
Really good replies so far to this question so I dont have much to add other than it may come down to demand. If you expect to have decent demand for the type of rental you are offering then I dont see any reason to rent short term to someone as longer term is preferable. However, if you can make it worth your while and really make sure you get a good sized security deposit and take all the "before pictures" as you walk through with the prospective tenant then it may work to your advantage to get someone in their and start getting some income. While the person is there you can continue to market it and that should also be made very clear that you can only do a short term lease with an understanding that you will be showing the unit to prospective tenants on an ongoing basis. That may also help to keep the tenant from wrecking the place. Just my added two cents. I stay away from short terms whenever I can but I also dont like to see nothing coming in per month. good luck