Long-Term vs. Short Term Tenants

When purchasing an apartment building to rent out to tenants, there are critical things that one should consider. One thing to consider is the type of tenants you wish to have. Choosing the right kind is crucial to your bottom line, and more importantly, your goals as an investor.

A short-term tenant is one whose lease agreement is less than one year. Short term leases are extremely popular in big cities, where apartments are usually scarce. Short term leases usually fall between 3 to 9 months, and offer investors the flexibility of scouring the market for new tenants through volatile intervals.

They tend to be the go-to for vacation rentals and offer investors competitive market rates in a shorter period of time. The down side of having short term tenants is that they are more inclined to treat their rentals like, well, rentals. The shorter duration typically creates the feeling of less responsibility and minimal maintenance, often requiring investors to purchase full coverage insurance for potential damages.

A long-term tenant is one whose lease agreement is at least 12 months. These leases tend to be more common as they provide investors with the security of receiving steady checks each month for at least a year. Another benefit to long-term tenants is that they typically consider their rental as their home and as such, tend to treat it with much better care.

With investors, long term leases tend to be the preferred path for generating income. This is because long term leases are the perfect choice for producing passive income. All that is required of an investor is to employ a property management company. This company then serves as the mediator between the investor-landlord and his tenants.

Topics: Real Estate, Investment, Lease Options

Source: Joe Fairless, https://joefairless.com/long-or-short-term-lease-which-to-look-for-when-buying-apartments-to-rent/