A rental lease agreement can come in many forms, and the key details can vary depending on a property owner's goals. It's important to follow landlord and tenant laws in Washington. Investors must also work to inform renters of the standards and expectations associated with renting properties during a tenancy.
One of the significant concepts to master is the appropriate length for rental agreements based on your properties, tenants, and ROI goals. For example, some renters look for a flexible, open-ended move-out date, while others would love to settle in and be your renters for years. Your expectations as an owner also vary, depending on how long you want to rent before selling a property or if you're looking to minimize the work of finding new renters and want to focus on long-term tenants.
Aligning these expectations is critical, and it all starts with understanding the different kinds of residential lease agreement options.
What's the Difference Between Short-Term and Long-Term Lease Agreements?
The fundamental distinction between short-term and long-term leases is the length of time specified in the rental contract. Short-term leases can range from only a week or less for vacation rentals to 5 or 6 months. While some property owners prefer a month-to-month lease agreement for "short-term" tenancies, a true short-term lease has a specific start and end date vs. a monthly agreement that can end with property notice from either a landlord or tenant.
Most long-term leases define a tenancy as longer than six months and often last at least twelve months. In some cases, long-term residents sign leases that last for several years to lock in a rental rate and home for an extended period.
The good news is that you don't have to commit to only short-term or only long-term leases—you can offer different lease terms for different properties or different renters. As your real estate portfolio grows, you may choose to have some properties on short-term contracts versus long-term residential lease agreements. A rental property manager can help you determine the ideal uses for short-term vs. long-term rental lease agreements to maximize returns and reach your goals!
When Do Long-Term Lease Agreements Benefit You?
Long-term lease agreements are the bread and butter of the residential real estate market for a reason. Owners benefit from the stability of consistent monthly income, and they avoid scrambling for new renters every few months. Renters benefit because they know a predictable cycle where they can decide whether or not to renew the lease or move. They can also lock in rental rates for longer periods of time instead of dealing with frequent rate increases when short-term leases end.
Property owners maximize returns with predictable rent payments. Reducing costs associated with tenant turnover also helps improve ROI when renters stay longer in your property. However, while many owners prefer long-term leases for these reasons, that doesn't mean they are one-size-fits-all.
When Do Short or Month-to-Month Lease Agreements Benefit Property Owners?
Short-term leases or a month-to-month lease agreement may not be the standard way to go, but the occasional demand for them can result in short-term rate hikes, allowing you to charge more for a desirable property for short stays. This extra income offsets some of the uncertainty when choosing a short-term lease since you'll need to find and screen more renters when short-term residents move out.
Lynnwood property managers can help you determine if these circumstances make sense for you to choose a short-term lease agreement:
- Some communities experience tourism during the peak season, with fewer visitors during the off-season. By using short-term leases, you can charge vacation-rental prices for the weeks or months in high demand.
- Some real estate investors know they want to sell when the market heats up but aren't sure when the best sales moment will be. So they turn to a short-term lease to allow themselves the options to sell if the right offer comes along.
- There is a market for short-term leases in your rental property's neighborhood due to short-term visiting workers in the area or a need for student housing.
- You want the ability to adjust the rent price in an appreciating market without waiting a full year after your long-term renters lock in their rate.
Before choosing a short-term lease, work with a residential property management company to run the numbers and make sure it's the right decision for your long-term plans!
Customize Your Lease With Lynnwood Property Management Experts
The Joseph Group works with real estate owners to help them decide what kind of rental agreement makes the most sense for their property. Because we manage many different types of properties through our Lynnwood property management company, we understand ideal neighborhoods with a high demand for short-term leases that can help you reach your goals.
No matter the best type of lease for your rental properties, we can help you customize these documents, find quality tenants, and manage your investments to maximize ROI! Reach out soon to learn more about our property management services in the Lynnwood and Tacoma areas.