Choosing between a short-term and long-term lease can affect several aspects of managing a rental property, including tenant turnover, vacancy, rental income, and day-to-day responsibilities. Each lease length offers potential advantages, and the right fit may depend on your property, local rental market, and investment goals.
Before deciding which lease term to offer, consider the level of flexibility you want, how frequently you are prepared to find new tenants, and how each option could fit into your overall rental strategy. Here are the key differences between short-term and long-term leases and the potential benefits of each.
What is a short-term lease?
A short-term lease generally allows a tenant to rent a property for a shorter period than a traditional year-long lease. Depending on the agreement, the lease may last several months or renew on a month-to-month basis.
Common types of short-term leases include:
- Month-to-month leases: Lease agreements that typically renew each month until the landlord or tenant provides the required notice to end the tenancy, subject to applicable laws and the terms of the agreement.
- Three- to six-month leases: Lease agreements with a fixed term of three to six months.
People who may look for short-term leases include those who:
- Are temporarily staying in the area
- Have recently relocated and need housing while searching for a longer-term home
- Have temporary work assignments or internships
- Travel for extended periods for work or other commitments
- Need temporary housing while their primary residence is being renovated or repaired
Short-term leases can provide tenants with greater flexibility while giving landlords an opportunity to serve renters whose housing needs do not fit a traditional 12-month lease. They may be particularly useful in markets with demand from relocating employees, traveling professionals, interns, students, or others who need housing for a limited period.
What are the pros of a short-term lease?
Short-term leases can give landlords more flexibility in how they manage their rental properties. Because lease terms end or renew more frequently, landlords may have more opportunities to adjust rent, lease terms, or other property-related decisions between tenancies, subject to applicable laws.
Potential benefits of a short-term lease include:
- Potential for higher rental income: Depending on the local market and demand, landlords may be able to charge higher rent for the flexibility and convenience of a shorter lease term. Seasonal demand, major events, and temporary housing needs may also create opportunities for higher rental income in some markets. Keep in mind that more frequent turnover can also increase expenses, so landlords should consider both potential income and costs.
- Greater flexibility between lease terms: Shorter lease periods give landlords more frequent opportunities to evaluate whether the current lease structure still works for their rental strategy. When a lease ends, landlords may decide whether to offer a renewal or make changes for a future tenancy, subject to the lease agreement and applicable landlord-tenant laws.
For tenants, short-term leases can provide flexibility when they need housing for a limited period. For landlords, these leases may provide opportunities to respond more quickly to changing market conditions or property needs.
What are the cons of a short-term lease?
Short-term leases can offer flexibility, but more frequent lease turnover may also create additional work and expenses for landlords. Before offering a shorter lease term, consider how it could affect the following:
- More frequent tenant screening: Shorter lease terms may require landlords to market the property, review applications, and screen prospective tenants more often. Using an online tenant screening service can help streamline the process.
Apartments.com free Rental Tools allow landlords to request applications and access TransUnion screening reports that include credit, criminal, and eviction information.
- Fluctuating demand: Demand for shorter lease terms can vary by location, season, and local rental market. Periods of lower demand could result in longer vacancies or less predictable rental income, so consider whether your market consistently attracts renters looking for shorter stays.
- Turnover and maintenance costs: More frequent move-ins and move-outs can mean additional inspections, cleaning, repairs, and other make-ready work between tenancies. Consider these potential costs when comparing the financial benefits of a short-term lease with a longer lease term.
- Furnishing costs: Some renters seeking short-term housing may prefer a furnished property. If furnished rentals are common in your market, providing furniture, housewares, or other essentials could add to your initial and ongoing expenses.
The potential for higher rental income and greater flexibility may make short-term leases appealing in some markets, but landlords should weigh those advantages against possible vacancies, turnover expenses, and additional management responsibilities. Comparing local demand and expected costs can help you determine whether a short-term lease fits your rental strategy.
What is a long-term lease?
A long-term lease allows a tenant to rent a property for an extended, fixed period. A 12-month lease is a common example, although landlords and tenants may agree to longer terms, such as 18 or 24 months, depending on applicable laws and the terms they are willing to accept.
Renters may consider a long-term lease when they:
- Expect to remain in the area for an extended period
- Prefer the stability of a longer lease term
- Want to avoid moving or searching for another rental in the near future
For landlords, a long-term lease can provide greater predictability by establishing the tenancy and lease terms for a longer period. Tenants may benefit from knowing they have housing secured for the duration of the lease, while landlords may experience fewer turnovers than they would with shorter lease terms.
What are the pros of a long-term lease?
Long-term leases can offer landlords greater predictability and reduce some of the work associated with frequent tenant turnover. Potential benefits include:
- More predictable rental income: A long-term lease establishes the rent amount and lease term in advance, which can make it easier for landlords to forecast expected rental income and property expenses. Keep in mind that a lease does not guarantee that rent will always be paid on time or that a tenant will remain for the entire term.
- Fewer turnover-related expenses: Longer tenancies may mean fewer move-outs and make-ready periods. This can reduce how frequently landlords need to clean, market, inspect, or prepare the property for a new tenant.
- Less frequent vacancy: A longer lease term may reduce how often landlords need to fill a vacancy compared with offering shorter lease terms. Fewer turnovers can also mean less time spent marketing the property, screening applicants, and preparing for new tenants.
These benefits can make long-term leases appealing to landlords who value greater predictability and prefer to minimize frequent turnover.
What are the cons of a long-term lease?
Long-term leases can provide greater predictability, but committing to a longer lease term may also limit a landlord’s flexibility. Before offering one, consider how a longer lease could affect your plans for the property.
- Less flexibility during the lease term: A fixed-term lease generally establishes the terms of the tenancy for an extended period.
If your circumstances or plans for the property change, you may have fewer opportunities to make adjustments until the lease ends. Any changes or termination of the tenancy must follow the lease agreement and applicable state and local laws.
- Fewer opportunities to adjust rent: A longer lease typically establishes the rent amount for the duration of the agreement, subject to applicable laws and lease provisions. If rental market conditions change during that period, you may have to wait until the appropriate time to adjust the rent.
Before deciding on a lease length, consider how much flexibility you want during the tenancy, your local rental market, and your longer-term plans for the property. Comparing the advantages and trade-offs of each lease term can help you determine which option better fits your rental strategy.
How should I advertise a short-term or long-term lease?
When advertising your rental property, clearly state the available lease term so prospective renters can quickly determine whether it fits their housing needs. Include accurate information about the rent, availability, property features, amenities, and other important lease details.
For a short-term lease, make the length and availability of the lease easy to find in the listing. If the property is furnished or includes features that may appeal to renters seeking temporary housing, such as an equipped kitchen or in-unit laundry, include those details as well.
For a long-term lease, provide a complete picture of the property and its location. Highlight relevant features and amenities, along with useful information about the surrounding area, such as nearby transportation, shopping, parks, or other points of interest.
Regardless of the lease length, an accurate and detailed listing can help renters determine whether the property meets their needs before they reach out.
Frequently Asked Questions
Can I change my property from a short-term lease to a long-term lease?
You may be able to offer a different lease length when the current tenancy ends, depending on the existing lease agreement and applicable state and local laws.
Before making the change, review any legal requirements and update your rental listing to clearly reflect the new lease term, availability, rent, and other relevant details.
Can I charge more for a short-term lease vs. a long-term lease?
Short-term leases may command higher rent in some markets, particularly where there is strong demand for flexible or temporary housing.
The amount you can charge depends on factors such as local rental demand, comparable properties, seasonality, property features, and applicable rent regulations. Consider potential turnover, vacancy, and other expenses when comparing the financial potential of different lease lengths.
How will I know which type of lease is best for my property?
Consider your local rental market, expected demand, potential turnover and vacancy, management responsibilities, and financial goals.
Comparing comparable properties in your area can also help you gauge demand for different lease lengths. The best option will depend on your property, market, and priorities as a landlord.
Originally published by Chanahra Fletcher on May 13, 2022, and has been updated.
