There are a few types of lease agreements you should be familiar with so that you can choose the best rental agreement and time frame for your unit. With the rise of flexible remote work options due to the COVID-19 pandemic, more renters are considering new living arrangements. By offering short-term lease options, you can expand the number of people you’re able to rent to, and establish a temporary housing market in your area. Here’s everything you need to know about short-term leases.
What is a short-term lease?
A short-term lease is a rental agreement where a renter occupies a unit for a short period, instead of the typical 12 month or longer time frame. Renters may stay in a unit with a short-term lease for just a few weeks, a month, or even a couple of months.
How does a short-term lease work?
In many ways, a short-term lease operates similarly to a long-term lease. A short-term lease gives a renter explicit permission from a landlord to stay in a unit until the end of the lease term. Plus, both types of agreements have the following information:
- Who is renting the property
- Type and length of lease agreement (month-to-month vs. multi-month agreement)
- Rent amount
- Rent due dates and late payment penalties
- Security deposit requirements
- Renters insurance requirements
- Utility responsibilities
- Renter and landlord responsibilities for keeping the unit in good condition
- The non-renewal notice period for both parties
However, a short-term lease may or may not automatically renew at the end of the rental period, whereas a long-term lease typically requires both the landlord and the renter to agree to renew and sign an updated lease agreement.
Types of short-term leases
Here are a few types of short-term leases that you might offer to prospective tenants.
- Week-to-week lease: A week-to-week lease is a rare type of short-term lease where a rental agreement ends at the end of a one week period. This agreement typically renews at the end of every rental period until one party terminates the agreement with proper notice, or requests changes in the terms.
- Month-to-month lease: This type of short-term lease agreement ends the rental agreement after 30 days. A month-to-month lease is the most common short-term lease option and typically renews automatically at the end of the rental period. However, either party can give a non-renewal notice within the period outlined in the agreement or request changes to the agreement before signing a new, automatic month-to-month agreement.
- Multi-month agreement: A multi-month lease agreement is similar to a long-term lease agreement in that the lease allows a renter to occupy a unit for a certain number of months up until a specific date. However, this number of months is typically six months or less.
Advantages and disadvantages to offering short-term leases to renters
Here are some benefits to providing short-term lease options:
- Flexible move-out date
- The option to remove renters who don’t take care of the property or pay rent on time
- Rental income while you find a suitable long-term renter
- Ability to end a lease without penalties, as long as it’s within the notice period stated on the signed agreement
- Potential to charge more than you would in a long-term agreement
- Flexibility to change rent amount at the end of each agreement before it renews
Consider these drawbacks of offering short-term leases to determine if it’s the right management decision for you and your property:
- Potential unexpected vacancies if a renter moves out suddenly
- Higher turnover rate than long-term leases
- Inconsistency in rental income due to increased chance of vacancies
- Possible decreased interest due to some renters preferring the stability of long-term agreements
- Increased funds spent on advertising a unit and preparing it for a new short-term renter
- Higher chance of renters who don’t care for the property as well as long-term renters might
Other things to consider about short-term leases
While there are plenty of pros and cons to evaluate when offering short-term leases, there are some other aspects of this agreement that you should be aware of to ensure you follow all the regulations of your city or neighborhood association.
If you rent out a house in a neighborhood with a homeowners association (HOA), you may have to get approval from the HOA before renting out your unit. The same applies if you plan to offer short-term leases, including month-to-month agreements, week-to-week agreements, and day-to-day rentals. In destinations like New York City, where co-op buildings are common, the board may need to approve of your renter before letting you sign a short- or long-term agreement with them. And in the case of short-term agreements, a building’s board may not allow any type of short-term agreement.
Your property’s location may determine whether short-term lease options would be worth your time and money. For example, college towns are a great place to offer short-term lease options to students who only need to stay for a few months at a time. Similarly, if your area has a prestigious institution like a hospital or research center, a short-term lease may be attractive to candidates who travel to the location for temporary positions.
Research what other short-term lease options are available in your property’s area, and be sure to set your price and agreement terms competitively. If there aren’t many options, use this as an opportunity to set your unit apart from others that only offer long-term lease options.
Knowing that you have options for flexible rental agreements can help you better manage your property in terms of renting to ideal tenants, taking advantage of different renter needs, and positioning your property in a competitive market. While allowing renters to occupy the unit for just a few weeks or months at a time may not accommodate your leasing needs forever, short-term renting can be a great option to fall back on should you find yourself with a vacancy that needs to be filled in a timely manner.
