When it comes to leasing apartments in your multifamily community, you like long-term commitments! It’s nice to know that you don’t have to worry about cleaning, renovating, and releasing the unit for at least a year unless the person decides to pay a lease termination fee. Commitment is always good, but at what point is it too much of a burden? If you are considering offering leases that extend beyond one year, keep reading our blog to find out if this is right for you.
Long-term leases are excellent because they offer income consistency. When someone signs a two-year lease, you know that you will have a steady income flow for that entire time period. When someone moves out, there are many added costs such as cleaning, renovating, and advertising. So when you are guaranteed no extra work for two years, you are saving money. Plus, once the lease is signed, sealed, and delivered, you really don’t have to do much work on your end until the renewal period comes around; this is a great way to avoid the hassle of renewals every few months and clean consistent paperwork.
When someone signs a long-term lease agreement, they agree to pay a set amount of rent each month regardless of changes to the property, community, or market. Should your property go up in value when you add new amenities or community features, you cannot change the rent amount that your long-term residents pay; this means that you could have someone paying $1200 for a one-bedroom because they are on a longer lease, and someone in the exact same unit paying $1500 because they moved in after the upgrades. There is significantly less flexibility when you opt for long-term leases, especially if you should decide later down the line that you want to reclaim your rental. Also, should you be stuck with a bad tenant, you could decide not to offer them a renewal when their short-term lease expires; if they are on a long-term lease, you may have to deal with them for an extended period of time.
While there are many pros and cons to long-term leases, it is ultimately up to you to decide the best option for your community. Do you have any questions about long-term leases? Ask away in the comments below.