Pros & Cons of Short-Term and Long-Term Leases - article banner

There are specific instances where a short term lease is necessary and even preferable when you’re renting out a Merced investment property. For example, if tenants are displaced due to fire, reconstruction, or some other natural disaster that leaves their home inhabitable, they’ll be looking for a place to live for the short term. Homeowners sometimes need to move temporarily as well, and they’ll be looking for a lease term of three or six months.

Anything under a year is considered a short-term lease because typical lease agreements run for 12 months. Today, we are taking a look at the pros and cons of each type of lease.

Long Term Rental Property in Merced

Long term rental homes have one singular advantage that’s difficult to beat: stability. The consistency of your rental income with a long term lease will ensure that tenants are in place for a year or longer. You can budget more accurately when you know exactly how much income you can expect in an annual period. You have stable rental income, planned expenses, and a strategic investment plan moving forward.

You also have the potential to earn more money in the long term with a stable tenant and a lease that’s at least 12 months long. Your ROI depends on rising rental income and low maintenance costs. Unless there’s an emergency repair that’s needed, your maintenance and cleaning expenses are preventative and routine. You won’t have to do a deep clean every few months between guests.

The downside to a long term rental property is that the longer your tenant is in place, the stronger their rights are. You’ll have to follow all statewide rent control and just eviction laws unless your property is exempt. Removing your long term tenant can be time-consuming and in some cases will come with financial costs.

Short Term Rental Properties in Merced

Short term leases have their own advantages. You’ll typically earn more rent on a weekly or monthly basis when you have a tenant who is renting month-to-month or for less than a year.

You also have the benefit of flexibility when you’re renting a home in the short term. Maybe you’d like to use the place yourself for a few weeks every year. You can do that when you don’t have a long-term tenant in place. Many people invest in property in California to use as a vacation home or a retirement home. If you want to spend six months out of the year in your investment home, you’ll have to rent out your property to short term tenants.

On the downside, you could find yourself with extremely long and inconvenient vacancies, especially in the winter. Finding a good tenant in the short term is great, but if they leave in October and you can’t find anyone to rent your property until the following year, you’ll be left with high vacancy costs and all the risks that come with an unoccupied home.

We can talk about your specific property and whether it’s better suited for a long term or short term lease. Contact us at River Drive Properties for help with this decision and anything pertaining to Merced property management.

Types of leaseRiver Drive Properties provides effective and professional property management services in Merced and the surrounding areas including Fresno, Modesto, and Turlock. We have extensive experience with both single-family homes and multifamily properties.