Longer tenancies VS short-term: what's more profitable?


Longer tenancies VS short-term: what's more profitable?

18 April 2018

As a landlord, you have multiple responsibilities on your remit. When it comes to deciding which tenancy length to offer tenants things can get a bit confusing. Tenancies can run anywhere from 6 months up to 3 years. We’re going to break it down for you.

Renewal Fees

Every time the tenancy is renewed you’re going to get charged administration fees by your agent. If a tenant only stays 6 months, the whole tenancy will have to be reset at the end of that period meaning the landlord will incur those fees every 6 months if that option becomes habitual.

Rental Reviews

If you opt for a longer lease term, you need to make sure that the rental amount is in line with evolving market conditions. This is far easier to do with 6 month tenancies because you can simply adjust the rent every half a year. For long-term tenancies, make sure that you include a clause within the lease that states an annual rent review. That way you’re covered when you want to increase to make sure you’re covered.

Keeping Up Appearances

It’s on a landlord’s remit to make sure the house is in good decorative order throughout, particularly at the start of a tenancy. If the tenancy is renewed every 6 months, the landlord will have to redecorate far more often than on a longer term tenancy. Think of it this way, the vast majority of wear and tear comes from people moving out. The property can suffer from removal companies knocking walls, or scratching flooring, which ultimately means you’re going to have to step in to fix it each time.

Gaps in the Tenancy

With a short-term tenancy, you’re exposing yourself to gaps where you’re left liable to cover the mortgage costs. You’re suddenly vulnerable to the gamble of finding a tenant quickly. If you’re out of pocket for 2 months, that could be your profit for the entire year!

Good Business Sense

With a long-term tenant, you’ll share a mutual interest in the upkeep of your property. If someone is committing to living somewhere for a long time, they will be more likely to repaint a room or redecorate where needed. If a good, reliable tenant puts roots down, gets their children into a local school and gets settled, that’s going to be guaranteed income for a longer term.

A Positive Relationship

A long-term lease allows you to build a positive relationship with your tenant. They learn to trust that you want them to live in your property, and you learn to trust that they are reliable, pay their rent on time and respect where they live. Having a positive relationship is always going to be more profitable, rather than short-term tenancies ending badly.

Here’s an article by Shelter with some opinions from other landlords. In a nutshell, if you find a long-term tenant you’re going to have a less stressful experience overall and probably make more money. But as always, make sure you partner with an estate agent who knows the market and industry inside out, who can do the thinking and running for you. We can anticipate all the pitfalls and advise you every step of the way.

Ask us a question about property investment.

Find out more