6 Steps to Investing in Short-Term Leases
September 4, 2019
Founder and CEO, Tru Realty
Investors who find that their markets better lend themselves to short-term lease options will find that they can charge higher rent because tenants are willing to pay more for the flexibility. Whether it’s reasons for work or play, renters will gladly pay more to be able to leave the property when they need to. It saves them the hassle and expense of breaking a long-term lease and gives the lessor higher income each month. If you’ve weighed the pros and cons of a short-term vs. long-term lease and you’re ready to invest in a property for short-term leasing, read these six steps to getting started.
1. Find the Right Property in the Right Location
Research is absolutely crucial in this phase of the process. Short-term rental tenants are renting these properties for a specific reason. Some tenants are in town for business, so they’ll want to be close to the city. If it’s a vacation home, they’ll want top-notch amenities like a pool or hot tub. Do research to determine where short term leases are most popular in demand. This will help determine the type of property to look for and where to find it.
2. Determine Expenses
Purchasing the property will not be the only expense to account for when the rent checks come rolling in. Don’t forget to factor in property taxes, insurance, HOA’s, maintenance, and landscaping. A tenant’s deposit can be used for damages they inflicted, but the landlord is fiscally responsible for normal wear and tear after a tenant moves out.
Before the property gets listed and potential tenants view the house, determine the parameters of the lease and how a lessee will be identified. This can include hiring a service to complete background and credit checks, as well as what the application will look like. Some lessors charge a non-refundable application fee. Decide if you will provide a month-to-month or three-month lease option.
4. Prepare to Keep Your Books
This rental property is your small business, so it’s important to make sure you’re keeping track of income and expenses. If you’re a numbers-savvy data-minded person, keeping track of everything in Excel with columns and pivot tables might work for you. If not, QuickBooks or Stessa are great online tools that easily allow you to view income and expense reports and keep you prepared for tax season. Linking your bank accounts to the program increases functionality and allows you to categorize expenses and income.
5. Prepare and List Your Property
Make sure the property is presentable and in good living condition. Take care of any maintenance needs, add a fresh coat of paint if necessary and address the exterior and landscaping. Take plenty of pictures of the inside of the property after it’s ready. Identify what makes this property stand out from the rest – large master bed/bath, pool, home office space, screened-in porch, etc. and use it to market the rental. List the property on Zillow, Rent. com, Rentals.com, Realtor.com, Trulia or Craigslist. Certain cities utilize more sites than others. If you decide to list on more than one platform, be sure to update all listings after the property is rented. Be sure to save the details from the listing to make it easier to relist when the short-term lease tenant has left and it’s time to look for a new lessee.
6. Manage Your Property
As the owner of the property, you are responsible for maintenance requests. If you’re not confident you can handle every maintenance request that comes along, be sure to keep a list on hand of who you’ll call for plumbing issues, electrical work, etc.
Managing a short-term leased property in the right area can be highly profitable. Just as it is with any new endeavor, research current trends and talk to people in the industry to get a feel for the market to decide if managing a short term lease is the right move for you.