Attracting high-quality tenants requires more than the ideal location and right amenities. Yes, those points are essential, but now renters also want more flexibility in their accommodation. In other words, landlords that are still firm on long-term leases because of the predictability they offer could find themselves facing higher vacancies as more tenants desire greater freedom of movement.
Continue reading below as this article covers essential insights you need to know when using flexible leases to stand out in the rental market. When done right, this strategy can help you attract digital nomads looking for a change of scenery, or families trying out a new neighborhood before they commit.
What is a Flexible Lease?
A flexible lease is a rental agreement that allows tenants more freedom over how long they stay and how they use the property. In other words, it’s the direct opposite of the traditional 12-month or multi-year lease where renters commit to staying in your rental for an extended period. Now, if they decide after a couple of weeks that they’d rather try out a new apartment or move states altogether, they can pack up their bags and leave without fear of breaking their contract.
Of course, that doesn’t mean that you’ll be blindsided. Although these leases offer adjustable terms, there's often room for a sufficient notice period or an early termination clause. Thus, these arrangements are ideal for short-term workers, students, or people in transition.
Types of Flexibility
Short-Term Lease
A short-term lease is a rental agreement for a fixed period that is generally less than one year, with 3, 6, and 9 months being the most common durations. For landlords who still value predictability, this arrangement is favorable because while the tenant may not guarantee a full year of rental income, they’re still locked in for the duration of the agreement. Besides, by being shorter than the traditional 12-month lease, property owners often charge higher rates to compensate for the increased risk of vacancy and higher turnover costs.
Long-Term Lease
Unlike the typical long-term lease that’s inflexible, you can opt for one that offers a more flexible exit strategy for your tenant. For example, some landlords include an early termination clause that allows renters to end the tenancy by paying a predetermined fee. This arrangement is often appealing to tenants who want the stability and affordability of a long-term location, but also want to keep their options open in case an unexpected job relocation or life change happens. This option helps first-time renters to determine if lease or rent best fits their needs. Vets are a great example of tenants that routinely value this type of lease arrangement.
Month-to-Month
A month-to-month arrangement is the most flexible of the bunch. Unlike the previous two, it doesn’t require tenants to lock in for a particular duration, no matter how short, or pay a penalty fee for terminating the lease. If you’re looking to make more money, you should capitalize on tenants who are willing to pay a premium for their mobility. Thus, tourists and remote workers often favor these types of arrangements and are typically willing to pay more for the extra mobility. The notice period for these arrangements is typically 30 days or less, depending on the parties and rental market.
Financial Benefits of Flexible Leases
Earn More Rental Income
Increase your income potential by embracing more flexible leases. Understand that offering flexible lease terms may mean more frequent cleaning and maintenance of the property, so it would be best to take advantage of that. Besides being free of the burden of the typical 12-month lease, renters often want the convenience of a furnished or semi-furnished apartment that frees them from the responsibility of setting up and disposing of furniture. You can also charge higher fees for that service, as well as a bigger security deposit to cover the increased risk of property damage and prolonged vacancy. When done right, this strategy can help you make more money in the long run.
Reduce Your Vacancy Rates
Keep your rental property attractive to a new generation of workers. With remote work on the rise and other trending jobs that typically require you to stay at home, tenants value freedom over stability. That means if you don’t offer them a lease that works, they’ll go elsewhere. Expanding your options to offer renters more flexible leases can help keep your rental property business relevant and keep it occupied.
Dynamic Pricing
With flexible leases, you can adjust your rental rates based on demand. Did your last tenant send their notice at the end of October? Why not make some extra cash by charging the next tenant a bit more to reflect the holiday season? Besides being able to make more money during peak seasons, flexible leases allow you to quickly adjust to market rates rather than waiting an entire year to reevaluate your prices. That means this dynamic pricing model can offer more long-term profitability.
Practical Steps on Implementing Flexible Leases
Knowing the Market
Start by understanding your target renters and local trends. For instance, if you own property in an area where remote work is growing in popularity, offering this type of lease could help you stand out early. Beyond those that work from home, other markets that benefit from such housing arrangements include those with lots of students or urban areas that attract contractors. You can also monitor your competitors to see if landlords offering these types of leases experience fewer vacancies, so you know when it’s time for a shift.
Craft the Lease Agreement
Create a lease that adopts a new flexible model without sacrificing clarity or protection. The last thing you want is a lease that leaves you with longer vacancies and no adequate compensation. For transparency, outline terms such as lease duration, renewal options, early termination, and security deposits upfront. Also, remember to clarify what your tenants’ maintenance responsibilities are to avoid disputes.
Preparing the Property with Frequent Cleaning
Ensure your rental is ready for the next tenant at all times by scheduling regular cleaning between stays. After all, flexible leases often translate to higher tenant turnover, so hiring a professional to maintain cleanliness would be worthwhile. Besides, you can always add it to your cost. A well-kept property enhances reviews and encourages tenants to renew, putting more money in your pocket.
Conclusion
Flexible leases are becoming more popular amongst tenants who value being able to get up and move to another location. For landlords, that means you either have to adopt more mobile agreements or risk growing irrelevant and having higher vacancies. That’s why it’s essential to know if your rental market is shifting towards more flexible options and craft an agreement that benefits you. Remember to also prepare your property to ensure your new flexible lease meets maximum tenant satisfaction.