You feel excitement course through your veins as you begin your search for the perfect apartment community. All you can think about is generating consistent income for many years and watching your bottom line grow like never before.
Wait a minute, though. Have you given thought to how long you will rent your future apartments? In other words, what will your lease lengths be? These are a couple of critical questions to ask when investing in apartments.
During your search for apartment deals, you will come across either long-term or short-term lease options. The truth is, they can both be great options based on various property managers’ or landlords’ preferences.
Here’s a rundown on what investing in short term rentals versus long-term rentals is all about, as well as which avenue may work best for you when buying apartments to rent.
Short-term leases are generally apartment rental agreements whose durations are no more than six months. However, leases that last for under one year technically fall under the “short-term” category.
If you’re interested in buying apartments to rent, you’ll mostly find these types of leases in cities where the rental property demand is high and the supply is low. For example, the Big Apple offers many short-term leasing opportunities due to the city’s constantly growing population and hefty rent amounts. Likewise, short-term renting opportunities are not uncommon in cities like Los Angeles, Boston, and Chicago.
Many short-term leases are in increments of three months—like three, six, and nine months. However, in areas like Atlanta, you’ll find many rental properties with a wide range of lease lengths—for example, five months or even 11 months. Some real estate investors also offer month-to-month lease options. In addition, renting out homes to tourists for under 30 days is becoming increasingly popular.
When you’re buying apartments to rent, investing in short term rentals is a good idea considering that the market for short-term rentals is on an upswing. In fact, if you’re considering renting out a property to vacationers, the good news is that this market is slated to grow globally over 7% from 2017 to 2021. That’s because a greater number of travelers are interested in staying in homes versus hotels when on vacation. Ideally, you should try to create a source of recurring revenue for yourself with these types of leases by encouraging vacationers to use your property year after year.
Another benefit of investing in apartments with short-term leases, in general, is that they often generate more income when compared with their long-term counterparts. Of course, you’ll have to take into consideration factors like your vacancy rates and market volatility, which can have a bearing on your bottom line.
Yet another reason for investing in short term rentals when you’re buying apartments to rent is that this move can help you to diversify your real estate investments. Asset diversification, where you have a mix of long-term and short-term rentals, can help to protect your portfolio from volatility in the market.
Long-term leases are rental agreements whose durations are at least 12 months. Some long-term leases run 13 months, 15 months, or even longer.
If you’re interested in buying apartments to rent, the main advantage of these types of leases is that they eliminate the need to constantly seek new tenants to fill your units. This ultimately provides you as an investor with more stability and security, as you’ll be guaranteed to have checks coming each month for at least a year.
This perk makes long-term leases quite different from short-term rentals, where the turnover is high. A high turnover means more time spent marketing your property and searching for new tenants, which can understandably be frustrating over time.
As you’re buying apartments to rent, note that long-term rentals are among the best investment strategies for real estate investors because they are relatively low risk. Why? Because more people now than ever before are interested in renting homes instead of buying them.
In addition, long-term rentals are generally low maintenance. That’s because, if your long-term tenants begin to view your units as their homes, they are more likely to treat them as such. This means they likely won’t cause major damage. On the contrary, some short-term tenants have a tendency to be more careless and reckless, which may increase your repair and maintenance costs. It also might behoove you to upgrade the insurance on your property when you invest in apartments with short-term leases.
On top of the above, a long-term rental is an excellent investment strategy no matter what an investor’s level of commitment or experience may be when buying apartments to rent. That’s because long-term rentals can serve as passive investments. Once you make an apartment purchase, you simply allow a property management company to handle just about every aspect of managing and owning the rental for you. Meanwhile, you can just focus on enjoying the property’s passive income.
Note that, with traditional rentals, the likelihood of your real estate property appreciating is also strong. Thus, your property’s value will likely increase with time, which can lead to a nice payday for you if you decide to sell the apartment complex in a great seller’s market.
If you’re interested in buying apartments to rent, now is a great time to get into the multifamily property market. Fortunately, this isn’t an endeavor you to have tackle on your own.
I would be happy to steer you in the right direction when it comes to investing in short term rentals or long-term rentals, depending on your specific needs and interests. Work with me and learn what your next steps should be. With my help, you can confidently make your next apartment purchase and experience income on a whole new level in the months and years ahead.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.