Investors who already own a property that is successful often conduct regular reviews to calculate income earned each year. A lot of factors go into judging just how successful an investment will be during the course of the year. There is a debate among many new investors about month to month leases vs annual leases for investment homes. This guide explores each type.
Pros of Long-Term Lease Agreements
Getting a tenant to sign a long-term lease is the obvious way to build wealth. When someone is tied into an ongoing lease agreement, the potential for more income increases for investors. There is virtually no guarantee for wealth building with a shorter lease term because not all renters live out the extended lease agreement.
It is standard in the real estate industry for a rental to include a one-year lease agreement or longer. Most people have already become used to renting for an extended period of time. A person who moves into a new area for employment or to retire often has pre-determined goals. A longer lease is more appealing to these renters.
Cons of Longer Rental Contracts
Credit checks are now the norm in the housing industry by landlords and property management companies to determine if renters are financially able to enter into a lease. A long-term client who rents a property during a one-year or extended agreement could face an unexpected financial setback. This could cause issues with rent collection and property upkeep. Costs for credit checks must be paid each year to ensure renter stability.