If you own rental properties in a big city like Chicago, you know that sometimes, you’ll work with tenants who are looking to stay put for a few years, and in an effort to reduce some stress on themselves will request a longer-term lease than is standard. Instead of leasing for one year, these tenants may request to sign two, three, or even five-year leases to avoid having to move. While the initial idea may not sound so great to you—how will you earn money on the changing rental market if you’re locked into a certain rental rate for a few years—it can be very beneficial to offer extended leases to tenants. As a property management company in Chicago, we at Lofty understand the hesitance of some owners and landlords to committing to longer leases than one year. It’s important to first have your renters sign a one-year lease, and after they have established that they’re trustworthy tenants, you can consider a longer lease. We want to make sure our clients get the most out of their investments, and for that reason, we’re sharing some reasons you should consider offering long-term leases to reliable renters.
1) Guaranteed Income
Perhaps the biggest benefit of offering longer term leases to tenants is the guarantee that you’ll have rented units with guaranteed cash flow for the duration of those leases. Instead of having to worry about finding a new tenant after one year, you can relax a bit and enjoy the steady influx of profits instead of worrying about creating new listing ads, screening new tenants, preparing the rentals for new tenants, and everything else related to tenants moving in and out every year. Decreasing the amount of time you have to spend on all of that not only saves you that time (obviously), but it has the added benefit of ensuring that you won’t have to deal with any vacancies during that time. If you’re worried about signing a tenant onto a rental rate that may have you earning less profit in their second or third lease year, just imagine what the cost is of having an empty unit for a month or longer every time a tenant moves out. Letting tenants sign two year leases is the perfect happy medium—they get two years of calm comfort, knowing they’re locked into a rental rate and won’t have to move, and you get two years of steady income without the worry that the market will change so much that you’ll be losing money on their rental rate.
2) Less Heavy Maintenance Related to Turnover
Another benefit of offering longer term leases is that it can reduce the amount of moving-related maintenance that you have to do. For instance, if you are required by law to repaint every time a tenant moves out, and you have tenants moving out every single year, you’re spending a lot of money on paint (and painters, if you’re not doing the job yourself). Now add on all of the other maintenance and cleaning that you have to do when tenants leave—imagine doing all of that work less frequently. Even if you’re working with a property management company that takes care of all the work that needs to be done, simply not having to do so is still the easier and more convenient choice. When tenants stay in your properties longer, you get the benefit of needing to do less work on your buildings.
3) You Can Focus On Other Investments
When you’ve freed up the time that you would spend writing new listing ads, showing the units, and screening tenants, you can use that time to work on other investments.
With the steady cash flow from long-term leases and the time to look at other properties, you may find your investment property portfolio growing much faster than you thought it would. This can lead to even more profits and opportunity to invest in other Chicago properties. Growing your own business is a huge benefit of offering long term leases. The two may not sound like they are related on the surface, but it tends to have a domino effect.
4) Better Tenants Who Are More Trustworthy
Finally, offering long term leases tends to attract trustworthy tenants. People who are more destructive or disrespectful to rental properties typically look for shorter term leases so that at the end of their time, they can cut and run without any adverse effects. If you’ve got a prospective tenant asking to sign a contract for multiple years, however, they’re indicating that they’ve got a reason to want to stick around for a while. Whether it’s a locked-in rate or even just a great location for them, people who rent for a long time tend to view the property as something they should treat well. In general, tenants who stay in one place for many years may be more trustworthy and cause less damage than those who are looking for shorter term leases.
How to Know What’s Right for Your Properties
If you’re not sure if offering long term leases is right for you, working with a property management company in Chicago can help. At Lofty, our goal is to make sure that our clients are getting the most return on their investments so that they can live the life they deserve, and we can help you figure out the best ways to market, rent, and maintain your Chicago rentals. To learn more about all we can do for you, contact us anytime.