What length rental agreement should I offer?
As a rental owner, one of the biggest questions to consider is what length rental agreement should you offer your renters?
And it’s an interesting question where the answer depends on what you’re hoping to achieve with your investment, what your future plans are, and also the circumstances of your renters.
So let’s look a little deeper…
Two types of rental agreements
When it comes to permanent rentals, there are generally two types of rental agreements available – fixed-term agreements and periodic ones.
The first sets a specific term where the rental agreement applies. In this instance it’s a legal document that states the renter will reside at the premises for a set time and pay a specific amount each week.
This type of agreement offers security for both parties.
For the renter they know how much to budget each week for their rent. Lengthy notice periods also apply and specific criteria has to be met if the rental owner is seeking to end that agreement.
For the owner, there’s the security that they will receive a set income each week throughout that agreement, and the renter won’t move out without good reason, in which case they might be required to pay some costs towards finding a new occupier.
When it comes to fixed term agreements, different timeframes can apply, the most common of which are six-month and 12-month agreements.
Periodic agreements tend to occur after a fixed-term agreement has expired. These are basically week-to-week agreements that have shorter notice periods should the renter or owner choose to change their circumstances.
Periodic agreements also provide shorter notice periods should the owner which to change the rental fee.
Six-month agreements
As the name implies, a six-month agreement involves a half-year contract where the renter and owner agree on terms for that period.
The benefit of a six-month agreement is that it offers the parties some flexibility to change their circumstances quickly.
A rental occupier will likely offer a six-month agreement if they believe the market might change and their property could command more in the short-term.
They might also offer this type of agreement if they have plans for the property such as renovations or they wish to reside there in the near future.
A renter might propose this length agreement if there’s a chance their circumstances might change in the shorter term.
12-month agreements
12-month agreements are more long-term and they offer different benefits for the renter and owner.
For the renter there’s the security they have a place to call home at a set price for a full year.
For the owner, there’s the practicality of knowing the rent will come in each week, and a stable renter resides in their property.
This type of agreement can also save an owner money when it comes to agreement renewals, advertising for a new renter, or down time where the property might be vacant between agreements.
How we can help
Our experienced property managers pride themselves on establishing great relationships with both rental occupiers and owners.
We manage every property as if it were our own and you can learn more about our property management services here.
Alternatively, if you are looking to rent a property, you can view the properties we currently have available here.
