A long term rental is distinctively different from a short term (or vacation) rental in many ways. Let’s take a look at long term rentals and how you can start your long term rental business.
How Do You Define a Long Term Rental?
Long term rentals across the US are, most commonly, a primary residence for individuals and families. With these rentals, they can establish legal residency in a region. Long term rentals can also be a vacation rental that lasts longer than the typical vacation. It can even be a long term work contract that requires an individual to do business in a region away from their primary residence for several weeks to a year or more.
Long Term Rental Lease Times
The length of a long term lease can vary but most sources agree that a long term rental lease must be 30 days at minimum, though some municipalities require a long term rental lease to be at least 180 days in order to establish residency. Most commonly, long term leases last a year, which can turn into month-to-month leases after that initial year or be renewed for longer terms.
Furnished Rentals or Not?
Long term rentals are most commonly not furnished because residents have their own furniture for their primary residence. However, for long term vacation rentals or long term work contracts, people cannot or do not want to bring their own furniture with them. For this and other reasons, many long term rentals are available already furnished.
What Are the Main Benefits of Owning a Long Term Rental Property?
Because tenants are committing to an extended period of time, income will be more reliable for the length of the lease. Long term rentals tend to require less maintenance than short term rentals because there is less turnover.
Another great benefit to owning a long term rental property is the variety of tax breaks! Things like operation expenses, owner costs and mortgage interest are tax deductible. Also, capital gains taxes can be deferred. Notably, FICA taxes can be avoided, as well as the potential for a pass-through deduction with a long term rental.
5 Things to Consider When Investing in a Long Term Rental Property
- Location! Location! Location! We’ve all heard the old real estate adage “location, location, location”, and there is a lot of truth to it! For example, you might consider a rental property near a destination location, like Ocean City, New Jersey. The closer you are to the location, the higher your costs may be, but your rental income can also be higher. Sometimes considering a property just a few miles away can lower your costs, but the farther away you get, the less rent you can likely charge. It all depends on your goals to find out which location makes the most sense for you.
- Who You Can Rent Your Long Term Rental To. What type of clientele are you aiming to rent to? If you want young professionals, there are certain things they are hoping for that may be different from retired grandparents. Will you allow pets? This can open up the market to a larger audience but can also open up your property to potential damage. These factors will determine how many bedrooms or how large of a yard your rental property should have, so you can attract the tenants you’re looking for.
- The Type of Long Term Rental. Consider what type of long term rental you want to have. A long term vacation rental will likely need to be furnished, as will a long term business rental for people traveling for an extended work contract. These will often have shorter leases than a typical primary residence rental and will affect how you advertise your rental property.
- How Much Can You Invest in a Long Term Rental? When deciding on a property, you will need to consider how much to invest in start-up renovation costs. Consider what it will cost to make the property meet health and safety codes as well as building codes. You should also consider budgeting toward curb appeal, and general appeal. For example, if the windows are hard to open, it can detract many potential renters.
- Considering Vacancy Costs of your Long Term Rental. Another budget consideration is vacancy costs. It may take several weeks to find a lessee. During this time, the mortgage and other bills still need to be paid. Vacancy gaps can be avoided in between tenants by doing showings before a lease ends, but cannot always be completely prevented. You can set up a savings account to cover costs like this.
Resources for Owning and Leasing a Long Term Rental Property
- Apartment Finder is a great resource for long term residence rentals in any US State. They have options for units, as well as full properties available. They also have business property options.
- AirBNB and VRBO have long term rental sections. These are mostly long term vacation rentals with 1 month+ time frames. While these platforms typically showcase short term rentals, they have a large customer base across the country who will be able to find your property quickly.
- 2nd Address and CHBO are great tools if you want to offer long term rentals for business travel. People spend an extended period
- Apartment Home Living and Apartments.com work together to match your property with a qualified renter.
- Apartment guide, Rent.com and Rentals.com are all part of the Rentpath group and have listings for condos, townhomes, single-family homes. They also have tools like tenant screening and collecting rent payments.
- Avail, Doorsteps, Rentalads and Rentdigs partner with other sites to get your listing widely viewed, as well as tools to help with renting the property out.
- Sites like ByOwner, Realtor.com and Zumper not only list your property, they also have leasing tools like tenant screening and collecting rent.
- Craigslist is one of the most widely-known site for selling things, and renting homes! Listings show for 45 days and can easily be re-listed after that, if needed.
- Facebook Marketplace is a free way to list your long term rental property, but it does not have any tools for managing your property once filled.
- A few more rental listing sites including Apartment List, Homes.com and MyNewPlace work to get your rental property seen and filled. These sites will help your property be seen by potential renters to help you fill your long term rental.
- People with Pets specializes in properties for: SURPRISE…people with pets! It not only helps you find tenants to fill your long term rental property. It then enables communication between you and your tenant once they are in the property.
Ready to Start a Rental Property Business?
It may seem overwhelming to consider all the decisions that need to be made to start a long term rental business, however, there are many tools to help you be successful. At Brass Financial, we offer no doc, no hassle rental loans for properties across the US that can make all the difference! Give us a call here at (609) 800-FUND to help you get started with your next long term rental investment.